The American Red Cross, which signed up with Consorta in April 2006, views the deal as a positive, said Robert Kloak, the Red Cross director in the national contracting office. The blood bank and disaster-relief agency spends about $1 billion per year on services, goods, equipment and leases, and probably purchased up to $4 million in supplies through Consorta contracts last year, documenting $400,000 in savings, he said. I certainly believe with the addition of the (purchasing) volume from the new partner that they should be able to improve the pricing under the contracts we participate in, Kloak said.
Consortas shareholders appear to have already informally approved the deal. Margaret Gavigan, senior system vice president and chief clinical officer for six-hospital Provena Health, Mokena, Ill., and its shareholder representative on the Consorta board, said Provena spent approximately $250 million on supplies in 2006$168 million of that through Consorta contracts. If the deal with HealthTrust is approved, Provenas projected value within five years is about $20.8 million, she said. Consortas decision to partner with HealthTrust was motivated by a desire to get the lowest possible pricing and best supply contract value, according to Gavigan.
Consorta had a great year; but when we looked at the future, we saw a really tough market, and we really felt we needed a partner, Gavigan said. What this will give us is economic value and best practices.
HPG, we feel, has great pricing and the best demonstrated contract value of any GPO.
Gavigan said Consorta considered every GPO in the industry, and yes, culturally, this was a good fit. Both of our organizations focus on group purchasing and providing value and both write sole source contracts when the value is there. HealthTrust, like Consorta, is also nimble and takes a lot of comment from members for contracting decisions, she said. I think as we looked at it as a board, the thing that rose to the top was the common culture, Gavigan said.
HealthTrusts strong contract compliance and its clinically based decisionmaking for product selection are what swayed the Consorta board, said Louis Fierens, its chairman and also senior vice president of supply-chain and capital-project management at 46-hospital Trinity Health in Novi, Mich. As a pure-play GPO focused almost exclusively on contracting, Consorta has been conservative in terms of interpretation of what a GPO should be, and the board found a compatible partner in HealthTrust, he said. I dont think we should make it more complicated than it is, Fierens said. Its not an alignment of missions. Its more of an alignment around a supply-chain strategy and a purchasing philosophy.
Trinity spends $2 billion annually on supplies with about half of that through Consorta contracts, Fierens said. He said he expects that percentage to climb as the combined GPO expands its contract offerings. It is premature to predict precisely how purchasing will change for Consorta members, but from talking to HealthTrust members, Fierens said he knows HealthTrust hospitals typically purchase a greater proportion of supplies under HealthTrust contracts. This is all about price. Its about the total value, and it is at the end of the day a fairly simple equation, Fierens said.
Religious differences and tax status play no role in selecting a GPO any more than it plays a role in selecting any hospital service provider, said Joseph Swedish, Trinitys president and CEO and a former HCA executive. Why does that matter if you are buying tongue depressors? he said. What were really striving for is optimal cost performance in our organization in a way that serves our respective missions.