Small Membership, Large Commitment

By Laura Thill

As it prepares to go live, AllSpire Health Partners’ members discover it’s possible to join forces without merging into a single organization.

jhc-oct16-istock_72833775_largeSometimes the strongest option lies somewhere in the middle. That’s exactly what seven Mid-Atlantic hospital systems discovered when they met three years ago to discuss forming an independent entity, AllSpire Health Partners. “The concept was to create a virtual network to accomplish things we couldn’t do independently, due to the size of each hospital system,” says Keith Noll, interim president of AllSpire Health Partners’ GPO Board. But, their intention never was to merge into one organization, he adds. “AllSpire’s GPO will go live October 1,” he adds.

Since its initial planning, AllSpire Health Partner’s goals have been much greater than the creation of a GPO. The group has focused on population health management, joint risk sharing and contracting around clinical care improvements and new technology to achieve greater savings. But, it’s not an RPC. In fact, in the future, the members are open to jointly owning or creating companies “not normally in our space, but related to healthcare,” says Noll.

“We actually are structured as a GPO,” Noll explains. “There were three directions we could have taken. The conservative approach would have been to join another GPO and become a regional purchasing coalition. At the other end of the spectrum, we could have contracted independently for every item we purchased, but we didn’t have that expertise. Some of our hospital systems have item masters with literally 100,000 items.

“We definitely needed a business partner,” Noll continues. “So we hit a middle ground and formed a GPO, while contracting with an existing one, which could offer infrastructure and access to their commodity contracts for us to start AllSpire Health Partners GPO. We put a bid out to eight different GPOs, and selected HealthTrust Purchasing Group. Essentially, we have a 3-5-year management agreement with HealthTrust to run AllSpire Health Partners.” That’s not to say the process has always been easy, he notes. “It has been a complicated transaction to get us to this point.” And, one member – Lancaster General – became involved in a hospital merger, at which time it felt it was appropriate to leave AllSpire Health Partners. “But, HealthTrust has done a lot to bring much value to us in a short amount of time,” he says.

So, while AllSpire Health GPO will maintain its own board, complete with a board president and senior supply chain executive, it will work closely with the HealthTrust staff to determine which contracts and products to target. (HealthTrust staff members will work in AllSpire’s Lehigh Valley, Pa. offices, and be paid by AllSpire, to help ensure an easy co-existence between the two organizations.)

At the same time, “AllSpire members will have a seat at HealthTrust’s table, and will be closely involved in evaluating and adding new products,” says Noll. The AllSpire board will approve all decisions, and all initiatives will be executed in collaboration with value analysis teams from each of its organizations. “Because we have fewer members than other GPOs, it provides an advantage in obtaining physician buy-in at our organizations,” says Noll.

A committed model
Unlike traditional GPOs, AllSpire Health Partners follows a committed model of purchasing, Noll points out. “Other GPOs follow an open model of purchasing, meaning the more they spend, the more they save,” he says, and typically 50 percent of each member’s spend would go through the GPO’s contracts. However, HealthTrust’s model requires AllSpire Health Partners members to work together.

At least 80 percent of each member’s spend must go through HealthTrust contracts, forcing them to work together and efficiently, he explains. “Some of our members were part of a purchasing coalition prior to forming AllSpire Health Partners,” he says. “We have learned that the fewer members you have, the easier it is to arrive at decisions, and the faster you can attain an 80 percent level of commitment.” The fact that all six members are a similar size is an added benefit, he notes, since larger members sometimes have greater voting power in their GPO.

“By consolidating our spend, we can work with our vendors in committed contracts,” Noll continues. “This makes us unique and keep our vendors happy. It’s a predictable model and they know what they can expect. ”

The short – and the long – run
AllSpire Health GPO has laid out a realistic set of goals for its first year. “We want to ensure we transition smoothly to our new portfolio of contracts and vendors, and that our members are working collaboratively and effectively from the start,” says Noll. “We also will look at various RFP processes and consider areas where we can bring value.” All of this will require a lot of data analysis in the coming months to help the GPO gauge its progress, he adds. In its first year alone, AllSpire Health Partners expects to save as much as $50 million across it organizations.

“In the long run, we are looking to expand our service offerings beyond a traditional GPO to increase our market visibility,” says Noll.

While the GPO anticipates opening its membership to other hospitals with whom it has relationships, new members will not necessarily be equity owners like the six founding hospital systems. “That said, if a larger hospital system expresses an interest in becoming an owner, we would be open to it,” he says. The question is, how large can an organization like AllSpire Health Partners become, without giving up the advantages of a smaller GPO?

“It’s difficult to say at this point,” says Noll. “It is more about philosophical fit with a committed model than it is about size. HealthTrust for years has shown the higher value it brings with a committed model, even though it is not the largest GPO in the country. We are attempting to do the same in the areas of physician preference items and purchased services. If an organization has the ability to move towards commitment, it will be a great fit for what we are doing here.”

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Participating health systems

AllSpire Health Partners GPO includes:

  • Atlantic Health System (Morristown, N.J.)
  • Hackensack University Health Network (Hackensack, N.J..)
  • Lehigh Valley Health Network (Allentown, Pa.)
  • Meridian Health (Neptune, N.J.)
  • Reading Health System (Reading, Pa.)
  • WellSpan Health (York, Pa.)