Market Shift

MedAssets, Broadlane combination will change the GPO landscape

The combination of MedAssets Inc. and The Broadlane Group brings together complementary bundles of service offerings, which company executives believe will result in a more complete package to help customers thrive during an uncertain period ahead.

Atlanta-based MedAssets announced in September its decision to acquire The Broadlane Group for $850 million.

The combined companies will have the ability to affect total hospital costs through group purchasing, strategic sourcing, medical device or physician-preference-item cost management, centralized procurement, supply chain outsourcing, supply chain analytics and data services, lean process consulting expertise, and a clinical workforce or labor management solution, they said.

And the new, larger MedAssets will be big. Though the companies declined to calculate their combined client base, they did say that Dallas-based Broadlane serves more than 1,100 acute care hospitals and 50,000 non-acute care facilities, while MedAssets serves more than 3,300 hospitals (inclusive of 1,700 in its Spend Management segment) and 40,000 non-acute healthcare providers.

By way of comparison, Premier has more than 2,400 acute care members and 70,000 non-acute members, and an annual purchasing volume of $36 billion. Novation contracts on behalf of 25,000 members of VHA and 5,500 members of Provista LLC, representing an annual purchasing volume of $37.8 billion. Amerinet reports that more than 2,500 acute care and 38,500 non-acute-care facilities use its contracts, and that 2009 purchasing volume was $7 billion.

As part of the transaction, MedAssets expects to achieve $20 million in what it refers to as “expense-based synergies” in 2011. The transaction was subject to regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, but was expected to be completed within 60 to 90 days.

Patrick Ryan, chairman and chief executive officer of The Broadlane Group, was expected to join the MedAssets board of directors and assume the role of president of the company’s Spend Management segment upon completion of the transaction.

Came together quickly
The transaction reportedly came together quickly. “I called Pat [Ryan] on the phone three and a half weeks ago,” said MedAssets President, Chairman and CEO John Bardis, speaking to investment analysts the day the announcement was made. “I asked if he would be willing to spend a day together and talk about this idea …. The more we got to talking in that first visit, the more we recognized that this opportunity was very unique, and the value to our clients, employees and shareholders on all fronts would be positively affected.”

The combination of MedAssets and Broadlane brings together the best of both worlds, said Rand Ballard, Senior Executive Vice President, Chief Operating Officer and Chief Customer Officer for MedAssets, Inc., speaking with the Journal of Healthcare Contracting. “There’s no doubt that Broadlane’s commodity-products Strategic Sourcing Solution is the best in the industry. [Combine that] with technology to measure cost by physician, by MS-DRG, and you will have a true cost-reduction strategy for customers beyond what they have today.” Strategic Sourcing Solution is Broadlane’s committed-volume purchasing program.
Launched in October 2009, MedAssets’ Service Line Analytics online program measures cost by physician, patient and DRG, for all acuity levels and patient outcomes, said Ballard.

The Broadlane Group’s committed program will coexist with MedAssets’ flexible one, said Ballard. “It allows us to keep options for customers who may not be able to drive that commitment.” Broadlane will also bring its experience in outsourced purchasing and materials management to the combined company.

“This is an incredibly interesting and challenging time for hospitals,” said Ryan, speaking with JHC. Providers need to focus their time and investment on their core competencies, then find partners that can manage the functions outside those core competencies, he said. “I believe that as healthcare reform takes hold, you’ll see a number of institutions trying to implement this [outsourcing] model. We believe this will be an important part of our combined companies’ offering.”

Meanwhile, MedAssets will bring to Broadlane customers its revenue cycle management offering, which it has been developing since 2003. “This combined offering will provide the ability for hospitals to lower their costs,” said Ballard. “Couple that with the ability to link the supply chain and revenue cycle on a common, integrated platform, and then measure that with the Service Line Analytics capability, and you have an integrated solution that will provide value.
“Let’s not forget that healthcare reform will put tremendous pressure on hospitals not only to reduce costs, but to optimize their revenue cycle.”

Not traditional GPOs
From their inception, neither MedAssets nor Broadlane was set up as a traditional GPO. MedAssets began as an exchange for refurbished medical equipment, then branched out into group purchasing and revenue cycle management. Broadlane, meanwhile, began as an e-commerce venture, then quickly developed into a group purchasing and outsourcing firm.

During the regulatory review process, company officials could not speculate how their respective offerings might be folded together in the combined company. That said, here’s a look at some of the programs each has developed over the years.

Group purchasing
MedAssets employs a multi-vendor contracting strategy, using what the company calls “a transparent, flexible, customer-driven approach.” The company’s SELECT® Commitment Program is said to offer better pricing for providers willing to standardize with a select group of products.
Broadlane says its Strategic Sourcing Solutions offers market share and category analysis (to help providers consider the impact of raw materials, supply stability, emerging technologies and vendor market share on pricing); sourcing category assessment (to assist providers in determining whether to standardize, purchase, lease or pre-commit); purchased services contracting; life and disability insurance; and med/surg, non-medical and pharmaceutical sourcing.

Non-hospital market
Like other GPOs, both MedAssets and Broadlane have pursued non-hospital business. MedAssets reports its Alternate Care Program serves more than 40,000 customers nationwide, including outpatient medical centers and surgery centers, medical and diagnostic laboratories, imaging and diagnostic centers, home healthcare service providers, oncology care, orthopedic care, long-term care providers and physician practices. The company says 2,200 ambulatory surgery centers use its contracting portfolio.

