A palm reader entertaining attendees of the annual meeting of the Health Industry Group Purchasing Association in Orlando, Fla., probably had as much right to predict the future of healthcare supply purchasing as the experts the association assembled.
The confab of more than 500 hospital execs, group purchasing honchos and supplier representatives earlier this month got an earful on what the next few years are likely to bring for healthcare purchasing.
First, the good news, at least for those in the buying business. Healthcare spending will continue to outpace inflation and almost every other sector of the economy, said Donald Muse, a Washington economist hired by the HIGPA to forecast health industry trends. As a result, purchasing executives will have more to manage.
In particular, Muse predicted that over the next decade the potential market for healthcare purchasing through groups would grow at 5.8% annually-more than twice the growth rate for the overall economy.
The bad news came in the form of tough, unanswered questions, the main one being what roles hospitals and group purchasing organizations will play in managing healthcare supply spending. The seemingly perennial debate about whether beefy hospital systems are better off purchasing alone or through groups remained hotly contested and unresolved.
According to some of the experts, GPOs have the advantage of contracting expertise, access to the latest information on price and market developments, and economic leverage.
On the other hand, emerging healthcare giants known as integrated delivery systems have the benefits of more-selective clinical choices, speed, and, well, economic leverage.
In debating the relative strengths, those eager to lump all GPOs together do so at their own risk, the experts said.
"If you know one GPO, you know one GPO," said Todd Ebert, executive vice president of the St. Louis-based GPO AmeriNet. Overlooking the diversity of the groups' approaches to serving their customers is a mistake, he explained.
Regardless of who winds up controlling purchases, the debate continues over the value of loyalty between suppliers and their customers.
"Long-term partnerships create complacency and a lack of attention to detail," said David Gjerdigan, logistics leader for material services at Allina Health System, Minneapolis. He and others at the conference advocated product-specific, shorter-term contracting.
Lynn Detlor, president of Premier Purchasing Partners, San Diego, stumped for the multiyear corporate approach his group uses.
Ford Motor Co., a master of supply-chain management, doesn't deal with 1,500 vendors, Detlor said. Instead, Ford works collaboratively with a relative handful of vendors over the long haul.
Healthcare purchasing groups should note the lesson and do the same, he said, adding "I'd like to do a few things well rather than many things poorly."
With Halloween on the horizon, HIGPA Executive Director Robert Betz prompted several executives to share the nightmares that keep them up at night.
The bankruptcy of Pittsburgh-based Allegheny Health, Education and Research Foundation is a "very scary thing for distributors," said Robert Zollars, group president at Cardinal Health, Dublin, Ohio. "We're really afraid that could . . . recur, and there's a lot of exposure there," he said.
Distributors are particularly vulnerable creditors to hospital failures, because the business has razor-thin margins on very large sales volumes. In AHERF's case, the large unpaid bills to distributors ranked them among the largest unsecured creditors.
Consolidation among suppliers, healthcare customers and purchasing middlemen seemed to scare everyone. The big question was, who will buy whom? Speaking for most purchasing execs, David Roesler, senior vice president for operations at Chatsworth, Calif.-based COHR's Purchase Connection, said, "We want to be a consolidator . . . not a consolidatee."
The mergers of giant product manufacturers on the one hand and huge healthcare systems on the other are challenging even for the mega-buying groups left standing.
To respond to that, `'group purchasing organizations really need to seek out niches and new markets . . . so they don't get squeezed," said Ira Miller, vice president of the multihospital systems business group at Picker International, Cleveland.
Zollars had a different prescription. Like distributors, he said, groups feeling the squeeze between mega-manufacturers and jumbo customers must bolster "market share value" for vendors while wringing cost out of the supply chain for even the biggest integrated healthcare systems.
Despite dire predictions, the perpetual winnowing of the group purchasing field has yet to extinguish its vibrancy.
Witness the swarm of national supplier account reps who clogged Consorta's booth at the HIGPA meeting. Consorta is a large Catholic buying group that was formed in July. "We're seeing early (contracting) results that are very promising in delivering value to our shareholders," said John Strong, president and chief executive officer at Consorta, Rolling Meadows, Ill.
Recently, public action has spewed out of the frustration of small manufacturers, who think they are being shut out of hospitals because they lack contracts with some major groups. Earlier this month, an advocacy group called For Patients' Sake asked Congress to look at GPOs' contracting behavior.
But Derwood Dunbar Jr., president and CEO at Magnet-a Harrisburg, Pa.-based GPO that has signed contracts with many small suppliers-offered a lesson in salesmanship to the disaffected.
Beware of the brushoff from the hospital materials manager who says, "I can't do this because my group won't let me," he said. "It's the No. 1 way of getting rid of a salesperson."