After three decades of successfully meeting the needs of both its large and small hospital members, HEc continues to seek new opportunities to leverage volume and commitment.
More than 30 years ago, when IDNs were little more than an experiment in managed care, seven Midwestern hospitals decided the time was right to join forces in an effort to leverage purchasing and remain independent. “Health Enterprises Cooperative (HEc) of Cedar Rapids, Iowa was founded in June 1983 in response to the pressures of managed care and the [initial] development of hospital systems, or IDNs,” says Jeanie Brown, vice president, Health Enterprises. “The hospitals were looking for a way to remain independent, but leverage scale in some key areas. Since managed care didn’t really gain a foothold in Iowa, they focused on the opportunity to cut costs through both regional and national group purchasing strength.”
In the late 1990s, the Health Enterprises board made the decision to align itself with a new GPO, American Healthcare Systems. “Shortly after that, American Healthcare Systems, Premier Health Alliance and Sun Health Alliance merged to form Premier, Inc., and we chose to remain with them,” Brown says. “Our mission was to provide value to our members by leveraging aggregated volume, and to create a collegial environment for executives to meet, discuss, and share. Our parent company, Health Enterprises of Iowa, is a membership organization now owned by 27 member hospitals. It provides management services to a variety of operating companies, including HEc.”
The Journal of Healthcare Contracting recently interviewed Brown about the organization’s initiatives and goals, and the success its member have helped orchestrate over the past 31 years.
The Journal of Healthcare Contracting: How has the coalition grown since it began?
Jeanie Brown: HEc currently includes 20 members and five affiliate hospitals. Our largest member is a four-hospital system. In addition, we run an extensive non-acute affiliate program, and currently sponsor more than 800 providers covering 39 states. Our program is open to all classes of trade, and we are always recruiting for both acute and non-acute providers.
JHC: Have you found the coalition is providing members with more advantages than originally expected?
Brown: I’m not sure that I can speak to our members’ expectations going back more than 30 years. However, I would say that we have been – and continue to be – a work in progress, and that the advantages our members realize change as HEc, Premier, and the healthcare supply chain change and grow. At heart, though, we have always centered on the value of leveraging volume and commitment in exchange for price, service and quality from our suppliers.
JHC: What are the top initiatives the coalition has pursued in the last 12 months?
Brown: On the acute care side, in 2013 [we focused] on the implementation of Premier’s ASCEND® program, which lets us realize more savings at a faster rate. This decision was driven by our board, and all of our members are participating. On the non-acute side, we have been working with a large alliance of long-term care and assisted living providers to implement a materials management information system and value analysis. We have also just completed a review of CPTs, and sterile drapes and gowns. We have been standardized for over 10 years now, and have realized considerable value from the relationships.
JHC: How has being part of a regional purchasing coalition enabled your members to leverage their buying power?
Brown: We have both large and small hospitals as members, as well as a wide range of affiliates. In total, we bring together $235 million of contract spend, and without fail, everyone benefits when we aggregate our purchasing volume. For instance, a group of long-term-care facilities saved over $145,000 by accessing our sole-source award for automated medication dispensing cabinets. And it’s not unusual for the addition of a new member or affiliate to give us the volume for the entire group to move to a better price tier. However, learning to be a part of a regional buying group is definitely an evolution, and it requires the support of everyone from facility leadership to the staff using the products. Some of our aggregations are informal; we work with the suppliers to recognize the combined volume, which may fluctuate based on individual decisions. However, our greatest strength is when our members make a sole-source, committed decision. Our by-laws provide for a voting process that is binding for all members. We don’t use it for all contract areas – only targeted ones – and we always try to build a consensus prior to the vote. We’re lucky to have great members who understand the dynamics and the value. They learn from each other and have come to trust each other to deliver on their commitment. As a result, our suppliers have recognized HEc members as valuable customers and are serious about bringing savings, service and quality to them. Our mission is to deliver value to our members, and the success of one project feeds the enthusiasm for the next.
JHC: How much savings did the coalition achieve in its first year, and how has that increased since?
