Building Relationships, Reducing Costs

As it wraps up its first year in business, one purchasing coalition reflects on strengthening ties between team members while leveraging its market share.

When eight supply chain executives, all from large Premier healthcare systems, came together in the summer of 2010 to form the Large IDN (LIDN) Group, their goal was to aggregate their buying power and “make common commitments around contracting relationships with suppliers.” Like-minded in supply chain and utilization efforts, and similar in size, the members began by identifying some guiding principles designed to benefit the entire group. They agreed to avoid “one-off deals for individual members.”

In the process, the coalition’s founding members – Adventist Healthcare (Rockville, Md.), Aurora HealthCare (Milwaukee, Wis.), Carolinas HealthCare System (Charlotte, N.C.), Fairview Health Services (Minneapolis, Minn.), Henry Ford Health System (Detroit, Mich.), Methodist Le Bonheur Healthcare (Memphis, Tenn.), Norton Healthcare (Louisville, Ky.) and Texas Health Resources (Arlington, Texas) – have found additional benefits through their growing relationships and collaboration. They recently added a new member and are open to additional growth with potential members that share their commitment and strategy.

The Journal of Healthcare Contracting recently spoke with coalition representative LeAnn Born, vice president of Fairview Health Services, about the LIDN Group’s direction, strategies and success in its first year.

The Journal of Healthcare Contracting: Have you found the coalition is providing members with more advantages than originally expected?

LeAnn Born: We are a young group in terms of how long we’ve been working together. We’ve spent most of our time to this point establishing our process and exploring opportunities. I have found great benefit from the relationships that have grown between team members in our organizations, which has allowed us to share our experiences about how to make opportunities work. I have been impressed by how these shared experiences (with regard to value analysis and arriving at decisions and approaches for implementation) have helped us identify the possibilities related to different products. Given that we have nine health systems from different parts of the country, we usually have one member that has an existing relationship with the supplier partners in any category. Our momentum is strengthening and I am optimistic that savings is going to be impressive over the next 12 months and beyond. We are finding that the pricing we are able to access through shared decisions is better than any that our large organizations would have otherwise been able to achieve alone. To date, the LIDN Group has realized savings of approximately $2.3 million.

JHC: What are the top three initiatives your regional purchasing coalition has pursued in the last 12 months?

Born: Of course, we’ve pursued product categories that would not surprise the market. Beyond that, we have partnered with Premier to gain a better understanding of the economics that drive pricing on certain product categories. We are using this to help suppliers understand what we think pricing should look like based on the cost to manufacture.

JHC: How has being part of a regional purchasing coalition enabled members to leverage their buying power?

Born: Our collective spend through GPO contracts is greater than $4.4 billion. Traditional tiers in GPO contracts are not typically designed for members with this size of buying power, but suppliers have demonstrated that they are willing to offer better pricing because of it.

JHC: Can you explain your process whereby your supply chain executives meet and make their decisions?

Born: We’ve partnered with Premier to assist us with facilitation of our group’s approach and initiatives. The supply chain executives from the nine members meet on a monthly basis to review opportunities, share experiences and make decisions. We rotate between in-person meetings and conference calls. Premier staff members assess and share our current purchasing patterns (identify what each member’s spend is on a category and which suppliers are being used by the members), solicit proposals from suppliers on our behalf, present proposals and facilitate our decision making. To this point, we’ve been able to give consideration from each member’s perspective and make decisions that benefit the whole group. We have a process in place to vote, but to this point all of our decisions have been unanimously supported.

JHC: How do you co-exist with your GPO? For instance, does the purchasing coalition only work off of the GPO’s contracts?

Born: Premier is the common denominator for our affinity group. Our group does not share a common geography; therefore, we are not currently pursuing opportunities on categories like services that may benefit from the group being close together. Our opportunities need to be based on our common commitment, not geographical efficiencies. Our opportunities are similar to the categories that exist within Premier’s contract portfolio. We anticipate that the vast majority of our opportunities will be with Premier categories and feel that to keep the national GPO successful, we will work with Premier contracted suppliers. Having a Premier contract is a ticket to play with our group.

JHC: How difficult is it to get buy-in from each of your facility’s physicians and staff when it comes to purchasing off the coalition’s contracts?

Born: Each of the nine members is highly regarded for their clinical quality and progressive approach to supply chain. I have found clinicians at Fairview to be very interested in hearing how things are working at our peer organizations within the Large IDN Group. Knowing that a certain supplier and its products work at other organizations means a lot to our organization.

JHC: What have been the greatest rewards you have reaped, individually and as a coalition?

Born: Like so many teams or work groups, it takes time to build trust and develop stronger relationships. My peers at the other LIDN organizations are very talented and committed to this process, and I value the relationships we’ve developed. We have learned a lot from [one another] and we have even had a little fun working together.

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