Medical Distribution Solutions, Inc.
GPOs
Medical Distribution Solutions, Inc.
Objective
Present a comprehensive view of the
GPO/IDN/RPC contracting arena.
GPOs by the numbers
GPOs 2008 Contract Throughput 2009 Projected Throughput Hospitals Served 2008 Hospitals Served 2009Novation $35.6 billion $36.0 billion 2,490 2,530 Premier $32.0 billion $33.0 billion 2,100 2,300 MedAssets $19.0 billion $20.0 billion 3,100 3,300 HealthTrust $14.0 billion $14.0 billion 1,425 1,370 Broadlane $10.0 billion $10.3 billion 1,175 1,130 Amerinet $6.6 billion $7.0 billion 2,350 2,500
GPO Market Share
GPO 2005 % of Total 2006 % of Total 2007 % of Total 2008 % of Total Novation(VHA, UHC &
Provista) 25,400 26.1% 31,518 27.7% 33,064 27.1% 34,797 26.9%
Premier(Incl. Innovatix &
GNYHA) 25,300 26.0% 28,900 25.4% 30,870 25.3% 33,000 25.5% MedAssets 15,000 15.4% 15,000 13.2% 17,000 13.9% 18,000 13.9% HealthTrust(+Consorta beginning 2007) 7,200 7.4% 8,900 7.8% 10,300 8.4% 13,500 10.4% Broadlane 6,500 6.7% 8,700 7.7% 9,700 7.9% 10,000 7.7% Amerinet 6,400 6.6% 6,500 5.7% 6,500 5.3% 6,800 5.3%
Govt(DoD + VA) 3,700 3.8% 5,200 4.6% 5,900 4.8% 6,300 4.9%
Consorta* 4,230 4.3% 5,159 4.5% 4,800 3.9% 2,700 2.1%
Other GPOs 3,570 3.7% 3,800 3.3% 4,000 3.3% 4,200 3.2%
Total GPO Volume 97,300 100.0% 113,677 100.0% 122,134 100.0% 129,297 100.0% *Consorta joined HealthTrust in 2007 but still does some of its own contracting.
GPO’s Now Serve Diverse Provider Types
(Beyond Acute Care)
Major GPO Membership 2008[1]
GPO Acute & IDN Alt LTC Physicians Total *
Amerinet 1,912 2,911 3,089 15,657 23,569 Broadlane 931 4,155 405 4,730 10,221 HealthTrust 1,052 1,099 352 1,037 3,540 MedAssets 1,673 2,978 7,049 24,074 35,774 Novation 2,866 7,278 1,551 28,161 39,856 Premier 1,781 9,980 13,500 26,056 51,317
Contracting for non-acute facilities
• 63% say alternate sites have become more
pro-active in contracting
• 68% say GPOs have marketed to their alternate site
facilities
• 30% believe their purchases on contract will grow
over 20% in the next 3-5 years
Non-Acute Members
Fig. 2. Reported GPO Non-Acute Mem bers hip
2,600 1,800 49,536 1,500 36,990 34,101 21,657 9,290 2,488 0 10,000 20,000 30,000 40,000 50,000 60,000 Medi Grou p Onm ark Prem ier ( incl. I nnov atix & GN YHA) NOA (Nat iona l Onc olog y Allia nce) Nova tion (VHA , UHC & Pr ovis ta) MedA sset s Amer inet Broa dlan e Healt hTru st (in cl. Co nsor ta) C o n tr a c ti n g M e m b e rs
Operating Income
Operating Income ($ Millions)0.3 51.6 156 386.4 0.4 60.3 140 351.1 M HA Solutions Cons orta He althTrus t Novation 2007 2006
GPO Share back/Cash Dividend
to Members
Leading IDN’s in Largest MSA’s
Top Five Metropolitan Statistical Areas (MSAs) by Population
Rank MSA/IDN Local Inpatient Market Share 1 Los Angeles-Long Beach, CA (population 9.14 million)
1 Los Angeles County Department of Health Services 13% 2 Kaiser Permanente 10% 3 USC Health Sciences 8% 2 New York, NY (population 8.57 million)
1 New York Presbyterian Healthcare System 24% 2 NYC Health & Hospitals Corporation 16% 3 Continuum Health Partners 9% 3 Chicago, IL (population 7.72 million)
1 Advocate Health Care 14% 2 Resurrection Health Care Corp 9% 3 Rush System for Health 5% 4 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH (population 5.77 million)
1 Partners HealthCare System Inc 16% 2 South Shore Health & Educational Corp 10% 3 Caritas Christi Health Care System 10% 5 Philadelphia, PA-NJ (population 4.95 million)
1 Catholic Health East 22% 2 Fox Chase Network 16% 3 Jefferson Health System 16%
The State of Healthcare
Contracting-IDN’s
Total IDNs
Shareholders
of a GPO
System IV
140
88
System III
470
101
System II
685
60
Medical Distribution Solutions, Inc.
HIDA GPO Report – sponsored by The MAX
Average # of GPOs per hospital is 2.4
Average # of GPOs per IDN is 1.7
The C-Suite and Supply Chain
• Executives now believe Supply Chain is a strategic initiative
• 35%-45% of a hospitals budget is supply chain
• CEOs see the greatest impact on supply chain from;
• Degree of product standardization
• Quality of contracts
• Product pricing
• Efficiency of supply chain processes
• Physician cooperation
The C-Suite and Supply Chain
• How are they measuring process efficiency and process improvement?
