The Premier hospital alliance will put a wrap at the end of the month on its largest-ever group purchase of capital medical equipment -- a consolidated order for magnetic resonance imaging scanners expected to top $100 million.
Although small in comparison with the $8.5 billion Premier expects to funnel this year through traditional supply contracts, the mega MRI purchase likely will account for more than 10% of the $800 million in MRI sales expected the U.S. in 1997.
As of late last month, 66 hospitals had signed letters of intent to buy MRI scanners and ponied up $5,000 each in earnest money for the deals, Premier says.
More hospitals are expected to join after kicking the tires of equipment displayed at the Radiological Society of North America meeting last week in Chicago.
"The month of December is going to be very, very busy for us," says Pamela Parker, director of group buys at Premier's office in Westchester, Ill.
Unlike some open-ended deals, the MRI scanner purchase requires that hospitals commit to the contract and buy within a three-month period ending Dec. 31.
Historically, 75% to 90% of committed hospitals actually place orders, Parker says. Dropouts are primarily hospitals that fail to win board approval of their planned purchases.
Consolidating capital purchases is proving popular with member hospitals and vendors, Parker says. Buyers receive better pricing than they could get on their own. Vendors, in turn, get the group's pledge to "make the best effort to keep pricing confidential," she says.
That means, for example, Premier hospitals only learn final equipment prices after they commit to purchase and are prohibited from using the information to bargain elsewhere. Hospitals in the group purchase of MRI devices also get preferential pricing for equipment service contracts and financing.
For only the second time in a group buy, Premier is going with two vendors instead of a single contractor. They are General Electric Medical Systems, Milwaukee, and Siemens Medical Systems, Iselin, N.J.
Financial terms of the deal have not been disclosed. Parker estimates Premier hospitals will save 10% to 12% under the contract, as calculated from bids hospitals already had on the table and from previous Premier agreements.