Strong member commitment has helped one coalition expand from a small regional organization to one that serves members nationwide.
When Louisville, Ky.-based Alliant Purchasing formed in 1990, it was with the intention of helping independent community hospitals obtain the same supply chain pricing concessions offered to larger IDNs. It wasn’t long, however, before the regional acute-care hospital coalition evolved into serving both acute and non-acute-care providers across the United States. The Journal of Healthcare Contracting recently spoke with Mike Stigler, president, Alliant Purchasing, about the coalition’s successful track record and the role it has played for its members.
The Journal of Healthcare Contracting: How has Alliant Purchasing grown in size since it began?
Mike Stigler: Growth has been achieved through new member participation, affiliations with aggregation groups and through acquisitions of smaller GPOs. Today, Alliant Purchasing serves more than 140 hospitals and 7,400 non-acute members across 50 states. Growth in members continues to be a primary focus of the organization and an important component of our contracting strategy.
JHC: Have you found the coalition is providing members with more advantages than originally expected?
Stigler: Alliant’s original goal was to leverage volume in a tight geographic region to obtain pricing advantage for its members. Growth in membership and in purchasing volume has allowed Alliant to create aggregation opportunities for its members that have exceeded original expectations. Our membership growth has provided Alliant with the leverage to negotiate agreements for services not offered through our GPO partner and to develop financially beneficial relationships with distributors. In addition to supply chain, we have helped our members develop shared service programs for mobile MRI and mammography services. These opportunities were not envisioned in the original business plan for the organization.
JHC: What are the top three initiatives your regional purchasing coalition has pursued in the last 12 months?
Stigler: We have:
- Built out a national footprint of personnel to serve our members in the states where we have a concentration of clients.
- Established a business partner program with our major suppliers to help improve communication, resolve issues and drive savings initiatives for members.
- Started a monthly collaborative call with our affiliation partners to develop contracting strategy and improve communications.
JHC: How has being part of a regional purchasing coalition enabled members to leverage their buying power?
Stigler: Alliant utilizes its members’ commitment to collaborate for the development of aggregation strategies, group buy opportunities and the development of shared service partnerships. Our field service team has been instrumental in helping our members understand contract utilization and ensure proper vendor pricing. Alliant has included members in workgroups that develop contracting strategy for major agreements, such as distribution. The goal of all these initiatives has been to strengthen collaboration and commitment and better educate our members on the value of the Alliant program.
JHC: How much savings did the coalition achieve in the first year, and how has that increased since?
Stigler: For acute care members joining Alliant, the first year savings has ranged from 5 to 9 percent, depending on their predecessor GPO and their level of contract compliance. For non-acute members, our distribution agreements and contract aggregation pricing has produced savings as high as 22 percent, which is phenomenal for some members. Annually, we establish the contracting strategy calendar for the coming year, which includes targets for contract concessions that we plan to achieve.
JHC: Please explain your process whereby your supply chain executives meet and make their decisions.
Stigler: We have monthly contracting meetings with our affiliation partners to discuss contracting issues and strategy. We have created steering committees for pharmacy, laboratory and distribution to make collaborative decisions regarding contracting strategy. Our staffing model includes personnel dedicated to new member development, field service and support and contract negotiation.
JHC: How do you co-exist with your GPO? For instance, does the purchasing coalition only work off of the GPO’s contracts?
Stigler: Alliant has had a strong relationship with Premier, Inc, since its inception. Our members, affiliates and personnel serve on the Premier steering committees for strategic advisory, surgical, food and non-acute to advise Premier on contracting strategy and provide a conduit for communication between our members and Premier. In addition, Alliant has a portfolio of agreements that are structured to provide members access to goods and services that Premier does not contract for.
JHC: How do you ensure that the interests of each of your facilities are considered and that each facility’s needs are met?
Stigler: Alliant has a dedicated service team to serve our member facilities. To ensure that we are meeting member expectations, we have developed an annual member survey to gauge member perceptions of Alliant’s service, contracting and value. We utilize these tools to assess our performance and make adjustments where necessary to enhance our value to our members.
JHC: Is it difficult to get buy-in to the coalition’s contracts from each of your facility’s physicians and staff?
Stigler: We suspect that Alliant members have the same resistance to change that most organizations do. We believe that when presented with meaningful data that helps them understand the implications of their behavior, they will take action to improve performance. Alliant developed a hospital scorecard several years ago that we utilize to identify opportunities that a member is not utilizing. The goal of the tool is to improve contract compliance and drive savings opportunities for our clients. We have found this tool to be an effective way to have meaningful dialog that ultimately leads to change.
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?
Stigler: An advantage of our size has been the ability to get the attention of the appropriate vendor personnel to resolve member issues, such as failure to supply, product substitution, delivery issues and payment disputes. Many times, Alliant is resolving issues that affect multiple member facilities at the same time. This allows our members to focus on the needs of their organization instead of the distraction of dealing with administrative issues.
JHC: How do you envision your purchasing coalition in five or so years?
Stigler: Healthcare reform continues to drive the need for programs like Alliant Purchasing, which focus on bending the cost curve of healthcare. We see our contracting focus expanding to focus on opportunities for cost reduction in purchased-service agreements. We are investing in tools that identify member utilization of products and will use this information to benchmark utilization and identify opportunities for volume and cost reduction. We will continue to identify GPO acquisitions that enhance our market position and develop collaborations with other organizations that will allow Alliant to create value for its members. We believe that for organizations to be successful, they must have a culture that embraces the opportunities created by change; adopts technology to do things better, faster and cheaper; and develops relationships that influence behavior.