As part of the second venture, Dignity Health partnered with UnitedHealthcare and up to 12 other unnamed systems to form a joint venture called SharedClarity.
“This new entity will enable us to assess clinical effectiveness and utilize the products that can best enhance patient satisfaction and reduce healthcare costs,” a UnitedHealthcare spokeswoman said in a statement. “The reformed healthcare environment encourages and depends on collaborative efforts to expand healthcare access and improve delivery of services.”
A Dignity Health spokeswoman did not respond to multiple requests for comment.
“My understanding is that trying to address supply costs is something that is an ongoing initiative of (Dignity Health) and an area that they have made some progress in already,” said Brad Spielman, an analyst for Moody's Investors Service.
Dignity Health isn't the only health system to form its own GPO this year. Ascension Health is forming a GPO that will operate as a wholly owned subsidiary of its parent company. Highmark, a Pittsburgh-based insurer, launched ProtoCo Supply Chain Partners. ProtoCo has established purchasing contracts with West Penn Allegheny Health System, a Pittsburgh system that Highmark has been negotiating to acquire since 2011, as well as West Virginia United Health System, Fairmont, and St. Vincent Health Center, Erie, Pa.
The GPO is a “key component of Highmark's integrated delivery system plan,” a spokeswoman said in an e-mail. The spokeswoman also said Highmark's GPO contract with West Penn Allegheny will not be affected by their legal dispute. West Penn said last month the deal was off and Highmark has gone to court to keep it alive.
What's unusual about the new crop of GPOs is that they require member hospitals to adhere to more committed models of purchasing than what many of the traditional purchasing organizations require. Compelling hospitals to buy products from negotiated contracts usually leads to lower prices from the manufacturer, but can limit choice for clinicians. Ascension has said its purchasing model is currently about 95% committed, while the Highmark spokeswoman said ProtoCo aims to address 100% of a hospital's spending.
The traditional GPO model has degrees of compliance. The HealthTrust Purchasing Group model requires stricter compliance, while Novation and Premier offer committed-model programs but don't require compliance with other contracts.
Drew Ungerman, a senior partner with consulting firm McKinsey & Co., said he expects to see more hospital-owned and -operated GPOs in the future, as well as more regional-based GPOs. “Some will succeed and some will very likely fail,” he said, noting that the upstarts will have to work hard to lure hospitals away from long-standing relationships with increasingly competitive large GPOs.
It's not clear yet what model the Dignity Health Purchasing Network will use. However, the membership model for Phoenix-based SharedClarity—the Dignity Health and UnitedHealthcare joint venture—relies on “committed physician preference item purchasing volume from its members,” according to the company website. The venture has approached a number of large integrated-delivery networks, including Catholic Health Initiatives and Intermountain Healthcare, for membership. Both systems listened to SharedClarity presentations and elected not to participate.
Physician preference items, such as hip or knee implants, are often a hospital's most expensive medical supplies, and hospitals and payers now have incentives to better manage supply costs. “Very few health systems have successfully been able to aggressively manage that spend,” Ungerman said. “It's where the device companies' growth has been coming from and it's where physicians do have stronger experiences and perspectives based on their training.”
