Publisher’s Letter August 2011

Traveling Thoughts

I have been on the road most weeks this year observing the pressing healthcare supply chain trends and how suppliers and providers are dealing with them, such as Regional Purchasing Coalitions, Alternate Site Contracting and Physician Alignment with IDNs and Hospitals. Indeed, we’re at a critical juncture for the U.S. healthcare supply chain.

When we first started covering Regional Purchasing Coalitions (RPC), we often had to explain to provider supply chain executives what they were. Now, just about every progressive IDN is participating in a RPC, and those that aren’t are seriously considering one to increase savings. This regional contracting strategy is a trend we are going to see progress, and probably come close to reaching the levels of current national contracting.

GPO contracts for years have crept into non-acute facilities, causing great angst to suppliers that have in good faith negotiated the contracts for the acute-care setting. In the last few years we have seen over 40,000 non-acute facilities appear on GPO rosters. The trend of getting our nation’s alternate facilities on a GPO contract is a full-blown strategy by national distributors and GPOs. To suppliers, this creates another level of complexity, and in most cases adds downward price and subsequently margin pressure.

For the past few years, Physician Preference Item (PPI) manufacturers have been the target of GPOs and providers as an opportunity to mitigate cost increases and drive standardization that would reduce costs. As physician practices have been acquired and aligned with Hospitals and IDNs, the assumption is that preference has become a luxury.

It will be interesting to see how this plays out as the big branded companies that have years of relationships built with physicians work to maintain these relationships as the physicians now become hospital employees. Will the supply chain team’s recommendations now outweigh the physician’s preference?

When you focus on just one of these trends it seems simple enough. But when you add in all of these trends that are affecting most every hospital and IDN it becomes quite a lot of prioritizing of strategy by suppliers. It is completely understandable for Provider Supply Chain Teams to chase efficiencies and look for saving opportunities when contracting with suppliers.

I know these moving priorities add a tremendous amount of confusion to the suppliers, so I hope our nation’s IDNs and Hospitals help our suppliers understand these trends to reduce as much confusion as possible in these imperative times.

Thank you for reading this issue of The Journal of Healthcare Contracting!

About the Author

John Pritchard
John Pritchard is the publisher of The Journal of Healthcare Contracting.