Supply chain execs talk physician and hospital alignment

Are physicians engaged, enraged, or both?

CHICAGO—There’s no doubt that physicians are more engaged than ever in supply chain discussions at the hospitals in which they practice and which, in some cases, employ them. But to hear supply chain executives tell it, once physicians get engaged, they are also likely to become enraged at the high prices their facilities have been paying for medical devices and equipment. And they’re willing to make some changes because of it.

Here are some highlights from the panel on physician/hospital alignment at the recent Healthcare Supplier/Provider Institute conference in Chicago. Participating on the panel were:

  • Gary Fennessy, vice president of operations, Northwestern Memorial Healthcare, Chicago.
  • Donna Drummond, vice president and chief procurement officer, North Shore-Long Island (N.Y.) Jewish Health System.
  • Joe Arruda, vice president, supply chain services, Indiana University Health (formerly Clarian Heath).


Better collaboration at Northwestern

Northwestern Memorial Healthcare owns or has affiliation agreements with several Chicago-area hospitals, a physician practice group of approximately 700 specialists, and a primary care physician group, said Gary Fennessy.

The Chicago market is an interesting one, he said. Even the largest healthcare system owns only about 15 percent market share. That spells opportunity for Chicago-area providers and interest from providers elsewhere, including Mayo Clinic and Cleveland Clinic. The fact that Chicago is fairly wide open heightens the competition, causing much activity on the physician acquisition front. “Our position is, if there’s a strategic fit, we will participate [in such acquisitions],” said Fennessy. But Northwestern’s philosophy is that by continuing to focus on managing costs, it is well-positioned to move forward.

Fennessy did have one word of warning to his supply chain colleagues: Beware your tax-exempt status. Provena Covenant Medical Center in central Illinois lost its property-tax-exempt status in March 2010, while three additional Illinois hospitals – Northwestern Memorial’s Prentice Women’s Hospital, Edward Hospital and Decatur Memorial Hospital – were denied property tax exemptions in August 2011, he pointed out. And other hospitals in the state are likely to lose their tax-exempt status. “The implications will be significant,” he said. Hospitals’ construction programs could grind to a halt, and providers and their suppliers will experience “unbelievably more pressure on the cost side.”

On a brighter note, physician participation in supply chain issues is greater than ever, in Fennessy’s opinion. “In the last three years, we have dramatically reduced our expenses,” partly due to better collaboration with physicians. “They were outraged at some of the prices we were paying [for physician-preference items,]” he said. Consequently, they are taking a harder look at the products they use or want to use.

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