Charting Your Course to Optimal GPO and IDN Relationships

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Introduction/ Objectives

Upon completion of this section, you should be able to:

Understand the role of GPOs and IDNs in the contracting process

Understand Surgical Solutions process to obtain a GPO agreement

Be able to decipher a GPO agreement based on Quick Facts

Know where to locate GPO agreement information

Understand where to obtain GPO information about your accounts

Objectives

Charting Your Course to Optimal GPO and IDN Relationships

The Basics

Government/Medicare costs escalating

Hospitals need to reduce costs

Influx of Low Cost suppliers

Reinventing themselves into more of a consultants role

Separating categories into smaller product groups

Most awards are multi/dual source awards versus sole

New pressures have changed the GPO contracting landscape.

Did you know…Today, virtually every hospital in the

U.S. belongs to at least one GPO. More than 70% of all hospital

purchases are made through GPO contracts, and GPOs contract for

purchases with an annual value in the range of $150 billion

Why Do GPOs Exist?

GPO agreements enable ABC Company access to their members

Access enables Field Sales teams to convert, standardize, and consolidate vendors to reach

GPO voting members in both committed and non-committed accounts

Penetration and presence in accounts allow ABC Company to introduce new technologies that build leverage and disrupt the competition

Pricing integrity and profitability are maintained for GPO members of like size and compliance ability

GPO (Group Purchasing Organization) Group purchasing organizations (GPOs) were created to help hospitals and other providers to pool their purchasing power to secure significant discounts on virtually all medical and other hospital supplies.

GPO Defined

Negotiates pricing/contracts on behalf of its members with the objective of lowering overall costs

Hospital pays GPO an annual fee to negotiate on their behalf

Manufacturers pay GPO’s a fee to market their agreements to the hospitals and drive compliance

Large IDNs and Systems typically are the owners of the GPOs

As the GPO’s membership expands, its ability to leverage purchasing power decreases

Today’s GPO Landscape

GPOs are enabling their members to establish geographical buying groups

Embracing coalitions and collaboratives which are driving standardization

Providing greater transparency to our pricing via intranet tools

Educating Integrated Healthcare Networks (IHNs) on best practices .that focus on enhanced collaboration between physicians and supply chain Add Ascension Health logo

Today’s GPO Landscape

GPOs are trying to reinvent themselves to ensure they bring value to their memberships

Embracing coalitions and collaboratives which are driving standardization

Providing greater transparency to our pricing via intranet tools

Educating IHNs on best practices .that focus on enhanced collaboration between physicians and supply chain

Integrated Delivery Network (IDN)

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A network of facilities and providers working together to offer a continuum of care to a specific market or geographic area (also referred to IHN-integrated healthcare network)

Developed in the early 1980s, IDNs emerged to address common concerns like capitation, excess capacity, decreased margins, and complaints from patients regarding access

Frequently, the GPO contracted price is seen as the starting point for IDN/vendor negotiations

Self contracting by IDN;s is on the rise: this trend started with commodities and is now picking up speed with physician preference items

Includes many types of associations across the continuum of care and one network may include a short- and long-term hospital, HMO, PHO, PPO, home health agency, and hospice services.

Where do I put this?

Examples

Kaiser, Tenet, Partners Health System, IHC, UPMC, Northshore/LIJ Health System

For example: Dignity Health is also part of Catholic Care Group (CCG – 1 of 6 IDNs) and is also voting members and shareholders of Premier

Why are GPO’s successful?

Lower total purchasing cost for small and large Providers*

Provide supply chain support to Provider through contract negotiation, value analysis and other additional services

Replaces some hospital full time employees (FTEs)

Providing consultant type roles for cost reduction

* Providers defined as hospital, system, coalition, alliance

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GPO Segmentation

GPO Type Description Examples

Proprietary Manage outsourced supply chainOwn/manage/lease membersHighest compliance to agreements- “mandate” 

MedAssets/BroadlaneHealthTrust ROi 

Alliance Members own GPO (equity owners, shareholders)High to moderate compliance- “expect” 

NovationPremier 

Voluntary Members pay to participateModerate to low compliance- “voluntary” 

