They’re growing in size, cohesiveness and direction
Regional purchasing coalitions are growing up. They’re growing in size, cohesiveness and direction. The MAX – a national accounts database owned and operated by MDSI, parent of the Journal of Healthcare Contracting – tracks approximately 160 of them nationwide, representing more than 1 million beds and 34 million annual admissions.
A panel of four RPC executives spoke with suppliers at the recent Healthcare Supplier/Provider Institute in Las Vegas, hosted by the Journal of Healthcare Contracting.
Theory of evolution
RPCs have grown stronger internally, says John Streger, senior director, supply chain management, Southeast Supply Solutions LLC, an RPC comprised of nine VHA members in Florida and Alabama, founded in 2008.
“The interaction between these hospital groups has [evolved],” says Streger. “First, there was some anxiety. ‘Are we really operating as one?’” Each member tends to cling to a bit of independence. “But as they continue to meet and interact with each other, they become more familiar with each other and develop a single entity culture. It is definitely something that has evolved over the course of the past years.”
Suppliers have taken notice, he says. “At first, they were skeptical. ‘Can you deliver that volume and commitment? We’re not sure you can.’ It took us several trials and challenges to get through that.” And the task never really ends, as RPCs must continually prove to suppliers that they can, indeed, deliver compliance to contracts and hence deserve better pricing than each IDN could achieve on its own – and even better pricing than their national GPO could get.
Southeast Supply Solutions has made some tough decisions, and will make more, says Clif Colley, corporate director of materials management for Baptist Health Care, Pensacola, Fla., and chairperson of Southeast Supply Solutions Operating Committee. Speaking of his participation on the RPC panel at the Healthcare Supplier/Provider Institute, he says, “Hopefully, I was successful in letting vendors know that SESS is a committed group of hospitals and that we can and will move business. I provided examples of our group moving business to vendors I had no desire to do business with, but that provided greater value to our health system as well as the SESS membership. I also provided examples of moving away from a vendor who was not providing the technical/sales support our members needed. They stood behind our organization, and we ultimately received the support we needed for our physicians and patients.”
Colley is proud of Southeast Supply Solutions’ success with contracting for coronary stents, wires, balloons; and IV flush syringes. But he’s most excited about the RPC’s med/surg distribution agreement with Medline, signed two years ago. “I have the opportunity to work with a business partner that is helping us align our acute care, long-term care, physician offices and surgery centers to a standardized portfolio of products,” he says. “These activities allow us to have complete, seamless visibility into our spend, so that we can continue to drive value to economies of scale and scope with our vendors/manufacturers.
“So now I can take the exam glove I’m buying for the acute-care setting and cascade it into our physician offices, long-term-care facilities, surgery centers.”
And in the year ahead? “Our SESS membership is looking at orthopedic and spine implants,” says Colley. The RPC was at press time preparing to host orthopedic surgeons at the Andrews’ Institute to discuss opportunities around clinical quality, outcomes, functional equivalents and cost. “Engaging the specialty physicians is key to ensuring commitment to decisions that can be firmly upheld and drive value to patient, physician, hospital and vendor,” he says. “I’m looking forward to engaging our surgeons like we did with our cardiac stent project, so that we can all be aligned around products and most important, do the right thing for our patients.” What’s more, the RPC has “a huge opportunity around purchased services and information technology contracts,” he says.
RPCs will no doubt continue to fine-tune their ability to get the best prices in their contracts. But some are looking beyond that, according to those who participated in the Institute.
“You have a group of hospitals starting to look at operational activity,” says Streger. “The contracting piece may be the bread and butter, but we’re asking, ‘What else can we do to augment that?’”
Streger and the participating supply chain executives in Southeast Supply Solutions are seeking to move beyond transactional relationships with their suppliers to more strategic ones. “That means getting past, ‘Here’s the tier pricing,’ to ‘How are you delivering product? How can [the supplier] help us change the utilization of our products?’
“Everyone has pretty well understood, ‘If we commit, we can get better pricing,’” says Streger. And while commitment might yield the best price, it doesn’t necessarily lead to lowest overall cost – at least, not without ironing out some operational and logistical issues.
Facing new realities
Jim Olsen, vice president, materials resource management, Carolinas HealthCare System, Charlotte, N.C., believes that RPCs can play a role in helping healthcare providers face what he believes are inevitable changes in healthcare financing. Carolinas is a member of the Premier Large Integrated Delivery Network Performance Group, an RPC formed two years ago by eight Premier IDNs. “We believe that regardless of the fate of the Affordable Care Act, we will need to make dramatic changes to adjust to the new realities we are facing today and in the future.” And judging from the response of those who attended the Supplier/Provider Institute in the spring, suppliers seem to agree, he says.
Providers will need to commit to long-term, sole-source agreements to achieve the pricing they need, says Olsen. Through commitment, members of the LIDN group have been able to achieve a 10 percent to 20 percent savings over what its individual members would have been able to achieve. “If we can’t do better than what the IDNs are doing on their own, then we don’t get involved in it,” he says.
Utilization and the RPC
“Our focus for 2012 is on utilization, that is, the manner in which supplies are used and the decrease of waste,” says Sandy Wise, R.N., director of clinical resources for Texas Purchasing Coalition, a regional purchasing coalition, or supply chain management partnership, comprising 27 acute-care hospitals in the state. Clinical integration is another goal.
“We can no longer continue ‘business as usual,’ as we move into the era of healthcare reform,” says Wise. “Emphasis beyond pricing strategies to include utilization and sharing of best practices among all stakeholders will be imperative as we face the coming months in healthcare. Clinical integration will be imperative in this new model.”
To complete such projects, however, RPCs must establish written guidelines and expectations, says Wise. “Choose your members thoughtfully, considering cultural fit as much as purchasing volume and commitment.”