New player gets down to business
Ask the folks at Northeast Regional Contracting Coalition about their newly formed organization, and they’ll tell you it’s more of an initiative. “The Northeast Regional Contracting Coalition is in large measure a demonstration project whereby membership can explore the practical application of committed contract volume to pricing power,” says Joe DiPaolo, chief supply chain officer, of New Jersey-based Atlantic Health. Indeed, as the coalition approaches its one-year anniversary, its members continue to lay the groundwork and move market share, thereby driving greater price efficiencies. The Journal of Healthcare Contracting recently interviewed DiPaolo for a glimpse of where the coalition is heading as it carves a new niche in the healthcare industry.
The Journal of Healthcare Contracting: When was the Northeast Regional Contracting Coalition started?
Joe DiPaolo: February 2010.
JHC: What was the founders’ initial goal when they established the purchasing coalition?
DiPaolo: The coalition was started as an attempt to use the collective purchasing power of the membership to drive additional price advantage for medical supplies. To date, there are eight members across the Northeast, and we are open to new members joining.
JHC: How is the Northeast Regional Contracting Coalition laying its groundwork? What steps are its leaders taking to ensure it will flourish in years to come?
DiPaolo: For most of us, this is our first experience with this type of purchasing coalition. As a relatively young initiative, we continue to develop the rules of engagement. The supply chain leadership of each IDN works hand in hand with MedAssets to ensure that we are comfortable with our goals and operating well within the established legal guidelines.
JHC: What goals does the coalition hope to accomplish in its first five years?
DiPaolo: Goals include a more efficient value analysis process; a streamlined contracting process; the inclusion of greater non-price value-adds; and a wider feedback loop for each of the suppliers/products reviewed.
JHC: What advantages do you anticipate Northeast Regional Contracting Coalition will offer its members in the upcoming years?
DiPaolo: In short, we hope to drive greater price efficiencies by leveraging our GPO’s vendor relationships and our ability to move market share to those suppliers who offer us the greatest price advantage.
JHC: How much savings do you expect your regional purchasing coalition to realize in its first 12 months?
DiPaolo: This is difficult to say. We all accept that any price improvement that results from the coalition is likely something we could not have achieved as standalone facilities.
JHC: How will being part of a regional purchasing coalition enable your members to leverage their buying power? Is this something your members should become better and smarter at over the years?
DiPaolo: The jury is still out, but the concepts of collective purchasing power have been played out in healthcare and other industries. In theory, the members and suppliers will learn from each engagement, and new strategies and tactics will likely be employed in order to achieve the same level of success.
JHC: Can you explain the process whereby your supply chain executives meet and make their decisions? How often do you meet and how do you arrive at purchasing decisions? (Is there a full-time staff dedicated to the regional purchasing coalition?)
DiPaolo: The meeting schedule has been fluid to date. We have been able to alternate between regular conference calls and meetings, and [meeting face-to-face] at a central location. An agenda is created and specific categories are discussed. Assignments are made and carried out through the meetings. Discussions are lively and participation is never an issue. There is no dedicated staff at this point, but the growing workload of formal analysis suggests that we may need to establish a staff to perform some of the more labor-intensive tasks.
JHC: Does the purchasing coalition only work off of the GPO’s contracts? If so, why? If not, please explain.
DiPaolo: To date, we have explored GPO contracts as the baseline for further negotiation. This strategy is most expedient as we are all operating from a shared vantage point and all of the players are incentivized to drive toward successful outcomes. It is the most practical approach.
JHC: How will you ensure that the interests of each of your facilities are considered and that each facility’s needs are met?
DiPaolo: Each IDN has the ability to participate or opt out if the cost outweighs the benefit. There may be any number of reasons for opting out. The member is allowed to freely make that decision. In those cases, the group determines the best way to move forward.
JHC: How difficult does it appear to be to get buy-in from each of your facility’s physicians and staff when it comes to purchasing off the coalition’s contracts?
DiPaolo: Every facility, like every category, has its own challenges. There is really no magic behind the traditional supply chain task of sourcing and implementing solutions, which require end-user acceptance.
JHC: If you could change one thing about the way your purchasing coalition works, what would that be?
DiPaolo: So many products, so little time. We could use more hours in the day!