Zeroing in on best procurement practices

Modern Healthcare's editorial webinar“Cost Saving in Device Procurement: Innovative Strategies on Physician Preference Items” explored best practices that health systems are implementing as they seek to get the best value at the lowest price on physician preference items. The webinar was hosted by Modern Healthcare reporter Jaimy Lee, and the panelists were Mark West, president of SharedClarity, a joint venture between UnitedHealthcare and several large health systems including Dignity Health, Baylor Health Care System and Advocate Health Care; Brent Johnson, vice president of supply chain and imaging services and chief purchasing officer at Intermountain Healthcare; and Durral Gilbert, president of supply chain services for the Premier healthcare alliance. The following is an edited transcript.

Modern Healthcare: How does the SharedClarity model work?

Mark West: We wanted to build a model that had physicians actively engaged in the process, bring new and independent data into the model to help physicians and scientists gain a better understanding of how medical devices perform, and move market share. We want to drive utilization toward those products that have the best clinical outcomes.

MH: What types of products do you focus on?

West: Our focus is on 30 physician preference items—high-technology, high-cost, high clinical-impact products such as stents, pacemakers and defibrillators. Every one of our products goes through a thorough clinical evaluation led by clinical review teams. The teams consist of physicians within our membership and scientists from Optum Labs, along with SharedClarity's chief medical officer. The teams participate in various activities including literature reviews, physician surveys and full-blown independent comparative-effectiveness studies to understand how products perform.

MH: What data do the teams use, and how are their decisions implemented?

West: UnitedHealthcare has a longitudinal history of what procedures more than 40 million members have had—inpatient and outpatient visits, lab results, prescriptions, etc. We complement this with the details of the devices used in the procedures and various clinical activities that happen in the hospital. The teams determine if there's clinical agreement on how products perform. If there is, we document that, and that information is used for our members' strategic sourcing process. If there isn't clinical agreement, the question is what additional information is required. It's not just evaluating how product A performs versus product B, it's also how a product would perform against another therapy.

Once we get the feedback from the clinical review teams, our next step is evidence-based contracting. We focus on learning which products have the best outcomes and driving utilization toward that. SharedClarity's strategic sourcing experts lead the negotiations with the medical device manufacturers. We want to have meaningful consolidation and rationalization of products. If we identify products that have less readmissions and less complications, not only is it better for the patient but it also takes cost out of whole health system. We're starting with stents—bare metal stents, drug-eluting stents and peripheral stents. We're having clinical reviews right now.

MH: Describe Intermountain's supply chain strategy.

Brent Johnson: As an integrated delivery network … we've taken more than $250 million out of the cost structure of the company on nonlabor spending over the past six years. Last year, we opened up a $40 million supply chain center that includes self-distribution. We rely on a GPO, but where we can add value, we do self-contracting.

We no longer use the term physician preference items because we think that it's kind of a misnomer to give the physicians the actual right to have preference. But on those types of items, we have agreements with the physicians to give back 30% of the first-year documented savings on utilization on our sites. We're certainly trying to drive to fewer suppliers, too.

Variation is the enemy of quality, and we ought to have as much standardization in our system as possible. But it's hard to drive standardization around clinicians. A big opportunity is in utilization management, trying to use the right product for the right purpose for the right application and quality. There's far greater savings in standardization and utilization management than in price and unit price. The real savings comes when you do clinical integration, when you are invited over to the clinical side and you have the talent and the resources to work with the clinicians on better outcomes and quality.

MH: How does Intermountain work with suppliers?

Johnson: There's been a lack of trust between suppliers and buyers. We have to invest resources into bringing solutions that suppliers have into the clinical side to help outcomes and to improve patient quality. We need talent and we need C-suite recognition. … We don't want suppliers running over to the clinical side without contracts or without compliance. There's got to be trust and there's got to be appropriate behavior both ways.

MH: How are you working with your physicians and clinicians to feel comfortable with some of the products that you're selecting?

