Publisher’s Letter March 2010

Aggregation is New Again

It seems like every day we hear about another organization being formed for IDNs and Hospitals to aggregate purchasing volume for better pricing and concessions. Until recently, these Regional Purchasing Coalitions (RPCs) have been under the radar of many supplier and IDN/Hospital executives that were not participating in one. Their value has become so apparent that they can no longer be ignored by suppliers or facilities not involved with one.

We are seeing mainly three types of RPCs being formed; GPO associated LLCs, GPO member organized and ones associated with a State/Regional association. We are currently tracking 123 RPCs that comprise 814,000 staffed beds, 30 million annual admissions and 129 million annual outpatient visits. These are tremendous opportunities of aggregation for their participants and market share for their suppliers.

Earlier this year, we released a study where we surveyed nearly 300 supply chain executives from hospitals and IDNs across the country. We asked them questions like “Are you in an RPC?” “Which GPO are you with?” “What is your primary reason for joining an RPC?” “What service line do you expect to receive the greatest savings due to your participation in an RPC?” “Has your RPC delivered the value you expected?”

I found it fascinating that 40 percent of our respondents were part of a RPC, but were currently buying less that 25 percent of their volume from their RPC contracts. This screams to me that the opportunity for savings by RPC participants is at its very early emergence. It was also apparent that most all RPCs contracting initiatives were being conducted, or at the very least facilitate, by the various national GPOs.

The future of RPCs will be very interesting for IDNs/Hospitals and suppliers. Will they be able to deliver the coveted contract compliance suppliers so dearly want? Will they be able to consolidate thought and utilization on high clinical preference items across hospitals with uncommon ownership?

I know RPCs will be a major focus in the future for The Journal of Healthcare Contracting.

Thanks 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.