With its Physician Services and Ambulatory Care Services programs, Broadlane provides group purchasing and other services to 50,000 non-hospital customers, according to the company.

Both companies provide pharmaceutical contracting. In addition, as part of its The Preference Group® program, Broadlane offers a pharmacy operations assessment (including assistance with inventory management, labor, etc.) and medication use management (assistance with the application of drug usage protocols).

MedAssets’ pharmacy consulting program is designed to help providers use pharmaceuticals in a way that is both clinically and financially appropriate. The company says it works with pharmacists, physicians and clinicians to maintain effective formularies, and helps providers implement drug-class comparisons, evidence-based reviews and protocol development.

Capital equipment
MedAssets says that its capital program extends beyond the initial equipment purchase to include research, strategic planning, financing, service contracts and equipment disposition. Customers are free to participate in any or all of the segments addressed by the company’s Capital Life Cycle Solutions, including construction services, group buys and the contract portfolio. MedAssets’ capital program was extended to include a Construction Services program in January 2010.

The Broadlane Group’s Capital Equipment Solutions program includes Budget Assessment, in which the company’s capital equipment solutions advisors suggest equipment best suited for the provider’s clinical needs and financial situation; Equipment Needs Assessment, which gauges the lifespan of the provider’s existing equipment, considering service agreements, technology trends and replacement/upgrade options; Capital Equipment Sourcing, including the contract portfolio, group buys, vendor promotions, etc.; Quote Review Service, which identifies errors to resolve before the purchase order goes out; and HELP Equipment Planning(sm), acquired by Broadlane in April 2010, which provides equipment planning services.

Labor management
Anticipating a shortage of nurses and other healthcare professionals in the near future, Broadlane began working on labor services several years ago. In March 2010, the company launched Prolucent Workforce Management, which, it says, “bring[s] together a unique combination of technology, agency nursing and allied healthcare sourcing, and vendor management services to optimize the staffing process.” Prolucent’s product allows providers to monitor and track staff credentials and performance; implement a Web-based staff scheduling software; source agency contracts for use in governing agency labor usage; and monitor contract nurse quality standards.

Revenue cycle management
A focus of MedAssets for seven years, revenue cycle management technology and services can help providers improve revenue capture and cash flow from patient access to claims denial, according to the company. Offerings include access integrity, charge integrity, revenue capture, reimbursement integrity, revenue recovery and accounts/receivable, decision support and performance analytics, and charge integrity solutions. The company says that more than 2,200 hospital customers use the Web-based revenue cycle tools and services.

Physician-preference items
MedAssets estimates that providers spend 40 percent of their supply dollars on physician-preference items. But with its Aspen Healthcare Metrics business, the company says it can help customers reduce dollars spent on such items by 5 to 18 percent.
Broadlane’s Preference Group offering includes surgical services assessment, which suggests opportunities for savings through physician alignment and product knowledge; as well as a cardiovascular services program, spine and neurological program, and orthopedic management program.

Regional purchasing coalitions
Both Broadlane and MedAssets have experience facilitating regional purchasing coalitions.

MedAssets provides interim outsourced management services for providers’ supply chains and central business offices within the revenue cycle. Broadlane offers its Interim Management Services program, for short-term, onsite implementation of purchasing, materials management and standardization.
But Broadlane brings years of experience in long-term supply chain outsourcing as well. The company has managed Tenet’s corporate materials management function on an outsourced basis for more than 10 years, and that of Kaiser Permanente for almost as long. The company manages supply chains at more than 120 U.S. hospitals, representing $4 billion a year in purchase volume.

Both MedAssets and Broadlane offer software and consulting services designed to help providers ensure that they are using contracts fully and appropriately, and paying the correct prices for products.

MedAssets’ CDQuick® Internet-based e-catalog is designed to help providers measure contract and price compliance, while CDQuick® Pharmacy Audit is designed to uncover pharmacy pricing errors by comparing purchase order pricing from wholesalers to contract prices. MedAssets Analytical Systems is said to help providers identify savings opportunities and verify pricing discrepancies from contract.

Broadlane’s BroadLink® e-commerce platform was created to speed up purchasing time and reduce errors. Meanwhile, its Velocity™ spend analytics platform is said to 1) help providers identify identical or similar products available on private contracts or those of the GPO; 2) provide a spending overview for product categories, including market share, contract coverage, price accuracy and contract savings opportunities; 3) identify causes of cost differences between two periods of time; and 4) identify purchases in which the transaction price fails to align with contracted price. In addition, Broadlane, like MedAssets, offers item master services (for cleaning up and standardizing product lists) and transaction management services (to process orders and eliminate price discrepancies).

MedAssets and Broadlane offer a variety of consulting services in addition to those mentioned above. In addition to supply chain consulting, for example, MedAssets offers revenue cycle management consulting.

As part of its Preference Group program, Broadlane helps providers set up and manage value analysis teams. Its wholly owned subsidiary, Healthcare Performance Partners(sm), uses lean and six sigma methods to help providers manage change and create continuous improvement. And using more than 200 operational practices and performance indicators, Broadlane consultants can review a customers’ supply chain and provide recommendations for improvement.

“It’s about execution,” said Ryan during the investment analysts’ conference call. “We’ll have a combined team from both organizations that will put together a plan and execute upon that plan.”