Recessions have a way of forcing everyone to rethink their expenditures and the prudence of each purchase. While hospitals historically haven’t had to do that with regularity, they definitely are doing it now and they are calling on group purchasing organizations and vendors to help them.
It’s an environment where fiscally minded entities like Dallas-based Broadlane thrive, said CEO David Ricker.
“In a perverse way, when times are bad, things are good for Broadlane,” he said. “What we do is help hospitals save money.”
Ricker considers Broadlane’s role to be far beyond that of a conventional GPO, which under a traditional cooperative model negotiates with vendors on hospital members’ behalf to get volume discounts on commonly used items.
“We’re not a club,” he said. “And our purchasing contracts cover virtually everything, including all types of capital equipment.”
Broadlane buys approximately $800 million in capital equipment for its clients, covering the gamut from CT scanners and MRIs to nuclear medicine cameras. Ricker says a typical hospital will spend 10 percent of its operating budget on capital equipment, but that the credit freeze and stock market nosedive have severely curtailed these purchases.
“Stock-based endowments, which hospitals depend on for income, have fallen 30 to 40 percent with the market,” Ricker said. “As a result, hospitals have become very judicious in how they spend their money. Layoffs, hiring freezes, salary cuts ... this recession has challenged the notion that hospitals are immune.”
Broadlane’s sourcing methodologies are outside the mainstream, with sole source contracts for capital equipment determined by the actual users. Ricker explains the process: “If we have 30 hospitals with budgets to buy (computed tomography) scanners, we bring them to Dallas and walk the physicians through a technical assessment process. We have them evaluate different equipment based on a set of criteria and ask them which has the best technology. They list the 15 things they consider be most important and have questions for the vendors. When the physicians leave the meeting, they have a preference. All 30 purchases are aggregated to one supplier.”
Imaging rental option
One vendor that recently signed a new agreement with Broadlane is Fargo, N.D.-based DMS Health Technologies. Steve Richter, executive vice president of sales for the company, says customers are definitely feeling a financial pinch.
“You can’t turn on the TV without hearing about the recession and healthcare has been hit especially hard,” he said. “Approximately 87 percent of healthcare organizations are delaying or canceling large projects or capital acquisitions due to limited access to funding.”
As a consequence of tightened capital budgets, healthcare organizations are forcing healthcare facilities to find alternative resources for imaging equipment, which falls squarely in DMS’ domain. By assessing customers’ need for technology, DMS customizes equipment short- or long-term rental packages to meet facilities’ needs.
As of May 1, DMS Health is the contracted supplier of diagnostic imaging, mobile shared services and interim rentals for Broadlane. The three-year agreement allows Broadlane client facilities to use DMS to access magnetic resonance imaging, CT scanners, positron emission tomography/computed tomography, nuclear medicine cameras, ultrasound monitors, bone densitometry, cardiac/angio and digital mammography mobile services.
“We’ve had relations with Broadlane for a few years now and we recognize the value they bring to it,” Richter said. “They bring economies of scale and better pricing for their clients and more visibility in the marketplace for us.”
Pricing ‘In the DNA’
When three disparate purchasing organizations combined into one in 1995, they became Premier, known throughout the healthcare industry as a mega-GPO. Yet the San Diego-based entity doesn’t define itself that way.
“We’ve moved much farther down the path of the GPO process,” contends Mike Alkire, president of purchasing. “We are a clinical supply chain services organization.”
While Alkire acknowledges that “finding the best price points is in our DNA,” he says Premier’s scope of services has become diversified and highly specialized.
“We’ve aligned ourselves around value analysis so that as high-tech drugs and devices enter the health system, executives ask us how to get a return on those investments,” Alkire said. “They want to know if they are seeing lengths of stay reduced, if care is improving and if they are seeing better outcomes as a result of that new technology. We have tools for them to think it through.”
Intelligence sharing has become a valuable commodity in the information age and Premier’s web-based databases can help members with product due diligence, clinical processes and other business strategies, Alkire said. With tens of millions of records in a database called Clinical Advisor, he said hospitals can look at myriad ways of saving money beyond purchasing.
“Yes our DNA is driving price points, but utilization is another major factor,” Alkire said. “By using this database, you can find out which physicians use the lab more than others and if there are appropriate outcomes with that usage. Or which stent provides the best outcome. With this information, we can make sourcing decisions based on usage patterns or clinical efficacy, so we’re coming full circle prior to the negotiation. We can determine clinical parity or the value associated with the appropriateness of a product.”