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GPOs – Valued Partners in Healthcare
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The healthcare group purchasing organization (GPO) members of HSCA work closely with their provider partners across the continuum of care to reduce cost, add value, and improve outcomes for patients. Below you'll find some narratives that help to demonstrate why GPOs are valued partners in healthcare.

 

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Vizient Members Adopt Energy Best Practices to Drive $3.7M in Budget Savings

Posted By HSCA, Wednesday, September 21, 2016

Hospitals are among the most intensive consumers of energy in the United States, with 3 to 5 percent of their annual budget going to energy costs. Yet many continue to overpay for energy supply by relying on traditional purchasing methods. Unfortunately, those methods rarely deliver the best price for the hospital.

Unlike supply chain purchasing for commodity items, the energy market requires a totally different approach that’s more akin to managing market-sensitive assets and liabilities, such as the hospital’s bond portfolio. To be successful, a hospital needs to be able to decide between hedge purchasing versus index decisions (or a combination of both), using financial probability modeling.

“We see many members issuing request for proposals using just their own volume, or in some cases, buying their energy with minimal market intelligence,” said Will Gowan, senior director, contract services for Vizient. “The Vizient energy program, which facilitates the implementation of energy procurement best practices, is helping hospitals realize significant savings.”

Three Vizient members have booked $3.7 million in budget savings by adopting these best practices in energy procurement and management:

·         Use of analytics to manage market risk and capture savings

·         Internal alignment of facilities, finance and supply chain staff around a central strategy that integrates both supply and demand management

·         Aggregation of spend with other hospitals to drive cost savings

 

WellSpan Health, a growing multihospital network based in south central Pennsylvania, realized a $2.1 million savings over their current contract term by transitioning from a traditional bid-based, fixed-rate procurement method to an actively managed market approach. A first step in the transition was organizing a multidisciplinary committee, consisting of the chief financial officer, chief operating officer, treasury vice president and key facility directors, who actively manage the electricity and natural gas spend across the organization’s facilities.

The committee then made the decision to join an aggregation network with other Vizient members and was able to reduce electricity supplier margins by 50 percent. Additionally, they have begun using statistical market analysis to identify savings opportunities in the forward markets, which led to a new contract design where the health system layers its energy purchasing over time. According to Richard Harley, vice president of corporate treasury services at WellSpan, “Our organization now manages its energy spend much as it does other market-sensitive assets and liabilities.”

Another health system seeing a reduction in costs as a result of adopting best practices and having access to analytics through a Vizient energy partner is Lifespan, one of New England’s leading health systems. Lifespan had already taken steps to more directly control its energy costs by recently building a cogeneration plant at its Rhode Island hospital campus. While that step was yielding cost savings, they wanted to take their energy program to the next level.

“We now have access to the highest level of financial and market analytics available in the industry,” said Tom Magliochetti, vice president of facilities at Lifespan. As a result, Lifespan saved $1 million on an already well-managed energy budget and is continuing to integrate and optimize both its on-campus assets and its market procurement processes to drive savings.

At the same time, OhioHealth, a 12-hospital IDN based in Columbus, has revitalized its energy management by implementing all three best practice principles. “The market forecasting and analytics were the key difference in reducing OhioHealth’s energy procurement costs by more than $600,000 over the past year,” said Alan Nelson, system vice president of treasury at OhioHealth. “Even more importantly, the health system has transitioned to managing energy using a team approach.”

“Vizient’s mission is to drive savings for our members. While we are confident every Vizient member can find benefit regardless of market conditions, we haven’t stopped working to improve," said Gowan. “We're currently conducting an outreach to all Vizient members interested in improving their energy results through our best-practices approach. We would particularly like to hear from member facilities, finance, and supply chain leaders so we can perform an assessment to discover opportunities and drive greater savings for all participants,” said Gowan.

Tags:  Cost  New England  Ohio  Pennsylvania  Savings  Vizient 

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Vizient, Inc. Named to Supply & Demand Chain Executive’s SDCE 100 Top Supply Chain Projects for 2016

Posted By HSCA, Friday, July 15, 2016
IRVING, Texas--()--Supply & Demand Chain Executive, the executive's user manual for successful supply and demand chain transformation, has selected Vizient, Inc. as a recipient of an SDCE 100 Award for 2016.

