From the November 2012 issue of HealthCare Business News magazine



GPOs are still relevant. The health care industry traditionally moves very slowly. It’s unlikely the need of GPOs will go away for a long time, if ever. I believe that there is a lack of investment into supply chain talent, in the industry, due to its dependence on GPOs and distributors. GPOs should be used as a tool not a complete strategy for a company. There needs to be a greater emphasis on managing all of the costs of non-labor spent and not just the traditional “medsurg” products. There also needs to be greater emphasis to evaluate total cost solutions and not solutions based upon price, which are traditional with GPOs. Also, supplier partnerships or alliance-type behavior should be expanded to help find solutions that improve patient care and outcomes, which are part of the new ACO environment. It’s hard to manage suppliers like a partner if they are your GPO’s supplier, not your own direct supplier.

- Brent Johnson, vice president of supply chain, chief purchasing officer for Intermountain Healthcare based in Salt Lake City, Utah. (Under Johnson’s leadership, Intermountain has moved toward a self-distribution model and therefore a new supply chain strategy for its 23 hospitals and 160 clinics).



Hospitals are facing unprecedented change and financial challenges. Health care reform is driving a much more acute focus on the linkage between cost and quality. At the same time, hospitals continue to face a very difficult economy as they brace for reform-driven reimbursement reductions. Hospitals are really struggling. As their operating budgets are being slashed to account for reimbursement cuts, the number of patients they care for is actually growing. And, with so many unknowns about health care reform, hospitals are finding it difficult to prepare for its impact. But this doesn’t necessarily translate into an obstacle for GPOs. In fact, it presents a rare opportunity for us to completely revolutionize the health care supply chain. Supply costs are more important to hospitals than ever – supplies are right behind labor costs in terms of largest expenses, and hospitals are much more eager to lower supply costs than cut much-needed staff, particularly in light of reimbursement changes that link financial performance with both quality and the patient experience. Hospitals are going beyond traditional purchasing and procurement and their responsibilities now include identifying strategic cost savings opportunities. This means materials management is becoming very skilled in the use of data, analytics and benchmarking. We are poised to help them with this new focus by leading the industry in lowering prices and by offering the most sophisticated data and analytic tools.

- Pete Allen, senior vice president of sourcing operations at Novation.

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