Johnson: We have six physician committees that help develop our strategies, including cardiac rhythm management, spine, orthopedic, trauma and a few others, and we get them heavily involved. We show them data. We offer an incentive to them to share in the first-year savings. They understand more and more that we've got to work together better. There are always a few outliers, but you can't let them hold you hostage.

MH: What is Premier's approach?

Durral Gilbert: Premier's approach on high-cost preference items relates more broadly to transforming healthcare and bringing down the entire cost structure. Data are critical to changing practices and protocols. Premier collects 1 out of every 4 U.S. hospital discharges. We couple that robust clinical data with $40 billion in purchasing data to go after resource utilization, comparative-effectiveness research and other best-practice collaboration. We then co-innovate with our members in using protocols to streamline care and improve quality.

The market views contracted suppliers as being part of the problem, but I'll tell you suppliers are hungry for data and measurement as well. Our suppliers partner with us to help our members look not just at cost but at utilization. We have stayed in the area of high-preference products with pricing on over 840,000 products in this area. We're able to give our member organizations benchmarks on over 90% of those products that are high cost and need to be streamlined. One of the areas is around functional equivalence. What is the cost variation around products that truly are functionally equivalent to other products in the marketplace, and why is that variation justified?

MH: How does Premier use product utilization data?

Gilbert: We're looking at product utilization as a complement to the pricing component. And this is where the clinical data collected during a patient's treatment become so important. Premier believes we should be looking at this on a DRG level. You often have physicians who have very different pharmaceutical and radiology regimens for the same services. We believe we have to look at these areas on the individual physician and hospital level to really show them that there is no justification for the practice variation.

MH: Can Premier's discharge data be used to follow specific types of surgeries, and can that data be used to conduct retrospective studies that can determine outcome utilization and total cost related to outcomes?

Gilbert: Yes in both instances. One of the big advances that Premier and our members have had in the past two years is as health systems begin to integrate their electronic health records, what happens inside the hospital is now visible to the health systems from the outpatient perspective. We have partnered with the FDA, the CDC, NIH, and CMS to look at data with this type of view.

MH: Given that comparative-effectiveness studies take a number of years to complete, how realistic is it for SharedClarity to actually use those data at this time or in the near future?

West: I think it's very realistic. Between the health systems' and United's claims information, we go back 15-plus years, and for some products it takes that long to evaluate. These are retrospective studies. They have prospective elements as we go forward. It shouldn't take 93 hip implants before we know that there's a significant issue.

There are new products that come on the market, and we want to use our clinical review teams to understand if those products are a quantum leap in technology or don't have that much clinical impact. We're also trying to look at products that aren't even FDA-approved yet.

MH: How is Intermountain working directly with suppliers?

Johnson: We have taken eight of our top people and turned them into supplier relationship managers. I had talked about the importance of identifying the best suppliers and growing them. But some suppliers came to me and said, “Brent, we call BS on you because you're still beating us over the head on price and cost alone.” Then we realized that all the incentives we have were just the savings. We realized that we had to put our money where our mouth was.

MH: How does Premier address pricing confidentiality with suppliers?

Gilbert: Where product and pricing information is protected by nondisclosure agreements, we do not use that for benchmarking. But I think that the day is coming when there is going to be legislated transparency on price. I think that's the low-hanging fruit in healthcare.

MH: What are your organizations doing to address physician-owned distributors and financial incentives from device manufacturers to physicians?

Johnson: We are complying with the recent HHS Office of the Inspector General opinion expressing strong concerns about PODs and POEs (physician-owned entities). Our compliance and legal departments have decided we will not contract or do business with anyone that is a POD or POE. They've got to certify to us that they are not physician-owned in any way.

West: When physicians participate on our clinical review teams, all the physicians disclose their conflicts of interest, and it's visible to other members in the clinical review teams and in SharedClarity. The other thing we do is we create a safe environment for the participating physicians to give us honest feedback. We don't disclose publicly who is participating in those teams. We want to create an environment that frees them of any fears of repercussions.