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The number of channels a supplier has to negotiate to gain business with an IDN is staggering. It is not uncommon for a Corporate Accounts Executive to sit across the table from a Supply Chain Leader negotiating for market share, and that Supply Chain Leader is accustomed to individual contracts for his IDN, yet is also a shareholder of a GPO and a member of a Regional Purchasing Coalition. This adds complexity to the supply chain for the supplier, but the IDN must be seeing savings to go through all the trouble it takes to have this many Channel Choices.
The latest issue of The Journal of Healthcare Contracting explores an emerging model with an LLC between VHA and the Cleveland Clinic. While there are a number of details yet to be released, I took the liberty of sharing highlights of the article below. You can read the article in its entirety at this link: http://www.jhconline.com/getting-better-all-the-time.html
“[T]he health system wants to get even better at sourcing, managing product utilization and monitoring results – and then offer that expertise to other hospitals and IDNs around the country.”
“We (Cleveland Clinic) wanted to build a relationship that put skin in the game for both organizations, that defined value, and delivered value to both parties,” says Bill Donato, executive director, supply chain management, Cleveland Clinic. “We weren’t interested in a traditional relationship.”
“These 18 networks, which represent more than $5 billion of spending, leverage the contracting and analytics capabilities of VHA and its supply contracting company, Novation, while giving the networks much autonomy,” says Byron Jobe, executive vice president, VHA.
“Cleveland Clinic has a proven approach to how they select products, how they use them, and how they manage outcomes. The LLC will help them do that, and give them the analytics to guide decisions and monitor performance.”
“The LLC structure will allow affiliates to access the joint venture’s contract portfolio, says Donato. That’s good for existing affiliates, and a potential marketing tool for prospects. It will also allow Cleveland Clinic to offer solutions to a variety of supply chain challenges.”
It amazes me how IDNs continue to open up new channels for procurement, like in the case of VHA and the Cleveland Clinic collaborating through an LLC, but it’s surprising that the Cleveland Clinic has gone to that much trouble to realize gains they don’t think they would see in their current GPO contracts’ local tiers, or through direct supplier contracts.
It seems suppliers continue to give price, terms and conditions concessions in exchange for committed compliance they feel they wouldn’t get without the opportunity to participate in the newly formed channel. Or we wouldn’t see the proliferation of new and hybrid channels.