How one contracting executive is using his unique perspective of the industry to help his IDN during a merger
John Burks has a broad perspective of the healthcare supply chain, having worked for providers, GPOs, manufacturers and distributors. That perspective should prove valuable in the months ahead, as he helps his IDN – Scott & White Healthcare – finalize a merger with neighboring Baylor Health Care System.
Burks is associate vice president, strategic sourcing, for Temple, Texas-based Scott & White, which announced its intent to merge with Dallas-based Baylor in June 2013. (The merger was being reviewed by government regulators at press time.)
Great job for a new grad
His first hospital job was actually with American Hospital Supply (now Cardinal Health), which placed operational leaders in hospitals. While employed by American, he served as a department head in two hospitals as director of laundry. “It was a great job for a new grad,” he says. “It laid a fundamental provider perspective for the rest of my career. And, candidly while working for a GPO, I always felt that my paycheck came from the providers we served.”
For 14 years, from 1998 through 2002, Burks was with Novation/VHA. When he left as senior vice president, he was responsible for guiding a group of technology, development, sales and marketing teams that managed an information systems infrastructure and all e-commerce activities.
It was while leading contracting teams at Novation that he gained “the fundamental contracting skills and began to understand of the importance of building strong relationships along with a contract,” he says. “Most of the time, contracts run their course smoothly. The relationship becomes important when market conditions change or an issue needs to be resolved.”
Burks considers himself fortunate in that his role with the group purchasing organization was so diverse. “While the products and markets are very dynamic, even those previous experiences clearly come into play at the IDN. Providers don’t have the luxury of a big staff. Sourcing leaders at IDNs must be subject matter experts on a wide range of categories.
“And it always amazes me how little the local representation knows about the GPO agreements they offer. Frequently now, I get to explain it to them.”
Following his work with Novation, Burks held national accounts positions for a number of manufacturers, including Medical Action Industries, KCI and Healthpoint Ltd. Again, the experiences proved to be valuable building blocks in his career. “I can understand and respect the challenges in product development, launch and rollout, limitations and flexibility under the GPO agreements, the struggles of channel (distribution) management, and the margin pressures suppliers face,” he says. “This knowledge can help us get quickly to the ‘sweet spot’ of an agreement.
“However, let me say bluntly: The margin pressures suppliers face absolutely pale in comparison to the provider’s decline in reimbursement and the impact on their bottom line.”
A lot to learn from each other
His varied experiences in the healthcare supply chain have convinced Burks that supply chain professionals at the IDN level and GPO level can learn a lot from each other.
“My experience is that IDN executives often express rancor and discontentment about their GPO – some warranted, but often exaggerated,” he says. “The best practice is to treat the GPO similarly to most suppliers and leverage the maximum value, be it information, resources and/or contract value. Build a strong relationship with this GPO supplier too, because many issues certainly will need to be resolved. Unfortunately, IDN leadership is often too distracted or pressured with daily operations to influence important outcomes and change at their GPO. It is important not to get frustrated and underestimate how much influence a large system can really have.”
Conversely, GPO executives can learn a lot about their IDN customer/members, he says. “The two GPOs with which I have the most experience – MedAssets and Novation – spend enormous amounts of resources, time and money being sure there are not too many disconnects in knowledge of their members. But as hard as they try, it is truly impossible to understand the provider’s levels of complexity around data gathering, physician preference contracting, logistics and daily operations.”
Today, Burks is right where he wants to be. “The Scott & White Healthcare System was founded upon and operates under a very unique clinic model, akin to Mayo and Cleveland,” he says. “All physicians, clinics and acute sites of care have been – and will continue to be – truly integrated, from vision and mission, down to sharing a single medical record. Adding to our differentiation, Scott & White owns its own health plan.
“Most physicians are not only employed but truly aligned, to allow for better coordinated care and cost reductions. Eighty percent standardization on preference products in supply chain is a small example.”
Scott & White’s vice president of supply chain, Phil Profeta, has built a strong value analysis program, which leverages Scott & White’s aligned clinician-and-physician model, says Burks. With Assistant Vice President of Value Analysis Sandy Myint, they have built a program earning a national reputation. Burks’s contribution has been to build a contracting, or sourcing, group with an information backbone, to leverage GPO contracts and to leverage the value analysis work to create “unique value from the commitment we can deliver.” Sourcing and value analysis are supported by a strong purchasing operation – customer service, order processing and implementation – known by Scott & White as customer fulfillment.
“This strategic sourcing role was a newly created position at Scott & White, one that fulfills a career goal for me – to leverage my industry knowledge on behalf of a leading provider organization,” says Burks.
That provider organization is about to get larger, assuming the merger with Baylor is consummated. “Combining these recognized leaders and leveraging our shared values will create a truly remarkable healthcare system that will be well-positioned to meet the demands of healthcare reform and lead the transformation of healthcare,” says Burks. The new organization will be the seventh largest healthcare system, comprising 43 hospitals, 500 sites of care, 6,000 affiliated physicians and $7.7 billion in total assets.
Editor’s note: At press time, John Burks had been asked to lead the work team focusing on sourcing strategies for the new supply chain organization for Scott & White and Baylor.
IDNs and GPOs: Evolving relationship
IDNs will continue to grow, but national GPOs will maintain their viability, predicts John Burks, associate vice president, strategic sourcing, Scott & White Healthcare. “Regarding GPO relationships, I am reminded of the time in the mid-90s when everyone predicted that the consolidation of distributors would certainly ‘disintermediate’ GPOs. Rumors of their demise were greatly exaggerated at that time. During the dot-com bubble and the rush to pick partners, again, the GPO demise was predicted, but they each in their own way – Novation, Premier and especially MedAssets – learned to make information a value point of differentiation.”
That said, GPOs need to prepare themselves for more change, and soon. Healthcare reform, declining reimbursement and the switch to population health management will accelerate the formation of larger and larger systems, says Burks. More critically for the GPOs, the potential for these systems will far exceed the scope and purchasing power of any existing regional purchasing coalition.
“But GPO leaders are bright people. I am already aware of some very creative and unique strategies that are emerging. Perhaps they will continue to reinvent themselves less around contracts and more around services.”