The SDCE 100 is an annual list of 100 great supply chain projects. These projects can serve as a guide for supply chain executives who are looking for new opportunities to drive improvement in their own operations. These projects show how supply chain solution and service providers help their customers and clients achieve supply chain excellence and prepare their supply chains for success.

Vizient was recognized for its supply chain transformation project with INTEGRIS Health to sustain a $15 million savings realized from a Vizient cost reduction initiative. Vizient enabled the health system to enhance its organizational structure by aligning facilities under a single supply chain operations and assisting in training of skillsets for positions. The organizational improvements generated a sustainable infrastructure across INTEGRIS Health supply chain operations; improved contract and GPO compliance; reduced rogue agreements; provided greater visibility into vendor performance; and delivered more financial value from vendor relationships.

“The challenges around operational improvement and cost reduction facing our industry are significant and gaining efficiencies in the supply chain are in the spotlight,” said Larry Bramble, vice president, Consulting Services – Supply Chain Operations. “Vizient’s approach is rooted in collaboration and creative problem solving that helps supply chain leaders make every aspect of their operations as cost effective as possible with sustainable results. We are extremely proud to have our work recognized by Supply & Demand Chain Executive.”

“Our goal with 2016’s SDCE 100 is to shine the spotlight on successful and innovative transformation projects that deliver bottom-line value to small, medium and large enterprises across the supply chain,” said Ronnie Garrett, editor of Supply & Demand Chain Executive. “The selected projects can serve as a roadmap for supply chain executives looking for new opportunities to drive improvement in their own operations. We congratulate all of our winners for a job well done!”

Tags:  Cost  Savings  Vizient 

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Optimize|Item Master Identifies $500,000 in Billing for Omaha Children’s

Posted By HSCA, Friday, January 15, 2016

The challenges faced by health care providers throughout the United States are daunting. Reimbursements are declining while costs are increasing, and staff is feeling pressure to do more with less. Simply getting paid for the services that are provided is an undertaking that can easily consume a vast amount of resources. In fact, billing and collections can be the most challenging factor in the revenue cycle equation. Health care providers are constantly adjusting their billing and collections methods in an effort to accommodate changing regulations and keep up with industry standards.

This is certainly true at Children’s Hospital & Medical Center in Omaha, Neb. — the only full-service pediatric specialty health care center in Nebraska. At Children’s, no child in need of medical care is ever turned away because of inability to pay. This may be why, according to Chris Klaiber, materials manager at Children’s, “we’ve always been paid a high percentage of the charges we bill.”

This was the case until fall 2012, that is. Chris and his team began noticing that some insurance payers were requiring that Healthcare Common Procedure Coding System codes be included when billing for certain items. “We’d never had a situation that required us to include HCPCS codes, so this was new to us,” said Lori Kirsch, value analysis nurse at Children’s. “Even if there was only one line item that was missing a HCPCS code, the payer would refuse to pay the entire bill.”

Realizing that these interruptions in their revenue cycle were unsustainable, Children’s began urgently looking for the missing codes to move the revenue process forward. Using every resource they knew of to tackle the problem, resources were stretched thin as their “all hands on deck” approach turned registered nurses into makeshift medical billing coders.

“Vizient helped Children’s bill over $500,000 within a couple of passes through Optimize|Item Master. Just imagine trying to fill a $1 million hole in your budget, and finding over half of it in one place. That’s huge.”  Read the rest of the story here.

Tags:  Cost  Nebraska  Vizient 

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Arkansas Children’s Hospital Implements $1.3 Million in Annual Savings in 90 Days With Predict|Price Performance

Posted By HSCA, Friday, January 15, 2016

Arkansas Children’s Hospital, the only pediatrics medical center in Arkansas, spans nearly 30 city blocks and has 370 beds. ACH has a staff of approximately 500 physicians, 95 residents in pediatrics and pediatric specialties, and more than 4,400 employees. Its physicians are consistently named to local and national “best” and “top” doctors lists.

Arkansas Children’s Hospital set a goal of finding $250,000 in savings in one year. By using Predict|Price Performance, they found $1.3 million in annual savings in just 90 days.  Read more in the attached summary.