– 74% Supply Expense – 73% Cost Savings – 36% FTE Reductions
• Hospitals and quality management programs
– Materials management 26% – OR Management 25%
– Emergency Department 22% – CS/Sterile Processing 20% – Surgical Supplies 17%
What is a Regional Purchasing Coalition?
•
Group of healthcare providers
•
Voluntarily combining purchasing volume
•
To access higher tier pricing
What is a Regional Purchasing
Coalition?
•
RPC members
almost always
in same GPO
– Premier members band together to aggregate volume against an existing Premier contract
•
Vary in size and institution type
– Small independent hospitals
– Large IDNs
•
Membership through parent IDN
– Physician practices
– Ambulatory surgery centers
Regional Purchasing Coalitions
We have identified 125 RPCs that represent 820k Beds
29m Admissions
127m Outpatient visits
Co-operative Services of Florida (LeeSar) Carolinas Shared Services
Illinois Purchasing Collaborative Coastal Cooperative of New Jersey
RPC Facts*
• The MAX
®identifies 125 Regional Purchasing Cooperatives
nationally
• However:
– 19 sites are subsets of various federal government procurement functions – DOD, VA, DOJ, FSS,
TRI-CARE
– 9 are HCA Regional Purchasing and Distribution Centers
RPC Facts
“Open Market” RPC Breakdown GPO RPC Sites Amerinet 14 Broadlane 2 MedAssets 13 Novation 23 Premier 34 Total 86
• 86 of 97 “Open Market” RPC’s are aligned with at least one major national GPO – 89%
• Of 86 RPC’s aligned with national GPO’s, all but 4 are
RPCs by the numbers
We surveyed 226 Hospital/IDN Supply chain executives
40% were not part of an RPC
Less than 25% of their purchases are currently through
RPC Contracts
How Suppliers Can Be
Successful with RPCs
1) Look at RPCs as opportunity rather than obstacle
2) Recognize RPCs as systems and aggregators
3) Respect boundaries:
RPC members commit to
not
hold discussions
with vendors until initiative is final
Approaching individual members won’t get you
the sale--
will
make a bad impression
Quarterly survey to pool of 290
Supply Chain Executives
• 44% of respondents have been in the healthcare
contracting arena for over 20 years.
• 71% of the respondents consider Novation
(VHA-UHC-Provista), Premier or MedAssets
their primary GPO.
How satisfied are you with your primary
GPO?
• Very Satisfied 50%
• Somewhat Satisfied 37%
• Neutral 7%
• Somewhat Dissatisfied 4.5%
• Very Dissatisfied .5%
Over the next 1-3 years, do you expect your purchases for
supplies and services from your primary GPOs contracts…..
• to be significantly less than 2007 volume 5%
• to be slightly less than 2007 volume 3%
• to be about the same as 2007 volume 19%
• to increase by 1-9% annually 50%
• to increase 10-14% annually 14%
Many contracted suppliers are often under-whelmed
by the sales volume they see from GPO contracts.
Why do you think this happens?
• 19% say Suppliers have unrealistic expectations.
• 20% say Suppliers do not do enough to drive
compliance of contracts.
What are some characteristics
of your very best suppliers?
• Too many suppliers don't want to do the work needed to sell their product once they have a GPO contract…… Getting the GPO contract gives them the license to sell, but it still requires effort and good representation.
• They know the contracts. They understand group purchasing. My best suppliers can help me maximize the contract, not just improve their sales.
• They get to know our organization and how we operate.
• They focus on patient safety and improving patient outcomes in the most effective ways.
• They work through distributors & the GPO representatives to identify true opportunities as opposed to force feeding contract "terms" regarding compliance. It's not always about the $'s...
People are talking
greater transparency and better tools for evaluating and weighing clinical benefits vs. the cost of devices, equipment and products will play a role in successfully
meeting the challenges
Karyn Gattermann
Corporate Vice President
Continuum Health Partners Inc. New York, N.Y.
People are talking
We will probably see IDNs band together, work in small groups, and increase volume for better pricing. They will do this with or
without GPOs
~George Hersch
People are talking
The ability to commit has provided us with access
to significant discounts and programs that would
otherwise be unobtainable…...
Mark Grove
Associate Executive Director, supply chain and alliance services Scott & White Healthcare
People are talking
Our industry will see company goals and incentives tied to their degree of success in helping hospitals and care givers improve patient outcomes, patient safety, operational efficiencies and costs
Gary McMann
Director supply chain operations Billings Clinic
Trends to Watch
We identified 284 Hospitals/IDNs that
eliminated 23,233 jobs in 2008
2009 Job cut results
12,711 3,314 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Q4 2008 Q4 2009Trends to watch…
• Regional Purchasing Coalitions
Healthcare Coalition of Texas Western NC Health Network
Upper Midwest Consolidated Services Center
Trends to watch…
What does the future hold?
• Aggregation will increase
• Alternate site contracting is here to stay
• Connecting Quality and Cost is the new consumerism of healthcare.
• GPOs will continue to differentiate and grow
