Healthcare - Group Purchasing Organizations (GPO’s) = Opportunity.
Jan 18, 2018
Healthcare - Group Purchasing Organizations (GPO’s) =
Opportunity.
GPO Market• 2004:
– GPO’s account for 72% to 80% of every healthcare dollar spent. *
• 2004: – Top 7 GPO’s account for 85%
of US Hospital Market. *• 2009: *
– Projected GPO Market:• $287 Billion = Hospitals
alone.
• * Source: Knowledge Source “Group Purchasing Organization Market Overview – 2004”
85%
15%Non-GPOGPO
GPO Market• 2004:
– GPO’s account for 72% to 80% of every healthcare dollar spent. *
• 2004: – Top 7 GPO’s account for 85%
of US Hospital Market. *• 2009: *
– Projected GPO Market:• $287 Billion = Hospitals
alone.
• * Source: Knowledge Source “Group Purchasing Organization Market Overview – 2004”
85%
15%Non-GPOGPO
Revenue
GPO economic impact on Healthcare Market.
Reseller driven Market.
Margin
Revenue
GPO economic impact on Healthcare Market.
Reseller driven Market to decline over time to 15% of current.
Margin
15%
Time
Revenue
GPO economic impact on Healthcare Market.
Reseller driven Market to decline over time to 15% of current.
Developed GPO Market• Participation in Market• Channel Development• Drive Market Standards• Channel Management provided by
Partnered, not Commodity engagement.
Margin
GPO Market Potential
15%
GPO “Market”
• GPO’s negotiate Pricing, Terms, Conditions by leveraging buying power of members.– Commodity Buying Model Employed.– Unique Market Space
• No Volume commitments• “Play, no Play” consequences
– HP lost $75 Mil in desktops and printers for 2003 through one GPO.
• Vendor Exclusivity is not desired – Variety is.
Understanding GPO’s• GPO’s must:
– Meet demands of their member base.• Heterogeneity whenever possible.• Less 3 way contractual commitment whenever possible.
– Operate under Government Scrutiny.• Must be able to demonstrate
– Non-preference for Specific Members or Vendors.– Ethical operations (Safe Harbor)
• No kick-backs, undo influence, etc.– Evolve in order to stay competitive.
• Growth.• Value of GPO’s Contract negotiation to commoditize over time.• Member retention = Do more for incrementally less.
– New services, products offered to expand market.– Each new offering will be initially less costly. This will evolve into increases as
bundling occurs.
Typical Account Management Standards do not apply
• Volume, tiering, bundling and exclusive commitments do not and cannot apply.
• Product access is a limiting factor to vendor, not the GPO.
• Healthcare consumes:– Broadest offering at; – least cost; – “DeFacto” standards whenever possible.
“Partnership” = Account Control
• “Partner” with GPO to:– Provide broader solutions (Products, Services,
Standards) to the members as a perceived value add.– Evolve the GPO
• Embeds Clearcube as partner for success.– GPO becomes dependent.
• Changes engagement dynamics from “Commodity” to “Partnered.”
– Broaden product offering.– Create new products and markets.– Drive Market Standards to a competitive advantage
– Become “De-Facto” solutions Standard by effectively partnering whenever possible.
Tier IServers
Storage
Desktops / Notebooks
Tier II
Co-Solutions Development
Tier IIIPartnered Products / initiatives:
Capital Equipment Management
Clearcube “X” Service Provider
Co-drive Industry Standards
Profit Center - Service Agreements
Analysis & Time
Complexity
TBD
TBD
Partnership Universe = Account Management.
