SPOG members have reaped benefits beyond aggregated volume and cost savings.
Being part of a purchasing coalition can lead to lower costs – and more. The folks at Southern Premier Owners Group (SPOG) can vouch that it is also an opportunity for its members to network and share best practices. Since its inception in 2003, the group has gotten better and smarter at doing so. Not only that, throughout the process, SPOG has continued to add members and reduce costs, largely explaining its current success.
The Journal of Healthcare Contracting recently interviewed SPOG co-chairs Todd Daniel, director materials management, Baton Rouge General Health, and David Mimms, system director materials management, Rush Health Systems, as well as Premier region director Kary LeBlanc, Premier senior region director David Turner and Premier region vice president Mark Slone.
The Journal of Healthcare Contracting: What was SPOG’s original mission?
SPOG: Our original mission in 2003 was to form a coalition to aggregate volume and drive down costs; to share best practices among our hospitals; and to enable members to network.
JHC: Has the coalition grown in size since it began?
SPOG: SPOG started out with 14 owner members. Today, it has grown to include 18 owner members and 66 affiliates (most of which are acute care facilities). We are definitely open to new members joining. We had approximately 10 hospitals join us last year alone, five of which were out of Kentucky. There’s more opportunity in Kentucky, as well.
JHC: How has being part of a purchasing coalition enabled members to leverage their buying power?
SPOG: We have been particularly successful recently at driving down costs in three areas: med/surg distribution, radiopharmacy and endomechanical. With regard to a recent endomechanical contract, the supplier requested buy-in from 100 percent of the coalition in order to get the price we wanted. Three hospitals initially were not on board, but we were able to accomplish that. The three hospitals, which had to convert their contracts to become compliant, saw $200,000 in savings. The group as a whole saw $800,000 in savings. It’s difficult – but not impossible – to achieve 100 percent compliance. When the supplier’s offer is compelling, the group will be motivated.
JHC: How much total savings has the coalition achieved since its start in 2003?
SPOG: We have saved over $20 million on contracts over the past 10 years. This is above and beyond the savings members can achieve on their own, working through Premier.
JHC: Please describe your relationship with Premier.
SPOG: We have an outstanding relationship with Premier. We typically work off of Premier contracts (although it’s not unheard of to consider off-contracts). In fact, today, we have over 200 Premier SPOG contracts for members to work from.
JHC: Have you found that the coalition is providing members with more advantages than originally expected?
SPOG: There are many things we do as a coalition. Aggregating spend and leveraging buying power has been a driving force of SPOG membership. But, beyond that, this has been an opportunity to get out and network, and share best practices. We continually work together to improve on what SPOG does.
JHC: Please explain the process whereby your supply chain executives meet and make decisions.
SPOG: We schedule four face-to-face meetings throughout the year (the last of which is SPOG’s annual cost and supply summit), which rotate at different SPOG facilities. We also hold monthly meetings to follow up on the face-to-face meetings. At the end of the year, we invite our suppliers to join our annual cost and supply summit. Generally, between 75 and 100 suppliers attend. In addition to enabling vendors and members to interact, we hold educational tracks, a vendor expo and a reverse trade show. We encourage our members to interact with the vendors at this meeting, and get a very good response from them. And, some suppliers reach out very early to inquire about participating.
JHC: How do you ensure that the interests of each of your member facilities are met?
SPOG: We all have the same general obstacles standing in our way. The key is to work as a cohesive team. All of our members are invited to attend our four face-to-face meetings, as well as the monthly meetings. We share information and try to be as transparent as possible. All 66 members receive minutes to the monthly meetings and are invited to provide feedback.
JHC: If you could change one thing about the way your purchasing coalition works, what would that be?
SPOG: We are going through some re-organization whereby we are looking to get member buy-in upfront – not at the end – of the contracting process. We have worked through an exercise in which we have reviewed our current process for bringing in suppliers and contracts and getting member buy-in. We are looking at how we can make decisions up front regarding the direction in which we would like to move, and then work with the supplier to make that happen. This has been a coordinated effort on the front end, and we have seen great success with regard to how we can drive market share.
JHC: How do you envision your purchasing coalition in the next five years?
SPOG: We definitely are in a growth mode, but we want to ensure that all of our members are on the same page, moving in the same direction as we grow. Much of our growth depends on healthcare reform. It will call for communication and an understanding of one another’s challenges in order to work together and move forward as a cohesive team.