The Premier hospital alliance would add $1 billion to its $10 billion in annual contract buying under a partnership with GNYHA Ventures.
The two companies announced a letter of intent last week to turn GNYHA Ventures into a marketing agent for Premier contracts, effective July 1. The board of GNYHA Ventures was scheduled to meet this week to vote on the deal.
GNYHA Ventures, a subsidiary of the Greater New York Hospital Association, is one of the top 20 hospital purchasing groups. It represents $500 million in annual contract spending from 96 hospitals and 78 other healthcare facilities.
The company would market Premier contracts to its members and to 135 other hospitals in neighboring New York counties, a large part of New Jersey and the commonwealth of Puerto Rico. GNYHA Ventures had been working with Puerto Rico hospitals to develop a buying group.
Its members would spend $1 billion annually under Premier contracts if they complied with contract terms, said Lee Perlman, executive vice president of GNYHA Ventures. Additional purchases could come from other hospitals.
Most current GNYHA agreements would cease to exist, although the company would maintain some regional agreements, Perlman said.
He added that he believes Premier is receiving better prices from vendors than almost any other hospital organization. That is because of its size and its demand that members commit to making most of their purchases under its contracts. For example, Premier members are expected to purchase 95% of eligible products under many of its pharmaceutical agreements.
GNYHA Ventures will hire 10 to 15 additional employees to make sure its members comply with Premier contracts.
"I don't want to put our membership at risk in terms of not giving them the best pricing," Perlman said in explanation of the agreement. "And I don't want our association at risk in terms of not having revenue to fund advocacy efforts."
Premier already has a significant presence in New York and, in fact, represents 21 of the GNYHA's members. But the addition of new members and more potential spending is advantageous, said John Strong, senior vice president and chief operating officer of Purchasing Partners, Premier's buying group.
"This also creates a relationship with an organization in the New York market that has demonstrated it can effectively represent and work with hospitals in a meaningful way," Strong said. "We also believe they can drive the compliance."
Eight other organizations are affiliates of Premier under similar arrangements. Two of the affiliates, however, still are discussing the terms of their transfer to the new Premier from the founding alliances. They are Child Health Corporation of America and the American Association of Eye and Ear Hospitals, Strong said.