Patient Management
GPO Contract Attributes
• No Volume commitment.• “Admin Fee” = 2-3%• Weekly reporting• Audit Rights
– Company to Company– Dept of Health + Human Services = flows
down to all services subcontracting• Family level discounting
$0$2$4$6$8
$10$12$14$16$18
Billions
2001Vol
2002Vol
2003Vol
AmeriNet
Broadlane
Consorta
HealthTrust GroupPurchasingJoint PurchasingCorporationMedAssets HSCA
Novation/VHA
Premier
Note Growth rates
Contract Values per GPO
2004 Broadlane Opportunity• 5500 accounts:
– 3800 are comprised from 10 major members• Kaiser, Tenet Healthcare, Christus health, Continuum, Kindred
Healthcare, Health Alliance Greater Cincinnati, Us Oncology, Community Health Systems, Alliance Imaging, NCS
– 21,000 locations– 500 Major Hospitals
• $15 Mil = Servers• $50 Mil = Desktop/Notebook• $25 Mil = Printer• $Emerging / Evolving Markets ($100 Mil + adder)
Account Structure• 1383 non-affiliated account locations
– Pending SMB/Commercial/Enterprise assignment analysis
• 22 Enterprise accounts comprised of 3583 locations.
Broadlane serves providers on a national scale … anchored by core customers
• Committed customers with comprehensive agreements ranging from 5 to 10 years
• Purchase volume flowing through Broadlane contracts is projected to reach $5.4b in 2003
Continuum Health Partners
1. Type: Not-for-profit IDN2. Location: New York City3. Number of acute hospitals: 74. Number of beds: 3,9015. Annual supply spend: $300 million6. Dedicated Broadlane employees: 37
1. Risk-based, full outsource agreement with compensation based on achieved savings
2. Broadlane is involved in 100 percent of all contracting efforts; provides custom contracting solutions; contract management system and e-procurement; and operational consulting services
Customer Characteristics Broadlane Services
5 years
1. Implement imaginative solutions to deliver savings outside of contracting, such as capital asset management and AP management
2. Engage physicians and other clinicians to drive and support product selection and standardization
Customer Challenge
1. To date: $38 million of recurring savings
Savings Achieved
5 years 5 years
The Health Alliance of Greater Cincinnati
1. Type: Not-for-profit IDN2. Location: Cincinnati, Ohio3. Number of acute hospitals: 64. Number of beds: 2,2565. Annual supply spend: $207 million6. Dedicated Broadlane employees: 28
1. Risk-based, full outsource agreement with compensation based on achieved savings
2. Broadlane is involved in 100 percent of all contracting efforts; provides custom contracting solutions; and e-procurement
Customer Characteristics Broadlane Services
1. To date: More than $7 million of recurring savings
Savings Achieved1. Deliver contract savings by
leveraging national customer base2. Incorporate clinical participation in
product decisions3. Provide business and clinical
expertise
Customer Challenge
CHRISTUS Health
1. Type: Not-for-profit / faith-based IDN2. Location: Operates in 6 states3. Number of acute hospitals: 404. Number of beds: 7,6325. Annual supply spend: $387 million6. Dedicated Broadlane employees: 15
1. Risk-based, full outsource agreement with compensation based on achieved savings
2. Broadlane is involved in 100 percent of all contracting efforts; provides custom contracting and self-contracting support; contract management system; temporary labor solutions; and directs and manages clinical and non-clinical resource groups
Customer Characteristics Broadlane Services
5 years 5 years
5 years
1. Enable centralized and focused approach to supply chain management
2. Coordinate internal groups responsible for contracting, implementation and utilization initiatives
Customer Challenge
1. Early phases of customer engagement
Savings Achieved
Kaiser Permanente
1. Type: Not-for-profit IDN2. Location: Operates in 9 states3. Number of acute hospitals: 294. Number of medical offices: 4235. Number of beds: 7,3266. Annual supply spend: $5.2 billion7. Dedicated Broadlane employees: 25
1. Risk-based, full outsource agreement with compensation based on achieved savings
