Program facilitates direct contracting

Novation is calling its recently announced aptitude LLC subsidiary “the healthcare industry’s first online direct contracting model.”

Though it was created and is a subsidiary of a group purchasing organization, aptitude is designed to facilitate and improve the direct contracting that goes on between hospitals and IDNs and suppliers, or to modernize how they go to market using GPO contracts. It’s a growing market, according to Troy Kirchenbauer, general manager, aptitude, who estimates that one-third of the supply chain business is directly negotiated between hospitals and suppliers.

Aptitude – which is available to Novation and non-Novation members – is designed to benefit both sides of the contracting desk, largely through easy, ongoing access to purchasing and usage data, says Kirchenbauer.

Providers can review their usage of a particular product category by manufacturer, as well as how their prices compare with other providers (though that information is blinded and does not identify specific hospitals or IDNs). Potential bidding manufacturers are already onboard, ready to respond to RFPs, says Kirchenbauer. With vendor and usage information in hand, providers solicit bids.

Potential suppliers, meanwhile, have online access to the provider’s actual usage information, to gauge potential volume. They maintain that access after an agreement has been signed. “We create an accountability or performance metric, so the supplier sees ongoing performance against commitments made in the contract,” says Kirchenbauer. “Buyers and sellers can think of contracts as people think about their investments,” he says. Its online measurement tools allow both sides to see how their “investment,” – that is, their contract – is performing. “Buyers can drill in to see how they are progressing with planned savings, while sellers focus on maintaining profitable relationships.”

Buyers and sellers pay a subscription fee to participate; sellers also pay a transaction fee based on sales.

Though aptitude anticipates that existing VHA and UHC members – who already share purchasing data with Novation – will comprise most of the early users, executives are also recruiting non-Novation providers and non-Novation contract vendors.

Scottsdale Healthcare

Scottsdale (Ariz.) Healthcare pilot-tested aptitude for about a year prior to aptitude’s public introduction in April.

“The generation of [an RFP] takes just minutes to accomplish,” says Mike Hildebrandt, associate vice president, supply chain. “The analysis tools save countless hours of analysis by our purchasing team. The contract execution phase is shortened since the base agreements are already in place.”

The analysis tools allow Scottsdale to adjust volume commitments and see the corresponding change in pricing, says Hildebrandt. “You can shift volume between the various responses to determine the best value options prior to making final contractual commitments. This saves a lot of time by not having to use traditional tools, such as Excel, etc.”

Usage status is very visible to both buyer and seller, he continues. “It’s a great tool for both buyer and seller. We have no reservations about sharing the data and becoming more transparent in the future.”

Though aptitude is well-suited for commodity items, Scottsdale is exploring the possibility of using it for physician-preference items, such as pacemakers and implantable cardio defibrillators.

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