Looking to bring some cachet to a complex process that threatens to be controversial, GNYHA Ventures, the for-profit subsidiary of the Greater New York Hospital Association, has enlisted the help of former New York Mayor Rudy Giuliani to help it select a group purchasing partner.
The GNYHA, which has offered group purchasing services to New York-area hospitals since the 1970s, is working under a seven-year contract with Premier that will expire in June 2004. With approximately $2.3 billion in annual purchases of pharmaceutical and medical surgical supplies by 95 New York-area hospitals at stake, the process of choosing a new GPO partner is bound to be bruising, arriving in the wake of nearly two years of public scrutiny of GPO practices. Several federal investigations and a Senate panel inquiry have tried to shine a light on GPO operations, giving special attention to the nation's largest players, Novation and Premier.
The GNYHA purchasing contract represents a huge catch for any GPO. Supply purchases by GNYHA hospitals account for as much as 15% of Premier's total purchasing volume, said Lee Perlman, president of GNYHA Ventures. Perlman said he believes with the right partner, the GNYHA can double its purchasing clout to approximately $4 billion annually.
Giuliani Partners-a consulting firm headed by the former mayor that is composed of a number of senior executives from his eight-year tenure as mayor-has signed a one-year contract for an undisclosed fee. "To help select the best partner, we wanted to work with an independent consulting firm whose name is synonymous with integrity," Perlman said. Giuliani Partners offers expertise in financial management, public safety, security, emergency preparedness and leadership during crises. Group purchasing is new to the firm, which hadn't previously worked with the GNYHA.
The GNYHA has sent out "selected" requests for proposals to about six national GPOs, including Premier, though Perlman declined to name the others. This time, the GNYHA is looking to play a larger role no matter which GPO it picks, leveraging the partner's portfolio of supply contracts as a starting point to negotiate better pricing on a regional basis, Perlman said. "The challenge is not going to be pricing," he said. "The question is how to take advantage of pricing and optimize that locally?"
GPOs will be evaluated on pricing, scope of contracts and their overall financial strength and capabilities, Perlman said. GNYHA Ventures expects to make a selection in March. Steven Oesterle, managing director of Giuliani Partners and a former vice chairman at Ernst & Young, will oversee the evaluation process. "Our role is to help them understand the issues and provide objective advice," he said.