Brown: Thirty years is a long time. Since we don’t have those records – or any individuals who go back to the beginning – I can only assume the savings were enough to convince our original members to stay committed and keep growing. As compared to the early years of low hanging fruit, the supply chain today has to do a lot of heavy lifting to find savings through utilization, standardization, managing PPI and overall efficiencies.
JHC: What is the process whereby your supply chain executives meet and make their decisions?
Brown: We like to stay as engaged as possible with our members. Key department heads participate in peer-group roundtables, which include materials management, lab, pharmacy, imaging, food service (with clinical dieticians as a subset), facilities (with EVS as a subset), OR and IT. They each meet several times per year. Roundtables are held face-to-face, but also incorporate Web and phone conferencing to accommodate the challenges of traveling. Materials management, though, is our primary focus of communication and – in addition to the roundtables – we have bi-weekly conference calls to stay in touch on projects and updates. The peer groups are the foundation of our decision-making. As mentioned, we are a cooperative and operate under a one-member/one-vote rule. Through the relevant roundtable, each member votes on contract decisions. For major projects, we form cross-functional subcommittees that make a recommendation to the full roundtable for the vote. We support our members and affiliates with five employees here at HEc. They provide financial analysis and manage supplier relationships, while subcommittees conduct clinical analysis and trial products as appropriate. Affiliates can access aggregated pricing as long as they understand the commitment and agree to be as compliant as our members. Acute care affiliates have a voice, but no vote, through the roundtables.
JHC: Please explain how you co-exist with your GPO, Premier.
Brown: HEc is the Premier shareholder, and our members and affiliates access their programs through us. We feel our job is to help them get the best possible value out of the Premier portfolio. We write a few regional agreements, but rarely one that conflicts with Premier. We focus our efforts on contract compliance and maximizing the value Premier brings. Even if we locally negotiate on price points, we utilize Premier’s terms and conditions to prevent duplicate efforts. PPI and major capital equipment are the most challenging areas of compliance within our group.
JHC: How do you ensure that the interests of each of your facilities are considered and that each facility’s needs are met?
Brown: We have a wide mix of members and affiliates. Through volume aggregation, we can standardize a lot of the work we do on their behalf (i.e., by ensuring prices get activated and loaded). However, we have a great staff, all of whom have hospital backgrounds and incredibly strong customer service orientation. Our members and affiliates know they can call on us for help with virtually any challenge. Probably one of the most valuable things we do is conduct semi-annual business reviews with each member and affiliate hospital. One is Web/phone and the other is face-to-face. This gives us the opportunity to spend time with the hospital CEO, CFO or COO, and the materials management director to discuss performance and areas of opportunity. Our larger non-acute affiliate groups also receive annual business reviews. In addition, for the non-acute affiliates we’ve developed a few strategic relationships with key suppliers, so we can monitor the program’s performance through a limited number of contacts.
JHC: How difficult is it to get buy-in to the coalition’s contracts from each of your facilities’ physicians and staff?
Brown: Our philosophy has always been that physician relationships are best managed by hospital staff, and that we would probably be seen as a disruptive rather than cohesive element. Therefore, we do everything we can to equip department heads with the appropriate information and resources, but we do not assume the role of working directly with physicians or other staff. Each member has its own unique set of challenges and successes in physician compliance.
JHC: Other than cost-savings your coalition has achieved through greater volume purchasing, what has been the greatest benefit of the coalition to its members?
Brown: I think there are two benefits we could name. For [starters], I can’t remember the last time I saw a supply chain department that was over-staffed, so one benefit would be additional resources to help with contract management. Secondly, as I mentioned, we serve a lot of small hospitals and unfortunately many suppliers don’t see the value in supporting them with on-site representation. So I’d say the second benefit is the leverage to ensure good service to all of our members, regardless of size.
JHC: If you could change one thing about the way your purchasing coalition works, what would it be?
Brown: I’m not sure what I’d change, but I have a wish list. I would love to have all of our members be able to travel for HEc, Premier, AHRMM and other meetings, to take advantage of the learning and networking opportunities they present.
JHC: How do you envision HEc in five or so years?
Brown: Given the rate of change in healthcare right now, the only thing I’m sure of is that we’ll be listening to our members, trying to anticipate – [rather than] react to – their needs in such a way that they will keep us incorporated in their organizations as an integral part of their operations.