Healthcare Cost Reduction: What Can Group Purchasing Organizations Learn From BPOs? (Part 2)

In healthcare, hospital and IDN procurement environments, the primary stakeholders are doctors. Given their historic role in owning the specification process for any material, service or supply that is involved in anyway in patient outcomes, it's logical that they would be resistant to change. But it is possible to show physicians that it's possible to improve patient outcomes by quantifying the overall quality and service levels different vendors provide -- not to mentioning saving money in the process which can then go back into a pool of enhancing overall patient care. Still, just as procurement BPO firms rarely tackle the strategic aspects of direct materials procurement and supplier management, its essential for healthcare procurement teams to take back control over critical spend areas versus relying on their current GPO partners to manage these categories.

Above all, healthcare provider sourcing processes for physician preference items should highlight and quantify all of the options -- and combination of options -- available to the hospital or IDN. Ultimately, it is procurement's job to show how patient outcomes are tied to a combination of healthcare quality and cost. This requires examining preference spend areas in a highly quantitative and collaborative way that brings together the hospital bean-counters (e.g., finance/accounting types, procurement leaders, etc.) with doctors to have a conversation based on the same fact sheet. These discussions must ultimately include patient-related issues.

As one example, take the case of examining comparative drug therapies and options and understanding their relative success and impact on a total cost basis. For example, in one case, the added costs of a particular type of therapy may be higher on a unit cost basis than a combined therapy of different drugs once administration and other costs are added in. These types of discussion rarely occur today with procurement in the middle, moderating the conversation and helping physicians to make better decisions with all of the facts in front of them. To get to this level of influence, procurement organizations must begin to view their role as one focused as much on information aggregator and analyst as one focused on supplier management and negotiations.

In addition, procurement groups should begin to take advantage of technology in the market that can help them analyze better quality and total cost decisions that optimize for a combination of patient outcomes, cost and risk. Sourcing, optimization, supplier performance management, supplier information management and risk management tools all have a direct role here. Moreover, procurement and supply chain organizations should take greater ownerships of solution selection and deployment versus just relying on the recommendations and technology that may be available to them from third parties with vested interests such as GPOs.

Interestingly, if procurement organizations do take greater control of strategic spend areas, making the right team and technology investments to do so, GPOs may morph in this context to becoming a source of not just third-party benchmarks for price but also clinical efficacy and patient-focused outcomes based on supply decisions. By choosing to share procurement and related performance and outcome decisions with GPOs in an aggregate manner, IDN and hospital procurement organizations could begin to realize a new source of value, building a true partnership with group purchasing organizations, versus just allowing them to skim value off the top as they do today.

Who stands to benefit most in this new equation from a provider perspective? Deloitte has, perhaps, the best known consulting practice in the healthcare space among larger consultancies and SIs. From a procurement software perspective, BravoSolution and Emptoris both have an impressive client list and SAP has some in-roads in the GPO market as well with their e-sourcing and contract management platform.

Jason Busch

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