Tags:  Arkansas  Cost  Vizient 

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Seattle Children’s Achieves $965,000 in Additional Realized Value

Posted By HSCA, Friday, October 16, 2015
Updated: Friday, November 27, 2015

CHALLENGE

Seattle Children’s wanted to improve its supply pricing and benchmarking, as well as obtain leverage to improve vendor negotiations, when it signed up for Vizient's Predict|Price Performance solution in August 2013. And while Dan Salmonsen, Seattle Children’s director of strategic sourcing and value analysis, felt that the hospital’s item master was in fairly good shape, he enrolled in Optimize|Item Master as well.

SOLUTION

The Price Performance solution identifies cost-reduction opportunities and specifically addresses benchmarking needs by helping users:

·         Leverage benchmarking data from the industry’s largest, most robust database comprising more than 7 million products, 2,500-plus hospitals and more than $70 billion in spend information

·         Receive a true market view of pricing trends, including both contracted and noncontracted items

·         Review historical pricing to analyze market fluctuation

·         View trend performance by hospital, vendor manufacturer or the United Nations Standard Products and Services Code® (UNSPSC), and drill down to line-item details

“This is just one tool that I can provide my employees for their toolbox to help them do their jobs and allow us to drive supply savings and help Seattle Children’s reduce costs,” Salmonsen said. While Price Performance has revealed some surprises, it also has provided validation for strategic sourcing. For example, the solution showed that while the department had secured a reasonably good price on a spinal implant request for proposal in 2011, there was still money left on the table.

“We again completed a spine RFP in 2014 and leveraged the price points we now have using the Price Performance tool,” Salmonsen said. The results were positive, driving significant savings. “The tool definitely provides us with significant leverage in many instances like these,” he added.

The solution also provides analysis that reveals vendors’ spend for like items that have been purchased via UNSPSCs. “This gives you significant influence to persuade your incumbent vendors to lower their prices, or move the business to competing vendors who will provide lower prices,” Salmonsen said.

The hospital has achieved cost-reduction success by taking a holistic approach for items it already purchases. “When the Price Performance tool shows that we’re paying too much on one item, we look at the entire book of business with that vendor instead of focusing on just that one item,” Salmonsen said.

He offered this example: Of 10 items purchased from a single vendor, the solution showed a high price index on two items and an average price index on the remaining eight. “By looking at the entire book of business, we’re able to lower the price on all of the items — even those where our pricing wasn’t that bad initially,” Salmonsen said. “We wouldn’t have driven as large a savings if we’d just focused on the two initial items.”

Seattle Children’s also worked Price Performance into its value analysis process for new items. “Previously, we had no way of knowing if the price the vendor offered was market fair, so often, we just negotiated for a target cost savings and accepted the reduction in price,” Salmonsen said. “But now we do know, thanks to these benchmarking capabilities.”

Salmonsen said that Price Performance has helped his organization do something it was not able to do previously. “Because we can now benchmark proposed pricing on new items before they’re approved, we can get in front of negotiations instead of discovering after the fact that we’re paying too much.”

Vizient’s Price Performance provides not only data, but also the expertise to gain actionable results quickly. It also:

·         Reduces valuable time necessary to analyze spend, validate data and synchronize item masters

·         Improves and implements work flow capabilities by monitoring trending, prioritizing opportunity and tracking overall progress

·         Offers efficiencies through enhanced/effective processes using the solutions/support offered through the service

 

 

RESULTS

Seattle Children’s has successfully negotiated 37 new vendor contracts since launching the tool almost two years ago, resulting in more than $680,000 in savings, with an additional $285,000 in cost avoidance.

Salmonsen cautioned his peers that while having an analytics tool is absolutely necessary, the tool itself isn’t all-knowing. “Your data needs to be accurate, and you must do your own due diligence using your organization’s purchase history to see what the true payout will be,” he said.

“Even though you may have Price Performance data that shows your prices to be high in the market, you still have to perform old-school negotiations to reduce your costs,” Salmonsen continued. “Vendors don’t just look at the data and say, ‘Sure, we’ll give you the lower cost.’ But, with this tool, we have a more level playing field with our vendors. They definitely have to come to the table more prepared, and it’s allowed us to hold them more accountable.”

