Premier’s first regional collaborative savings already to $8 million mark

Challenge:

The road has never be easy for independent, not-for-profit hospitals, but today with the growing consolidation in the industry and more competition from for-profit providers, not to mention healthcare reform and reimbursement cutbacks at all levels, the road has become more treacherous. When the buying power of an independent hospital – even as part of an aggressive group purchasing organization – reaches its limit, what next?

Solution:

In 2003, 13 owners of the Premier healthcare alliance in Arkansas, Louisiana and Mississippi began aggregating and standardizing purchasing volumes to increase leverage with suppliers. Calling themselves the Southern Premier Owners Group (SPOG), the group became the first – and a model of sorts – for what are now 20 regional and national alliance collaborative groups – and one of the most successful.

They are fiercely independent hospitals separated by nearly 600 miles – from north central Arkansas to the Louisiana bayous. But when it comes to making decisions about hospital supplies, they act more like an IDN with a tightly centralized purchasing function. In fact, they have dubbed themselves a “virtual IDN.”

By learning to work together, aggregate volumes, standardize where possible and make disciplined purchasing decisions, their solidarity has benefited not only the hospitals, but more important, the patients they serve. If SPOG were an IDN, its aggregated supply spend would exceed $450 million, larger than all but a handful of Premier owners.

Totally voluntary, SPOG is not a legal entity. It is supported by Senior Region Director David Turner, Region Director Kary LeBlanc, and Senior Contract Analyst Jeff Bates. There is also corporate support for all collaboratives.

But SPOG is unique. When members speak to suppliers, they speak SPOG first and facility second. The value of SPOG is that members put so much importance on group decision-making.

There are other benefits as well. SPOG is a resource to other members. If a member is having difficulty finding a product or experiences problems with a product or a contracted supplier, he or she has the resources of 12 other members to call on.

It’s also a venue for networking – formally and informally. One of the formal opportunities is SPOG’s annual trade fair where members, their affiliates, experts from Premier and contracted suppliers come together to share information, learn more about new contracts and meet face-to-face. In November 2010 the group met in Tunica, MS. Fifty-five materials management executives and laboratory directors representing 35 SPOG facilities participated along with 70 vendor booths representing 63 suppliers with SPOG agreements in the trade fair.

Results:

• Since 2003, SPOG members have realized more than $8 million in savings* over and above everyday savings from Premier contracts.
• In 2010 alone, a new medical/surgical distribution contract resulted in documented savings of nearly $900,000 for participating members.
• When SPOG instigated the potential for competition in a certain category where there had been little movement in years, the incumbent supplier negotiated new pricing, saving $10,000 for one member alone.
• A member got a 35 percent savings on an existing contract because the supplier became a contracted supplier with SPOG; competition in the category led to lower costs and the incumbent (a new contracted supplier) did not want to lose the business.

* SPOG savings are considerably greater than $8 million. SPOG is voluntary and depends on members to calculate savings. With small purchasing staffs, members don’t have time to track down and detail all savings from SPOG contracts.

"We are entering a new era of healthcare reform. There will definitely be adjustments in the market. It’s important for an organization our size to be represented. Suppliers will continue to adjust the way they market their goods and services, but we still have to be able to negotiate with them to benefit our organizations. Premier and SPOG allow us to do that. SPOG still has quite a bit of vitality, still has quite a bit of influence in the market. We’re not Premier’s largest regional aggregation group, but we’re certainly one of the most effective.”

Jerald L. Ulmer Sr.
CAPT, MSC, USN retired, director, materials management,
South Central Regional Medical Center, Laurel, MS

 

 

 

 

 

 

 

 

 

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