Publisher’s Letter October 2010

The First Move?

As we go to press, all indications are that MedAssets will buy Broadlane, effectively making three large national GPOs in Novation, Premier and the soon-to-be finalized post-acquisition MedAssets. While the regulators are surely going to take a look at this major consolidation in the Group Purchasing arena, all indications are it will go through.

On an investor call, MedAssets President and CEO John Bardis, and Broadlane CEO Pat Ryan, discussed the acquisition, and also the concerns they were hearing from U.S. hospitals regarding healthcare reform and reimbursement. Bardis stated without hesitation that “Infrastructure cost reduction” is on every hospital/IDN executive’s mind, and Ryan said executives are focusing on revenue today more than ever. Both indicated that because of the pending reform, hospital executives are simply worried if revenue will quickly recede.

I am asked daily “What does reform mean to the supply chain?” This is the million-dollar question to all of us in the GPO/IDN/Hospital/RPC supply chain profession. Common thought has been that patient volume will increase and reimbursement per patient will decrease – a frightening proposition until primary caregivers can find a way to handle demand.

We’ve seen the first major move in the supply chain by MedAssets. What other major moves will we see to address the intended and unintended consequences of pending reform?

Some of the great minds I talk to think there are a number of ways that cost can be managed by supply chain professionals that previously may have seemed extreme.

As physicians sell off their practices in favor of being hospital employees, will the shift of power move from the physician-preference corner to the administration-physician corner?

Will the regionalization of contracting lower costs by delivering committed volume that the suppliers so dearly covet?

Are we going to see shared services among providers develop as accountable care organizations are implemented? For example, will we see stakeholders in an

ACO use one imaging center instead of each hospital in the ACO providing that service? Will all the same hospitals centralize laundry, food and janitorial services?

It will be interesting to watch how supply chain leaders contribute to the new reality created by healthcare reform. I would love to hear your thoughts on what your crystal ball shows you.

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.