Quid Pro Quo – Engaged affiliates benefit IDNs and RPCs, and vice versa

Rosaline Parson doesn’t go out and recruit affiliate members of Healthcare Purchasing Alliance, a non-profit cooperative serving Orlando Health and two other facilities in central Florida. But if a facility approaches HPA about an affiliation, and if that facility agrees to allow HPA to be actively involved in product selection, and it has the ability to influence decision-makers relative to new technology or evidence-based outcomes, then she’s all ears. (In fact, HPA has had just one affiliate member, and that hospital has subsequently become a full member of the cooperative).

In other words, for Parson, as for others with whom the Journal of Healthcare Contracting spoke, the approach to taking on affiliate members isn’t so much “come one, come all” as it is “we’re looking for a few good men,” to borrow the old U.S. Marine Corps slogan.
It’s true that affiliates can increase purchasing volume (and revenues, if dues to sponsoring organizations are involved), leading to better pricing from vendors. But if those affiliates aren’t committed to participating in group contracts, they add little to the party, and can actually be a detriment to the mission of the hospital, IDN or, increasingly, the regional purchasing coalition.

“Larger market share leads to better pricing, and that helps the community and smaller hospitals,” says Parson. “It’s the right thing to do.

“But I also have to be aware of, ‘Am I going to dilute the services I provide to our full-time members [by taking on affiliates]? Never do I want to put our business model in a position where we can’t complete projects in a timely manner, and have a negative impact on our owners.”

She offers another caveat: “It’s more difficult to get clinical integration and buy-in if you have multiple non-owned, affiliate-type hospitals, especially in the physician preference market.

“And I also have to think about the potential confusion it can lead to in the vendor community. They’re wondering, ‘Is this hospital part of your organization? Is it picking and choosing the contracts it wants to use?’ Manufacturers are giving us favorable pricing and service because we give them market share in return.” If HPA can’t deliver on its end of the bargain, then vendors can’t expect to deliver on theirs.

Alignment around mission
Traditionally, affiliates are smaller facilities that seek a relationship with a larger organization to gain access to a GPO portfolio and services. Oftentimes, the bond is born outside the supply chain, points out Ron Hefner, vice president, market management, VHA Pennsylvania, who is the VHA Pennsylvania representative to the Purchasing Coalition of Pennsylvania, an RPC comprising 16 hospitals and health systems in the state.

The affiliate and sponsoring organization might have some alignment around their respective missions, he says. “Typically there is a set of services including patient services, that are provided by the larger member.” The two can share physicians, institute some kind of referral relationship, or engage in joint ventures to improve the health of their communities.

The closer the sponsor and affiliate work together on all these projects, the better for both, says Hefner. “I see closer supply relationships between affiliates and larger members. One is their ability to share their supply pricing and to integrate that smaller organization into their supply activities. Maybe if that affiliate and sponsoring shareholder can act together on their own volume, they may improve price.”

Affiliates are seated at the table during PCOP decision-making forums, says Hefner. “They can describe their issues and articulate the challenges [associated with] making or not making a product change.” It’s a tremendous opportunity for the affiliates and for PCOP members as well, he says. Ideas and concerns are aired. And while there’s little pressure exerted, members expect each other to be clear and to articulate their thoughts regarding product conversions. But in the end, those affiliates are free to make their own decisions.

Bounce ideas off peers
In West Memphis, Ark., Steve Faulkner began a search for a new GPO relationship soon after he was named materials management director at 150-bed Crittenden Regional Hospital several years ago. Even though Crittenden was an affiliate of a major hospital system at the time, Faulkner discovered that vendors didn’t always extend their best prices to the facility. His search led him to Charles Griffin, corporate director materials, St. Bernards Healthcare, Jonesboro, Ark. About a year and a half ago, St. Bernards agreed to sponsor Crittenden, giving the smaller facility access to VHA programs, including group purchasing, as well as to the AROK Purchasing Coalition, an RPC comprising VHA hospitals in Oklahoma and Arkansas.

“The beauty of it is, St. Bernards gets to use our spend [to aggregate volume], and we get the benefit of decreased pricing,” says Faulkner. “So it has really worked out.”

In addition to better pricing, the affiliation gives Crittenden directors a seat at the various roundtables that AROK sponsors regularly, which bring together materials managers, pharmacy directors, radiology directors, nurses, etc. “You get a chance to meet and bounce ideas off your peers,” says Faulkner. “That’s invaluable.”

The arrangement benefits AROK as well, says Griffin. “Once an organization has decided to join VHA’s Affiliated Patron program, we have an on-site VHA Implementation Day at the new affiliate member organization. In most cases this involves not only the regional team, but also support from VHA Inc. In most cases it is the commitment from AROK members that drives pricing,” he says. “Therefore, if an affiliate does commit to the initiative, I would say it does assist AROK in obtaining the best price in the market based on committed volume.

“The message here is that every member is important, and we believe that, regardless of the facility’s size, we can assist them in improving their clinical and economic performance.”

