While the common, simple items are easier to bundle, providers are challenged by physician-preference products and more sophisticated items. Some hospitals and health systems including Baylor Scott & White have hired executives with experience improving supply chains outside of healthcare to help.
GPOs are embracing the role of getting physicians, clinical staff and administrators to agree on supplies to ease these more complicated purchases, said Rick Conlin, a partner and supply chain specialist at the Advisory Board Co.
"Physician-preference items rely heavily on consulting engagements and the manpower required for more personalized service instead of offering catalog-like services," he said. "GPOs are offering these localized consultant-esque agreements frankly because they are following the money."
Salt Lake City-based Intermountain's GPO, Intalere, manages internal as well as other providers' supply-chain needs. It also has a distribution center, which has bolstered its supplier relationships and helped eliminate redundant inventory, the company said. GPOs need to use data and be transparent in addition to lowering prices to remain relevant, said John Wright, Intermountain's vice president of supply chain. Managing purchasing internally has helped lower costs, he said.
Suppliers have fewer customers as systems consolidate, so they need to get more creative with shared-risk models to cut waste from the supply chain. But they've been slow to do so, Navigant's Austin said. While there has been progress in tying food and janitorial service contracts to patient-satisfaction scores, risk-sharing arrangements in the clinical space with outcome- and readmission-related metrics are in the very early stages, he said.
Medical-device manufacturer and health technology company Philips recently extended a contract with Phoenix-based Banner Health, one of its roughly 40 strategic provider partners. Philips says its technology helps monitor patients with multiple chronic conditions at home, cutting hospitalizations in half and reducing 30-day readmission rates by 75%. It collects vital signs and other data with virtual monitoring and connects Banner physicians and patients via a video feed.
There is an emerging group of customers that want to have risk-sharing contracts and closer vendor relationships to help bend the cost curve and improve outcomes, especially as more organizations form integrated delivery networks, said Joe Robinson, Philips' senior vice president of health systems solutions.
Medical-device manufacturer Lisa Laser USA decided to contract directly with manufacturers after its relationship with a GPO yielded minimal results. While GPOs provide a good storefront to browse products, they don't adequately convey the uniqueness of the company's relatively newer products that fall outside the "mainstream," said Peter Allen, CEO of Lisa Laser. There is also a lot of red tape in dealing with a GPO, he said. "From what we've heard, surgeons know what they want but hospitals have such a tight relationship with GPOs that they're almost forced down a different path."