Simplified pricing has become the selling point of at least two new group purchasing contracts.
The effort seeks to sidestep rebates and prices for groups of products, or matrices, which so confuse supply prices that calculating product spending can be like finding your way out of a maze.
The new Premier hospital alliance, for example, bit on a proposal for uniform pricing in its dual-source contract for forms. Comparison shopping won't be any easier, though, because the second contractor continues to use matrices.
Matrices, which replace individual prices, dominate the forms industry, because many hospitals use 1,000 or more unique documents.
Although less onerous than individual prices, matrices still impose high administrative costs, said Hugh McBride, vice president of healthcare services at Uarco, Barrington, Ill. "Administering complex matrices is not value-added-not for us, not for hospitals," he said.
He figured Uarco, the No. 3 company in the forms industry, needed a creative proposal to win a piece of the $1 billion Premier contract. Half the business of the five-year contract would move Uarco's market share to 20% from 12%. "This is the kind of deal that forces people to rethink their strategies," McBride said.
Surveys showed that one of hospitals' biggest beefs with forms is pricing. Uarco pitched a single price per ply, or sheet. The price per ply was based on an average of Premier hospitals' historical unit costs for forms. Actual prices weren't disclosed.
Hospitals no longer need worry about whether Uarco updates its matrices regularly, McBride said. Additionally, they easily can estimate their cost.
Uniform pricing makes particular sense with Premier, because the alliance mandates compliance with its contracts, McBride said. Tiered pricing, which lowers prices as purchase volume rises, might be more appropriate when hospitals need motivation to use contracts.
The second contractor in the Premier forms agreement is Standard Register of Dayton, Ohio. Its executives weren't available to discuss their proposal in time for this story.
VHA, an Irving, Texas-based hospital alliance, also replaced pricing matrices in a new program. The program, with Advance Paradigm of Irving, provides pharmacy-benefit management services to HMOs owned by VHA members.
HMOs often complain they can't easily calculate their total costs for such services, said Jeff Hayes, vice president of development services at VHA. "Our program will provide a clear picture of the fees, incentives, rebates and discounts," he said.
Don't expect matrices, rebates and discounts to go away. Suppliers use such pricing systems partly to motivate hospitals to buy on contract. As important, the unwieldy systems make price comparisons difficult. That serves the purposes of both hospital alliances and suppliers.