Publisher’s Letter February 2012

2012 Complexities

Time sure flies when you’re having fun. We have been having fun the last few years, right? With the complexities of emerging contracting and distribution models, and the implementation of reform, the last few years have been difficult in our industry. It’s only going to continue to get more complex.
Supply chain leaders from our nation’s smallest hospitals to the largest IDNs are more sophisticated than ever, and deploying more sophisticated sourcing disciplines. It amazes me that as we explore supply chain processes within hospitals and IDNs, we see the incredible variability in how they source facility to facility.

Many organizations are very loyal to their GPO, and many organizations use the GPO to customize a portfolio that best meets their needs. That customization may include a regional aggregation opportunity though a Regional Purchasing Coalition, or even through a virtual aggregation organization where large systems collaborate and prioritize contracts that their GPO facilitates for them.

Hospitals and IDNs are continually evaluating these contracting opportunities. I think the variability on how they source will continue to get more complex. We are even hearing that ACOs are in talks with suppliers in developing formularies. This trend will emerge quickly in 2012 where payers are more involved in supplier selection and negotiation.

It seems like the value analysis process is getting more sophisticated as well. Suppliers are frustrated with what they see as an increasingly arduous and redundant process with GPOs and IDNs. Frankly, I don’t see this reversing. I believe more and more evaluation will continue to lengthen the product conversion timeline.

This year and the coming few years will continue to be the most complex for hospital and IDN supply chain organizations. The stakes are so high and the cost is so great that they all have to do their very best to be good stewards of their organizations’ resources.

I hope 2012 brings you all your professional and personal hopes. Thanks for reading this issue of The Journal of Healthcare Contracting!

About the Author

John Pritchard
John Pritchard is the publisher of The Journal of Healthcare Contracting.