AmerinetMedAssets/BroadlaneVA/Government

The various types of GPO’s, IDNs and other purchasing entities

Inse

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A GPO Agreement Pricing: Non-Committed Tiers- minimum compliance needed

Revenue Tiers – require specific revenue to gain pricing

Committed Tiers require 85% compliance and are revenue based

Greater committed revenue= better pricingMost GPO’s try to negotiate “fixed” pricing for the term

Some agreements will have price increases associated with them

Term: Typically 3 years with various option yearsLetter of Participation (LOP): Member required to sign an LOP or other equivalent document in order to be “tied to the agreement” in order to activate pricing

Standardization Analysis:Many agreements require Standardization analysis to ensure they are meeting the criteria of the agreement

An agreement on behalf of

hospitals/IDNs that have retained the

services of a GPO to secure contracts

for goods and services from designated

suppliers.

The primary goal of the GPO is to get

the lowest price for the goods or

services for its members.

Award Types

Sole Source: One single national,

regional or program specific supplier

contract for a defined product

category or service

Dual Source: Two specific supplier

contract sources

Multi Source: More than two

specific supplier contract sources

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Local Agreements

Used when the volume and compliance of an IDN, Purchasing Coalition or Hospital exceeds the highest tier offered on a GPO contract that they may request special pricing that is better than the agreement. In these cases, an local agreement is negotiated directly between ABC Company and the IDN, Purchasing Coalition or Hospital. These agreements typically are an extension of the GPO agreements and we pay the same administrative fees to the GPO. In rare instances we may pay fees to the IDN, Purchasing Coalition or Hospital. Please consult your National accounts team before entering into any local agreements. Fees range from 1-3% depending on whether contract is sole, dual or multi-source.

These agreements will be driven by the Strategic Accounts Team or Sales Leadership.

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Surgical Solution Current GPO Agreements

• Surgical Solutions currently has 42 Active GPO agreements• Approximately 75% of our business runs thru a GPO agreement

AST Only4

AST/SuS 8

AST/SuS/Hernia 3

Hernia Only9

SuS Only18

GPO Agreements by Business Unit

HealthTrust6

Premier9

Amerinet11

Novation9

MA/BL2

VA/DOD5

Number of Agreements by GPO

Can be streamed into earlier slides or did you know

Leveraging the GPO Agreements

Key Representative Actions• Monitor Compliance to grow market share or take revenue• Introduce New products• Ensure the safe and efficacious use of our portfolio

Key Resources

Use SFDC to identify GPO

– Go into SFDC and go to the 'Reports' section and search for the following report.

 S2 Account List with Primary GPO and locate your account

• Offer Development Tools• The seller/RM should put a work request in via Business Analysis Tool (BAT). http

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• They can then run up to three different “what if” pricing scenarios, by themselves, on current usage

• If they have competitive usage in an excel format, they would then send that into their Offer Development Analyst along with the BAT work #.

• They would then get an analysis and Executive review from Offer Development between 2-5 day, maybe sooner.

• Pulse Connect GPO site (https://pulseconnect.ABC Company.com/groups/gpo-discussion-board)

Marketplace Changes – Procurement Strategies

Recent Marketplace Trends: Third Party E-Sourcing

There’s been an increase in hospitals self-contracting as they look to revisit their capabilities and approaches to improve their overall supply cost budget. This is not just focused on price, but total cost. Hospitals and Health Systems are hiring sourcing consultants to handle the sourcing and live bid process of many expense categories to create a more transparent and flexible marketplace. The process is all done through a hospital and supplier online portal.

This on-line negotiation and bidding platform provides the flexibility to source nearly every expense category in a hospital, allowing clients to negotiate contracts during a live-bid process. This ensures the best terms and value from current and prospective suppliers.

Reverse auctions is another e-procurement strategy used by purchasing and supply management organizations to reduce spending as part of strategic sourcing and other supply management activities.

Can call this out in blurb:Third Party Sourcing: Benefits to hospitals: outside party to manage the process with vendors and hospital stakeholders to help increase savings for hospitals

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Charting Your Course to Maximize GPO and IDN Contracts

Congratulations. You have reached the end of this module.

Thank you for investing the time to understand how GPO…….can positively impact your success at ABC Company. The following questions were developed to test your understanding of the material just covered.

You are expected to get a score of 90% or higher.