2. Broadlane is involved in 100 percent of contracting efforts; provides custom contracting solutions; and manages physician committees for both medical and non-medical groups
Customer Characteristics Broadlane Services
5 years 5 years5 years 10 years
1. Provide customer-driven contracting process and leverage clinical input
2. Deliver compliance and utilization strategies
3. Streamline business processes and reduce contracting timeline
Customer Challenge
1. To date: $83.9 million
Savings Achieved
Tenet Healthcare
1. Type: For-profit IDN2. Location: Operates in 16 states3. Number of acute hospitals: 1144. Number of beds: 27,8825. Annual supply spend: $1.9 billion6. Dedicated Broadlane employees: 5
1. Risk-based, full outsource agreement with compensation based on achieved savings
2. Broadlane is involved in 100 percent of all contracting efforts; provides custom contracting solutions; contract management system; nurse staffing and other consulting services
3. Controllable expense diagnostic to identify additional cost reduction opportunities
Customer Characteristics Broadlane Services
5 years 5 years 10 years5 years 10 years
1. Drive cost savings in supplies and other controllable expenses, such as contract labor and purchased services
Customer Challenge
1. To date: $121 million
Savings Achieved
Direct
Broadlane outsourced procurement / Account management = leveraged 110 Broadlane people
Sales Touch Points
Other Major Broadlane Accounts by # of locations
• Advocate Health - 201• Alliance Imaging – 182• Brim Healthcare – 47• IHC – 34• Catholic Health Services – 14• Christus Health – 153• Community Health Systems – 106• Continuum – 57• Kindred Healthcare (Long Term Care) – 368• Omnicare (Long Term Care) – 194• Health Alliance Greater Cincinatti – 114• Universal Health Services – 100• US Oncology (Ambulatory Care) – 477
Identified Opportunities• Consultant - $40 Mil MOU for Storage.• $2.3 Bil / 3 yr. “Health Connect” project @
Kaiser.– Taken away from IBM Global Services– 5d0,000 desktops off the table – went to Dell– Servers and Storage = target
• Tenet– Blade Server
• Continuum– $2.7 Mil in Desktop refresh (4000 units)
Opportunities derived from Synergy
• Business derived from:– Multiple account, level and time management
• “X” ways– Steering Committee + Member + Influencer (Consultant, Other
provider, Developing Project• e.g. Broadlane + Continuum + CGE&Y + Patient Bed or
RFID, etc. • “Y” time
– Leverage future projects for imminent opportunities– Summary:
• “Z” Synergy equation– Opportunities (present and future) in relation to present and
future projects in relation to Influencers + Members + Broadlane.
Account Success = 4 levels External + 3 levels Internal
Work with Field
Regional Sales Managers
Work with Channel
Sales
Specialists
Work across business functions
Sales
Marketing
Product Dev
Operations
Premier Revenue per quarter (Direct + Indirect)
00.5
11.5
22.5
33.5
44.5
5
PreMerg -
02
Q4 03 1Q 04 2Q 04
Revenue(Millions)
Account coverage dispersal +
Economy + reduced focus
Account coverage re-focused, new support.
Relative Revenue per Engagement Strategy for One GPO (Broadlane)
050
100150200250300350400
$Millions
Commodity Partnered Finance -4% on
$1BillionEngagement Strategy
LeasingCo-Dev'dSolutionsServicesProducts
GPO Strengths• DeFacto PC Blade Standard (Healthcare Herd
Behavior)• Healthcare likes to consume perceived leader.• Leader defined by provider able to provide the most with less
effort at a competitive price that industry talks about.– Recognized work in Healthcare Industry. – Drives Standards through proactive partnering and bundled
problem solving. • GPO’s most efficient means to deliver
– Economies of Scale:• Sales, Ops, Marketing, Account Management
– Opportunity Cost – Play or no Play = 15% vs. driving and creating market.
GPO Opportunity
– Partnered development opportunities with emerging technology. (Dell does not invent)• RFID / “X”SP / Asset Management / Patient
Management– ARM for GPO to members
• Technical / Non-technical– Momentum to satisfy Healthcare “Herd”
behavior.
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