Community Hospital Corp., an organization that owns, manages and consults with community hospitals, is launching a group purchasing organization to help small health systems across the country get big-hospital discounts.
The Plano, Texas-based not-for-profit is teaming up with HealthTrust, a Brentwood, Tenn.-based GPO, to offer tier one pricing on drugs, supplies and services, which would typically only be accessible to larger hospitals and health systems. The new business, called CHC Supply Trust, is part of the organization's for-profit consulting arm.
Since 2008, CHC has offered HealthTrust GPO access to its own hospitals and a select few other facilities. Supply Trust will commercialize and expand that program to an estimated 1,100 community hospitals with 100 beds or less, said Mike Williams, CHC's president and CEO.
The American Hospital Association includes 1,600 small or rural hospital as members.
“There's so much opportunity for value and benefit for small community hospitals that are struggling financially,” Williams said. “It doesn't make sense for us not to extend this.”
CHC's supply-chain services, which include GPO access and supply-chain consulting and outsourcing, currently serve about 30 hospitals, 10 of which are not owned or managed by the company, Williams said. The organization is currently in talks with about eight other independent hospitals to join Supply Trust.
Community hospitals that contract with HealthTrust through CHC have saved an average of 10% on pharmaceuticals and 15% in medical-surgical supplies, Williams said. Hospitals pay a membership fee to CHC—as low as $1,500 a month—that includes fees for HealthTrust membership, but all rebates earned from purchases will be given back to hospitals, Surplus normally funds overhead in other GPOs, Williams said.
“Through our relationship, small hospitals can benefit from significant savings, even when purchasing many of the exact same items procured prior to working with CHC,” said Richard Philbrick, CEO of HealthTrust's southwest region, in a statement. “That means more money to dedicate toward patient care or other needs.”
No equity is exchanged between CHC and Health Trust as a part of the relationship.
The move to help smaller hospitals comes at a time when those health systems, particularly many in rural areas, are struggling. Many of these rural facilities operate on thin margins and typically see a larger share of Medicare and Medicaid enrollees than other hospitals.
Roughly three-quarters of the 51 rural hospital closures nationally since 2010 have been in states that didn't expand Medicaid.
Many rural health systems have expressed concern over how the Affordable Care Act's push to incentivize quality and cost-cutting measures might affect those who can't take advantage of economies of scale that can help reduce costs.