A Baxter International contract with Duke University Medical Center departs radically from the usual relationship between vendors and hospitals.
Under it, Baxter and Duke will split the savings and costs if they teach physicians to use fewer or less expensive supplies. Baxter recently signed a contract that rewards the Deerfield, Ill.-based company for reductions in hospital supply expenditures but doesn't penalize it otherwise (June 27, p. 48).
The Duke contract, effective Sept. 1, will draw Baxter into the practice of medicine at the 1,008-bed hospital.
In the coming months, surgeons and other professionals at Durham, N.C.-based Duke will meet with Baxter representatives to sort out the best products for surgical procedures. They'll pick one supplier for certain products and outline their optimum use. Baxter has tested this process at other hospitals (Feb. 28, p. 45).
Many hospitals, on their own, are in the midst of similar efforts to cut waste and leverage better prices. Other vendors, too, are negotiating "shared-risk" contracts (May 2, p. 68).
Baxter and Duke first will target surgical procedures likely to produce the greatest savings. Baxter's gain or loss, however, will reflect total supply cost for all surgical procedures.
Its bills will be reconciled each quarter to a targeted supply cost per surgical procedure, set annually.
Duke has agreed to buy about $200 million in Baxter-manufactured products over the five-year contract. The volume of goods that Baxter now distributes to Duke also will grow.
Some observers call shared-risk contracts a promising way to cut supply costs and fix them quarterly (See related story, p. 22). As cost pressures grow, such contracts might lead to vendor capitation, the observers argue.
Meanwhile, 51 of the 67 hospital members of the Oak Brook, Ill.-based University Hospital Consortium signed a three-year pharmaceutical distribution deal, reportedly valued at up to $5 billion, with FoxMeyer Corp., a Dallas-based distributor.