VHA is presenting the battle between itself and Premier, the other large hospital alliance, as one of quality vs. price alone.
It recently published its second book of case studies showing how VHA hospitals are saving money by standardizing products and controlling utilization. In an accompanying press release, VHA Senior Vice President Bill Elliott said: "This book supports our stance that the price of an item isn't everything. No matter how hard you squeeze, at some point a sponge stops yielding water."
VHA isn't giving up on trying to "meet or beat Premier on price," VHA spokesman Lynn Gentry said. "We just think there is more to life than price itself."
Premier said that it, of course, cares about more than price.
"If you take a look at many of our new contracts, there are value-added aspects," said Lynn Detlor, president of Purchasing Partners, Premier's purchasing arm. "Price certainly is predominant, but we want to make sure of things like what it costs for distribution, the service levels of companies."
Alliance and group purchasing organizations are trying hard to differentiate themselves in a changing market.
Hospital mergers are reducing the number of their potential members, and hospital competition is increasing the pressure on groups to save members money. The spotlight on groups probably grew more intense with the recent formation of Premier (Nov. 27, 1995, p. 2) and its aggressive negotiations with vendors.
VHA and Premier are the most visible foes by virtue of being the top two purchasers of supplies. Irving, Texas-based VHA represents about one-fifth of community hospitals and an estimated $6.7 billion in 1996 contract purchases. Premier represents about one-third of community hospitals and $10 billion in contract purchases.
Other groups also are vying for hospital loyalties and staking out their positions in the marketplace. Louisville, Ky.-based MedEcon Services and St. Louis-based AmeriNet, for example, are trying to show how flexible they can be in meeting members' needs (Sept. 25, 1995, p. 49). MedEcon and AmeriNet are the third and fourth largest buyers of supplies, respectively, according to the 1995 MODERN HEALTHCARE*purchasing survey. Each is negotiating special contracts for hospital networks and systems that meet certain criteria.
The VHA book highlights projects that could save individual hospitals hundreds of thousands of dollars, and in some cases more than $1 million, in supply costs.
For example, Sutter Health, Sacramento, Calif., worked with Dietary Products to standardize its purchases and identify lower-cost ingredients that could be used while maintaining patient satisfaction.
Sutter said it reduced food and supply costs by $268,000, or 7.2% of its food and supply budget.
The Custom Sterile division of Baxter Healthcare Corp. showed St. Francis Ministry Corp., Wichita, Kan., how to reduce the costs of its custom procedure trays by 5%, or $39,000. The program examined whether sterile trays were always worth the extra costs of packaging and labor.
Pendleton Memorial Methodist Hospital, New Orleans, has saved about $960,000 in the past four years since adopting energy-efficient environmental systems. Johnson Controls, which worked with Pendleton, projected $2 million savings over a 10-year period, although the hospital is now $40,000 ahead of projections.