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For Hospitals Only (Part 2): How an Internal Marketplace Drives Hospital Standards

12/11/2018 By

More often than not, procurement projects that finally make the docket address problems that staff have been complaining about for a long time. Therefore, having a detailed understanding of the problem is essential. To get there, cross-functional input must be solicited from staff representatives of all affected organizational layers throughout the system design and implementation phases.

One thing that successful change management efforts have in common is that they are typically driven by a combination of front-line workers and back-line executives. When this happens, success if virtually assured. When it doesn’t, well, the odds aren’t great, but sometimes we get lucky (according to statistics, about 46% of the time).

In Part 1 of our series on Prodigo Solutions, we talked about the company’s dedication to the needs of hospital procurement organizations and how it has allowed Prodigo to achieve dominant status in its market. From a change management perspective, Prodigo provides a shining example of how desired results can be achieved when we focus ourselves on doing certain things particularly well. As we know, when we don’t, pushback is a certainty.

ProdigoMarketplace is often regarded as the Amazon of the hospital market. In truth, Prodigo doesn’t like that reference any more than Amazon probably does. Although they’re both e-commerce platforms and share similar use-conventions, that’s pretty much where the comparison should end.

For the sake of argument, imagine Amazon dedicating itself to a painfully narrow niche, developing solutions that are entirely focused on the needs of a homogenous user community and forgoing any/all opportunities to expand its business at the risk of compromising its stated sole advocacy. As an investor in Amazon, I don’t even want to consider it. I would much prefer that Amazon continue to go about its business changing the universe by focusing on the common good.

But I’ve just described where Prodigo actually lives. It has built a tailored Marketplace solution just for healthcare. Its technology platform continues to transform the supply chain operations of the biggest and best hospital systems in the U.S., and there are several good reasons for it:

  • Although Prodigo is perfectly situated to cash in, the company has refused any conflicts of interest, so it won’t consider supplier-funded revenue models. Prodigo is the only healthcare-focused Marketplace and Exchange network that does not tax the supplier to do business with their provider customers. This policy distinguishes Prodigo, as most all of its competitors have some form of commissioned arrangement with the supply-side.
  • Moving up market, consider how group Purchasing Organizations (GPOs) dominate hospital supply chains. The contracts they “sell” are fee-bearing, meaning administrative fees are charged to suppliers (it’s the GPO industry’s financial bread and butter and that’s fine). In fact, in many cases, the GPO will share back a portion of those supplier-paid fees to help its members/customers fund procurement infrastructure projects.

Consider Prodigo’s approach:

  • The company released a contracting module (ProdigoContracts) that, among other things, tracks these GPO “share-back arrangements” so that hospitals can see what they’re owed and get paid quicker. It’s a capability that is tied to the point of sale, so the resulting audit trail is essentially real time. Bottom line, Prodigo is delivering transparency to a uniquely lucrative area of hospital commerce that has never before been available.
  • ProdigoContracts also tracks the terms and conditions of any/all supplier agreements so hospitals can control the point of sale to ensure that they don’t miss any rebate or volume discount opportunities. The system dynamically provides procurement managers a way to modify products and services presented to requisitioners so that order patterns can be optimized for such advantage. Obviously, it’s a powerful add-on for a point of sale system, as requisitioning behavior, ordering patterns, inventory turns, manufacturer recalls, ad hoc specials, etc., can and should be managed in a strategic, informed context, at the speed of business.

Keep in mind, an internal marketplace is accessed routinely by a cross section of thousands of users in a typical hospital setting (maybe the largest and most diverse community of users in a health system). So, consider the value to procurement leadership in having a communication platform that provides a way to enforce policy and/or shape desired behaviors in support of strategic sourcing initiatives.

Imagine a hospital system that can invoice the GPO and/or manufacturer for admin-fees earned and rebates owed. Compare that scenario to today’s reality where there is no buyer-side verification of the amount recovered.

Prodigo has listened to its customers talk about such capability and made it explicit functionality. The required inter-system connections (POS, inventory, contracting, transaction processing, etc.) are all made, as Prodigo implementations are hyper-connected to provide the kind of transparency that makes such things possible.

In healthcare procurement, it’s usually about eliminating variance. Whether we’re talking about specific products or their utilization at the procedural level, the clinical integration of well-managed supply chains is already shaping how hospitals are getting paid. The directive is known as value-based purchasing (VBP). It will fully define hospital reimbursement in the future, so the stakes are obviously high.

In the end, it’s not only about the quality of content, the controls around content presentation and how easily information can be accessed, it’s also about how purchasing behavior can be shaped to drive use, contract utilization and value.

While modern e-commerce platforms all provide a shopping interface, Prodigo delivers a system deliberately designed to optimally and/or opportunistically shape the point of sale in hospital environments. It’s a big difference, as the nuance the company has captured doesn’t just drive lower costs, but improves the quality of care.

In Part 3 of this series, we’ll explore where Prodigo’s likely heading. Clearly, there’s a data play here — isn’t there always?

This article was written on behalf of Prodigo as a Spend Matters Brand Studio piece and not by the Spend Matters editorial or analyst teams.