Tags:  Cost  Vizient  Washington 

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Arkansas Children’s Hospital Implements $1.3 Million in Annual Savings in 90 Days With Predict Price Performance

Posted By HSCA, Thursday, October 1, 2015
Updated: Friday, November 27, 2015

Arkansas Children’s Hospital, the only pediatrics medical center in Arkansas, spans nearly 30 city blocks and has 370 beds. ACH has a staff of approximately 500 physicians, 95 residents in pediatrics and pediatric specialties, and more than 4,400 employees. Its physicians are consistently named to local and national “best” and “top” doctors lists.

CHALLENGE

Lisa Farmer is the first to admit she’s a skeptic. To put it simply, she said her job as director of Materials Management requires it. “I listen to people all day every day tell me how great things are — that’s the nature of sales,” she said. “But I’m always questioning things. If I believed it all, we would buy everything from everybody. My job is to find the melody within the noise.”

Arkansas Children’s Hospital transitioned along with Children’s Hospital Association from a competing group purchasing organization in July 2012. At that time, Vizient, the Association’s preferred data and analytics partner, introduced Farmer to its Predict|Price Performance application — the industry-leading benchmarking solution that allows users to gain control of their supply chain, negotiate better prices and increase cash flow.

But Farmer had her doubts. ACH had not used a price benchmarking solution previously, and the recent GPO conversion hadn’t really given her team members time to get their feet on the ground with Vizient. “I wanted to do everything we could on our own and then see where the dust settled,” Farmer said.

Would hearing what her peers had to say about Price Performance and seeing some of its results in the coming months be strong enough evidence to change Farmer’s mind?

SOLUTION

Indeed it was. By May 2014, Farmer saw things very differently. “I started seeing examples of savings from other hospitals,” she said. “When I saw what some of our suppliers were negotiating with other hospitals, knowing our compliance levels were at least the same if not better, I realized then that there was something to Price Performance.”

 

The data intelligence offered by Price Performance quickly made Farmer a believer. “I can look at line-item detail and determine exactly where we fall in the grid — whether that’s in the 10th percentile, the 50th or the 75th,” she said. “And knowing where you fall tells you if there’s any room to negotiate.”

Though still early in the process, the solution already has dramatically improved the physician buy-in process at ACH, particularly with spinal implants. Farmer said, “When I met with the physician, he was blown away by the data. I have to explain to physicians that although their relationships with vendors are valued, those same relationships may be costing our hospital money.”

Previously working with Vizient's other pricing solutions made Price Performance even more valuable for ACH, Farmer added. “We had implemented everything we could within Vizient itself before we moved to this tool, so that allows us to strategically negotiate with vendors even further. Overall, we were right in the middle of the bubble graph, so we didn’t have the best pricing or the worst. Knowing where our opportunity is, I can negotiate to move us further to the left on that grid.”

Price Performance has already saved ACH enough to pay for the organization’s subscription several times over, and hospital leadership is thrilled. “Any time I can put hard dollar savings back on the table for them, it’s a great thing,” Farmer said. “Price Performance allows me to break it down by line item so that I can actually show them what we buy, how many, our old price and our new price. It’s not soft dollars — it’s real.”

Nothing beats the feeling Farmer now has when she enters vendor negotiations. “When I walked in before, I was blind. I had no idea what constituted a good price or a good percentage to go after,” she said. “In my mind, if we saved $400,000, that was a good savings. What Price Performance helped me realize was that there was $800,000 still on the table.”

Farmer called Price Performance a no-brainer if one were willing to put the effort into it. “You do have to work the tool,” she said. “It’s not a fountain where someone has tossed in coins and you just pick them up off the ground — but it’s pretty darn close!”

RESULTS

Farmer had established a Price Performance savings goal of $250,000 in the first year. However, ACH saved $1.3 million in just 90 days, including $804,000 in spinal implants and $354,000 in cochlear implants.

“We had several other savings examples of $40,000 and $50,000, and we’ve had some that were $5,000, but whether it’s a dollar or a million dollars, it’s better than what we were previously paying,” she said. “As we continue to position ourselves for health care changes, this is something we all have to do. Price Performance just allows us to do it in a much more strategic fashion.”

Tags:  Arkansas  Cost  Vizient 

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