The RPC connection
As is the case with most RPCs, affiliate members within the Catholic Contracting Group – an RPC comprising five of Premier’s largest Catholic health system members – are affiliates of CCG’s health system members, not CCG itself, says Michael Maguire, executive director, Catholic Contracting Group. That said, attracting affiliates is a joint effort.

Premier helps CCG members “build out the infrastructure” for recruitment by providing marketing materials and aiding in market-basket analyses, he says. And these joint efforts have paid off.

“We have grown substantially over the last three and a half years, when we decided to make a more focused effort on recruitment and retention of affiliates,” he says. In fact, some CCG members have decided to hire full-time staff members to manage their affiliate programs. “There’s a general consensus among the members that they need to make sure they tend [their affiliate] programs well, and let them grow appropriately.”

The affiliates may not be included in CCG committees, but that’s not say their voice isn’t heard, says Maguire. “A number of our members have calls with their affiliate base in which they talk about what’s coming up on the CCG calendar. The member has that direct input from the affiliate, and knows how they want to position their thoughts and votes within CCG itself.”

When CCG contracts are signed, CCG creates a launch document (a one- or two-page summary of the agreement), which its members share with their affiliates. CCG members tend to ask for some compliance from their affiliates, but not necessarily rigorous compliance, says Maguire. Some members keep an eye on affiliates’ participation in the contracts. If volume is lacking, they may get on the phone to find out why.

Premier Inc. is there to lend assistance as well, says Dave Edwards, vice president supplier relations, contract uptake, Premier. For example, Premier has a telemarketing group that can draw attention to newly signed contracts among affiliate members. But the alliance leaves the “heavy lifting” in terms of affiliate recruitment and interaction to its members. “I don’t think [Premier members] just want volume,” says Edwards. They want committed volume.

Compliance and participation
“Ultimately, we’re looking at the behavioral aspect [of affiliate hospitals],” says Roger Nolan, senior vice president, MedAssets, who provides supply chain services to the Texas Purchasing Coalition, a supply chain management partnership comprising 27 acute-care hospitals in the state. “If a hospital asks to be treated as a TPC member … we will figure out a way to get the paperwork done. At the end of the day, the behavioral aspects of the relationship – compliance and participation – are what is most important.”

Recognizing that there are a number of potential affiliates in its geography, the Texas Purchasing Coalition board has had discussions about developing guidelines or benchmarks for admitting affiliates. “With healthcare reform, standalone, rural, ancillary type entities in the marketplace are going to need to be more closely aligned with bigger systems and IDNs,” says Jon Pruitt, TPC vice president. “Whether it’s truly an ownership model or affiliate model, it will be more important that those relationships get stronger. It’s a benefit to the IDN and the affiliate.”

Accountable care organizations, physician practice acquisition and other developments are changing traditional relationships between providers, including IDNs and affiliates, adds Nolan. “You’re going to see all types of hybrid relationships brought about through healthcare reform,” he says. “We’re seeing them now. It’s how you react to them that’s important.”

Continuum of care
Participating members of WNC Health Network in Asheville, N.C., are making every attempt to react to the changes taking place in healthcare, says Tim Bugg, vice president member services. WNCHN is a collaborative network with a regional purchasing organization representing 16 core/owner hospitals and 33 affiliate hospitals in North Carolina, South Carolina, eastern Tennessee and Virginia. “We believe that to truly reduce the cost of healthcare, we need to look at both the acute care and the alternate site/continuum-of-care markets.”

WNCHN has two types of sponsored affiliates to whom it markets the Premier purchasing program: acute-care affiliates and continuum-of-care affiliates, such as long-term-care facilities, physician offices, hospices, health departments, etc. WNCHN also has group purchasing affiliates, which are acute-care hospitals that are currently owners within Premier. All are considered equal partners in the program, but only the 16 owner hospitals have a governing voice on the WNCHN board, says Bugg. However, the acute affiliates do participate in WNCHN’s work groups, which weigh the merits of new programs, contracts and services in such areas as materials management, laboratory, pharmacy, food, finance and human resources.

The group purchasing program also has an oversight committee titled the materials management advisory group. MMAG is tasked with reviewing most clinical category savings opportunities within the program as well as new programs and potential operational changes, explains Bugg. The MMAG membership is rotated regularly and has membership from core members, sponsored acute affiliates and group purchasing affiliates.

WNCHN is still working out the fine points of the continuum-of-care affiliate program. “They may have their own work groups, such as a work group of home health providers or assisted living providers; and a separate set of contracts and/or products to review,” says Bugg. WNCHN will facilitate these groups. “Over the next 12 months, WNCHN intends to emphasize its commitment to this market with increased staff and focus.

“The goal of WNCHN is to effectively bring down the cost of healthcare within the entire continuum of care,” continues Bugg. “From birth to death, from physicians to hospitals to home healths to long-term-cares to hospices, WNCHN aspires to help all classes of trade in controlling the cost of healthcare.
“WNCHN utilizes volume aggregation, best practice, resource utilization studies, and simple old fashion negation skills to help all our members – core and affiliate – gain the best results possible in supply chain expense reduction.”

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