Healthcare Business News

Cleveland Clinic-VHA venture seeks to curb supply costs

By Jaimy Lee
Posted: February 5, 2013 - 5:00 pm ET

The Cleveland Clinic is the latest hospital system to form a joint venture that aims to address the rising costs of hip and knee implants, stents and other pricey physician preference items.

The Cleveland Clinic previously handled purchasing of physician preference items internally and contracted with Premier healthcare alliance on other supplies. The system in the process of moving its contracting to Novation, VHA’s group purchasing organization.

The joint venture with VHA, Irving, Texas, is similar in some respects to SharedClarity, a for-profit venture between Dignity Health, a large San Francisco-based health system, and the insurer UnitedHealthcare. That partnership also seeks to manage the costs of physician preference items.

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As the pressure to cut costs and improve quality becomes more and more of a reality for hospitals, many providers are looking to reduce supply costs and are testing out new ways to reduce costs, standardize and improve utilization.

The Cleveland Clinic is no different. Under the direction of Dr. Delos Cosgrove, the Clinic’s president and CEO, the 11-hospital system has reduced supply chain costs by $155 million in the last three years, said Bill Donato, executive director of the Cleveland Clinic’s supply chain division. However, he added there is still a need to further reduce costs and make the supply chain more efficient.

“I think everyone would recognize the healthcare supply chain is broken,” Donato said. The system spends about $1.6 billion a year on supplies and services, including $180 million on implantables, according to Donato.

The Clinic owns 60% of the joint venture. Donato said that while the system is the venture’s “No. 1 client,” there are plans to eventually bring in other VHA members, Cleveland Clinic affiliates and other organizations.

A Premier spokesman said in an e-mailed statement that the “alliance's very large hospital membership in the Ohio region is collaborating to achieve population health management and to deliver high quality, cost effective care.”

“Increasingly, however, our strategies have diverged with those of the Cleveland Clinic,” the spokesman said. “We hope to collaborate with the Clinic in the future.”

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