Time-tested

The LIDN Group works because its members work together

Some things grow better over time. It’s a question of experience and maturity. So it is with successful regional purchasing coalitions, like the Large IDN (LIDN) Group.

“One thing that we knew when we started – but that gets more apparent over time – is how vital it is to select members who work well with each other,” says Jim Olsen, senior vice president of supply chain, Carolinas HealthCare System. LIDN Group was formed six and a half years ago by a group of Premier IDNs.

“We see each other and treat each other as peers,” says Olsen, speaking of the supply chain executives who meet monthly (either face-to-face or via WebEx) to discuss LIDN Group contracts. In fact, the group hasn’t felt a need to identify a chair. “We consider everyone a member with equal rights, but as things come up, we may appoint someone to handle an interview or other [duty].

“There’s a lot of give-and-take; it’s not a situation where a lot of ego is involved. It’s really sitting down and trying to get something accomplished. That makes things a whole lot easier.”

Contracting
The LIDN Group’s relationship with Premier is a close one. For example, the RPC has no full-time staff members, but rather, shares a dedicated staff with Premier’s Strategic Performance Group.

What’s more, the LIDN Group signs agreements with Premier contract vendors only. “We feel it needs to be good for Premier as well as for the group,” says Olsen. “There’s some fear from members that these performance groups fragment the purchasing power of the larger group. We have felt it is important to support Premier, so we choose Premier suppliers.

“We’re all Premier members, and we try to be in a position where we’re getting a higher tier discount because our purchases are greater and we are more compliant – not because we’re taking anything away from Premier members.”

In many cases, it is Premier staff that calls attention to potential contract opportunities for the LIDN Group. In other cases, it is one of the RPC’s members who does so. In all cases, before signing a contract, the group must be convinced that by doing so, members will get a clinically excellent product, outstanding service and the right price. “We feel we would lose our edge with the hospitals in our systems if we started accepting contracts that did not bring all of those things,” says Olsen.

“Some people think there’s a conflict between quality and price, but we found that in most cases, we can accomplish both.”

In almost all cases, the RPC is able to secure better pricing as a group than each of the members could have gotten on its own, says Olsen. Successes include contracts for contrast media and custom procedure packs.

“Generally, we’ve had very good products, very good pricing, very good compliance; so it really is a case of the suppliers and the members getting what they need,” he says. “We’ve been careful to work closely with our clinical value analysis people, so we are sure the products we are considering are what all the systems need clinically.”

Suppliers have a better understanding of the LIDN Group today than they did six and a half years ago, says Olsen. “They recognize our focus on clinical quality, and our emphasis on getting the price at the pump rather than a lot of rebates,” he says.

Vendors and providers alike have come to recognize that the cost of healthcare has to come down, he continues. “We can do that by being more rational, going through a good process in order to commit, and working with the supplier to be the low-cost customer.”

Helping each other out
Though the LIDN Group’s primary mission is writing excellent contracts, its members help each other out on a variety of supply-chain-related issues. “We have a collegial relationship, where if one of us needs something, we’ll let the group know, and inevitably, somebody has something to share,” says Olsen. Maybe one IDN has a particularly good approach to value analysis, for example. That member can share what he or she has learned with the others.

“We have found that each of us has areas in which we are very strong and areas where we’re not as strong. The ability to use resources across all the systems is very helpful.

“Regardless of what happens in Washington, we’re going to have to provide the highest quality care at a much lower cost than we have in the past,” he says. That realization is dawning on everyone in healthcare today – not just administration and supply chain, but the clinical teams as well. For that reason, Olsen expects the LIDN Group will continue to write contracts on more sensitive items – which may not always be the preference of clinicians – in the future.

“They will recognize that [these items] are what they and their patients need from a clinical perspective, while still reducing cost. That will allow us to address the need for improved quality, lower cost and patient satisfaction at the same time.”


Lessons learned

How do you make an RPC work? Jim Olsen, senior vice president of supply chain, Carolinas Healthcare System, offers these thoughts:

  1. Choose members who work well with each other. Avoid oversized egos.
  2. Select product categories with care. A clinical value analysis team can help.
  3. Figure out what’s in it for the supplier. (It’s usually compliance and/or volume.)

LIDN Group members

  • Adventist Health, Roseville, Calif.
  • Carolinas HealthCare System, Charlotte, N.C.
  • Fairview Health Services, Minneapolis, Minn.
  • Henry Ford Health System, Detroit, Mich.
  • Methodist Health System, Dallas, Texas.
  • Norton Healthcare, Louisville, Ky.
  • HonorHealth, Scottsdale, Ariz.