The Colorado Hospital Association has become the latest state association to launch a regional group purchasing program intended to provide value-added services, such as clinical and operational improvement programs, to its member hospitals.
On June 1, the association signed a deal with Alpharetta, Ga.-based MedAssets to develop the program, which association President and Chief Executive Officer Steven Summer said has the potential to bring more than significant savings to participating hospitals. Group purchasing can easily save hospitals 10% to 15%, but the real reason we got into this is because there is a whole group of value-added services that will bring efficiency to the hospitals, said Summer, whose organization represents 88 hospitals.
Under the for-profit arrangement, MedAssets will negotiate volume-discounted contracts with suppliers and also will offer operational services programs such as clinical and revenue-cycle management. The association will earn a percentage of each contract signed between MedAssets and participating hospitals.
Both the association and MedAssets officials declined to say what that percentage will be, but Peter Freytag, senior vice president and chief financial officer for the association, acknowledged that the opportunity to shore up the groups finances was among the factors that drove it to consider a group purchasing program.
Illinois and New York hospital associations already have statewide GPO deals (May 8, 2006, p. 14.)
No hospitals have yet committed to the Colorado program, and Summer said its difficult to project how many will actually sign up for either the group purchasing or value-added operational services, as the organization has not offered a group purchasing program since the early 1980s. The nature of GPOs has changed substantially over the past 25 to 30 years, he said. My view is this (program) will develop over the next three to five years, but clearly our goal would be to bring 10 to 15 hospitals into the program in that time.
Summer added hed like to see at least half of the groups hospitalswhich include the three-hospital, 1,151-bed Exempla Healthcare system, Denver; and Banner Health, with four hospitals and 476 beds in the statecontract for services other than group purchasing in that period.
Freytag said the organization expects it will take longer to develop group purchasing participation because most hospitals have active GPO contracts. Those contracts need to expire before the hospitals can consider switching to the association program. Its some of the other servicessuch as supply-chain analytics and pharmacy chargemaster managementthat well see a lot of activity in at first, he said.
Mark Hess, president of customer management-West for MedAssets, said he expects to begin rolling out the program to member hospitals immediately, but added that there is no target date for signing the first contracts. But we have high hopes that this will be a strong program. We have revenue goals, but we dont want to set an unrealistic goal, added Hess, who declined to reveal the earnings target.