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SPECIAL FOCUS and streamlining “process improvements


to make procurement less of a burden.” GPOs aren’t — and shouldn’t — be just about automating processes and ordering faster, Vizient’s Allen said. Case in point involves how Vizient supported a New Orleans provider with a public works problem with the city water system. “Freezing temperatures had damaged


pipes, and some members didn’t even have enough water pressure to flush a toilet while others had no water supply at all,” Allen recounted. “While the city was working to fix the problem, who did our member call? They called us. We mobi- lized our teams and got on the phone with our large food vendors, and we were able to have water and ice shipped in to those affected locations in fairly quick order. We are here to help with day-to-day challenges as well as when emergencies and disasters strike. An online exchange is not set up to offer that level of service.”


Intalere’s Heil foresees and promotes GPOs “consolidating and morphing into service organizations where members will increasingly pay a fee for products and services” provided by or through the GPO. Heil points to customized solutions to “increase agility and flexibility” and “overcome pain points and challenges” in a veiled nod to an earlier era of coopera- tive buying.


“Strong collaboration between care de- livery and supply chain, between suppliers and providers, and between patients and clinicians, is critically important,” Heil noted. “The evolving model requires a deeper cross-functional type of internal and external collaboration, aligning to


Since 2016, Amazon has been sowing the seeds and laying the groundwork for expanding in a number of areas, ranging from brick-and-mortar retail to grocery and most recently to healthcare. At press time, the company agreed to team up with Berkshire Hathaway and JP Morgan Chase & Co. to form a separate healthcare company that provides services to their employees “that is free from profit-making incentives and constraints.” Some healthcare industry observers initially


thought Amazon’s fact-finding efforts in health- care rules and regulations as well as supply chain activities portended a massive venture into the business-to-business side of operations that complemented a business-to-consumer reach on a grander scale. Their efforts led one prominent publicly traded group purchasing organization to issue a formal statement last November about perceived market upheaval simmering to a slow boil. Premier Inc.’s statement is on page 14. Because of its public listing and stature, Premier


product/operational performance and metrics or benchmarks that GPOs or other outside partners can assist in facilitating. The industry must continue to transition from a purely transactional focus to an integrated, enterprise-wide, collaborative partner.”


ROi’s Sandler links GPO relevance to healthcare’s Byzantine reimbursement model. “GPOs continue to develop capabili- ties in the clinical analytics and advise- ment area, which online exchanges cannot offer,” he said. “They are online exchanges to eliminate the overhead of brick and mortar locations as well as re- ducing the need for a large contingent of a field-based workforce. As we continue to shift to quality-based reimbursements and bundled payments, providers will need GPOs and/or other advisors for operational and clinical advisement. We will also see a shift in how we contract to a more risk-based approach between providers and suppliers. GPOs will be able to provide both of these services to providers, whereas the online exchang- es as they are currently constructed couldn’t offer either one.”


GPOs demonstrate their value by mov- ing beyond price, according to HSCA’s Ebert. After all, online marketplaces base their success on moving price. “Price is very important, as is provid- ing a very competitive portfolio, but the full GPO value proposition comes from total savings beyond just price,” Ebert said. The equation is simple. “For example, GPOs have become very ef- fective at using and interpreting data


officials declined to address the “Amazon effect” directly with Healthcare Purchasing News, prefer- ring to let its statement stand. But officials from Vizient Inc., Premier’s market-


leading competitor in group purchasing services based on annual purchasing volume and member organization totals, agreed to field some pointed questions from HPN Senior Editor Rick Dana Barlow about Amazon’s perceived advances into the healthcare supply chain. Pete Allen, Vizient’s Executive Vice President, Sourcing Operations, proffered his company’s view on the competitive landscape now and going forward.


HPN: As Vizient establishes itself as a performance improvement company with integrated sourcing programs, what’s to prevent an online exchange, particularly one like Amazon, from usurping from Vi- zient and other GPOs all of the heritage contracting, purchasing and distribution


12 March 2018 • HEALTHCARE PURCHASING NEWS • hpnonline.com


that identifies opportunities to reduce or eliminate duplication in supply chain products, which leads to standardiza- tion. Standardization leads to reduction in treatment variability which improves care and reduces costs. Our GPO mem- bers all focus on these types of processes — beyond the price in a catalog.” Resilience and relevance can be traced to adaptability, according to ROi’s Sandler. “I believe that any business must evolve and adapt to the market to be successful,” he said. “GPOs must con- tinue to utilize the data in the healthcare sector, as well as other business sectors, to advise providers on reducing costs while not jeopardizing quality. GPOs must continue to engage physicians and other key stakeholders in product deci- sions to ensure patient outcomes do not diminish. GPOs will continue to utilize the pricing available in the market to negotiate with suppliers, whether it be online exchanges or other price transpar- ency tools available. I believe for best in class pricing, GPOs and their members should drive as much volume as they can to as few suppliers as possible in given product categories. By utilizing clinical and pricing data, GPOs can align their membership to do this. Suppliers don’t receive guaranteed sales volumes through the online exchanges as they can from GPOs. Also online exchanges are experts in small parcel shipments, which lends itself to the non-acute market. These same type of deliveries would create operational inefficiencies resulting in increased costs in the acute care setting.” HPN


Vizient voices support for market competition, backs GPO future


transactions on which group purchasing was founded? GPOs know healthcare better? Customer loyalty and trust? Not enough margin? Why? ALLEN: These questions drive to the core of the healthcare GPO industry’s evolution. In the cur- rent healthcare environment, we don’t think the “legacy” transactional functions can exist separate from performance improvement. Here’s one ex- ample of how integrated purchasing is essential to overall performance improvement: Vizient is working with hospitals to enhance


the financial and operational metrics of the or- thopedic service line by aligning 25 orthopedic surgeons around a certain procedure. We are helping the hospital analyze clinical and supply data to understand how the different devices and processes used by the various surgeons impact patient outcomes relative to the organization’s cost structure (i.e., are outcomes a function of product cost, or can we achieve the same or bet-


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