Afaxys, a supply chain company serving the public health sector, is opening up its group purchasing organization to new members. The Charleston, S.C.-based company was founded about eight years ago offering group purchasing services to a relatively exclusive group of public health agencies.
Its expansion and the recent launch of similar organizations reflect providers' hunger for options in an increasingly consolidated GPO market, experts say.
Afaxys' portfolio includes branded and generic contraceptives, a business it began in 2013. The pharmaceutical division and the GPO serve a broad range of mostly non-acute clients, including public health clinics, student health centers, community health centers and city, county, state and federal health facilities.
In addition to gaining access to exclusive products, Afaxys members have dual membership in Provista, a subsidiary of Irving, Texas-based Vizient that provides group purchasing and other services, primarily to non-acute providers. The Afaxys GPO has previously served about 2,300 clinics or member sites, but membership has grown to over 2,500 since the GPO's expansion was announced at the annual meeting of the National Association of County and City Health Officials earlier this month in Phoenix, according to Todd Rodeheaver, head of services and business operations for Afaxys.
Regional and niche-based GPOs have gained popularity recently. Seven Northeast providers launched their own GPO last month, and a purchasing cooperative focused on “green” products was launched by four other systems in May. This all comes after major consolidation in the industry following last year's acquisition of MedAssets, a major GPO, by the UHC-VHA Alliance, forming what is now known as Vizient.
Rodeheaver believes consolidation has left some providers – especially smaller budget-challenged public facilities – dissatisfied and lacking engagement with their GPO and suppliers. Afaxys' own survey of 52 current or former members showed that strong customer support is a top priority for 76% of them when buying supplies and drugs, while price was a top priority for 90% and quality was a top priority for 79%.
Only one-third of Afaxys customers described the procurement process as good, while 13% called it “stressful and challenging.” Rodeheaver believes some providers are looking for more value in their GPO and expertise specific to their sector or region.
“I personally think that what's happened is that some of the organizations out there have gotten so big – they're focused on the larger commercial integrated hospital systems – that some of the medium and smaller entities out there have been left behind,” Rodeheaver said. “When they do get approached by some organizations, they're (saying) more of 'This is what we'll give you,' instead of what you (actually) need.”
Experts agree. Jamie Kowalski, a Milwaukee-based supply chain consultant, said that members of big GPOs may feel they're simply getting a service instead of the membership-based collaboration that has traditionally come with GPOs. At some point, the organizations may have become too big and bureaucratic, he said.
“(Providers) have no voice, they get the sense that I'm just a number out here,” Kowalski said. “They want something other than that out of a relationship. Yes, they want the deal ... but they also want to be a part of the enterprise, somehow have a voice. When you get too big that's awfully hard to do.”
Organizations like Afaxys hone in on a specific product or provider while leaving the remainder up to the national GPO, for example trying to contract for medical devices and implants, something GPOs have largely shied away from at the national level. This can make it easier to standardize a product portfolio and get providers to agree to specific items, which can lead to better deals with suppliers who want exclusivity, Kowalski said.
But Brian Pellegrini, executive director of consulting and management at The Advisory Board Co., points out that providers have a hard enough time driving standardization of products within the walls of a single hospital. Asking them to do that as a group seems even more difficult.
Regional and niche-based organizations may be able to drive slightly more compliance from their members, but Pellegrini, a former GPO executive, isn't convinced that this model is the end-all be-all.
“The move toward regionalization is rational, but I don't know if it gets everyone what they're looking to get out of it,” Pellegrini said. He believes formation of these organizations comes in part from national GPOs looking for the new avenues of growth outside of acquisitions, as providers don't appear to be moving between organizations.
Doug Swanson, senior vice president of sales and marketing at Brentwood, Tenn.-based HealthTrust recently said his GPO anticipates “increasing interest from regional collectives,” and is open to the model as long as the groups can agree to HealthTrust's model, which requires providers to use HealthTrust contracts for 80% of their supply spend on most products. The GPO has an exclusive membership deal with AllSpire Health Partners, the recently launched GPO in the Northeast.
It remains to be seen whether the industry will be well-served by the regionalization of GPOs, but Pellegrini said that shifts caused by consolidation in the GPO industry are also opening the market to non-GPO disruptors offering innovative ways for providers to manage their supply spend, a priority that has become increasingly important to them. He pointed to Pensiamo, a recent spin-off from UPMC and IBM offering analytics-enabled supply chain management services, as an example.
“With this consolidation, I would expect to see more nontraditional players attempt to come in and disrupt the space,” Pellegrini said. “You'll see more non-GPO based strategies to try to bring efficiency and price.”