Thinking Big – At a Small Price

A Gulf States coalition has high expectations for low supply expenses.

Gulf States Purchasing Coalition LLC had a lot to celebrate last New Year’s Day. On Jan. 1, 2011, the regional purchasing coalition officially transitioned from the Gulf States Sourcing Collaborative into a Limited Liability Company (LLC) designed to further aggregate its purchasing volume and achieve greater savings for its members. “The vision of Gulf States Purchasing Coalition is to reduce our members’ supply expenses and improve their operational performance,” says Doris Vaughn, director of materials management, Forrest General Hospital (Hattiesburg, Miss.). Today, the coalition includes 17 members and is open to newcomers, provided “they are members of VHA, located in the Gulf States region and agree to the same philosophy as the existing members of the group,” notes Vaughn.

The Journal of Healthcare Contracting spoke with Vaughn about the coalition’s goals and expectations as it approaches its six-month landmark.

The Journal of Healthcare Contracting: How is the organization laying its groundwork? What steps are the leaders taking to ensure the coalition will flourish in years to come?

Doris Vaughn: Gulf States Purchasing Coalition LLC is governed by an executive committee comprised of our member chief operating and chief financial officers. They are responsible for the organization’s leadership and direction, establishing contract priorities and serving as the governing body. An operations committee deals with day-to-day details and decisions, with regard to product selection for savings initiatives and product conversions. Sub-committees meet based on clinical specialty. Specific guidelines and expectations are spelled out in the foundation documents, and meetings deal with current and future initiatives. Goals [will be] set and plans formulated at the beginning of each year.

JHC: What advantages do you anticipate the Gulf States Purchasing Coalition will offer its members in the upcoming years?

Vaughn: The savings per year will increase over the next three years, and much of it will result from enhancements to existing contracts. The additional volume and commitment will enable the group to seek savings beyond what each hospital can gain on its own. The coalition will aggressively seek any potential initiatives, whether [in the way] of supplies, capital equipment, purchased services or pharmaceuticals. We expect to save over $5 million in annualized savings our first year.

JHC: How will being part of a regional purchasing coalition enable your members to leverage their buying power?

Vaughn: Through the VHA Gulf States Purchasing Coalition, participating member organizations act as a virtual system when contracting with suppliers. By synchronizing contracting decisions and consistently bringing the entire group’s committed purchasing volume to suppliers, the coalition targets significant cost savings through improved pricing across a wide range of product areas.

JHC: Is this something your members should become better and smarter at over the years?

Vaughn: Absolutely. By meeting with each other monthly, the committee is learning to make decisions together, act and speak as a group.

JHC: Can you explain your process whereby your supply chain executives meet and make their decisions? How often do they meet and how do they arrive at purchasing decisions?

Vaughn: The operations committee, which meets at least monthly, is an advisory committee empowered to make recommendations to the executive committee regarding all matters of the coalition operations. The committee is authorized to make binding decisions on behalf of the coalition, as directed upon specific advance authorization from the coalition. The operations committee develops and proposes written guidelines for operations of the coalition, which may be amended from time to time by the executive committee, upon the request and recommendation of the operating committee. The operating committee is responsible for assessing the performance of any person or party providing day-to-day administration and operational services for the coalition, and it will make specific recommendations regarding such performance to the executive committee. (All members have a vote and a voice in our meetings.)

JHC: Does the purchasing coalition only work off of the GPO’s contracts?

Vaughn: We work mostly through Novation contracts. We utilize VHA and Novation to create a network-specific portfolio by leveraging a mix of national and custom contracts. Our coalition considers all initiatives that have the potential for substantial savings.

JHC: How difficult does it appear to be to get buy-in from each of your facility’s physicians and staff when it comes to purchasing off the coalition’s contracts?

Vaughn: Strategic planning plays a critical role in the process. Clinical areas are included in sub-committee meetings, and consistent communication occurs between the operations committee, the sub-committee and the clinical staff. Value analysis committees in each facility are also important, and clear communication with physicians regarding product trials and savings, clinical benefits and requests for physician support are critical. The buy-in from staff and physicians at each facility depends on both the reliability of the product being considered, as well as how successful the hospital is in its value analysis process.

JHC: If you could change one thing about the way your purchasing coalition works, what would that be?

Vaughn: The large geographical distance between facilities. This makes it inconvenient for facilities to meet without spending at least one to two days because of travel time. I believe that there are definite benefits in meeting face-to-face instead of via conference call, because the members of the coalition are removed from the distractions of their office and able to focus on the meeting agenda and one another.

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