Hospital Network Nets M Savings

January 16, 2004
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GRAND RAPIDS — A regional hospital network formed last spring generated more than $1 million in savings on purchases during 2003 and, according to its administrator, has the potential to pay far greater dividends.

The savings easily exceeds expectations and resulted from better prices negotiated on supply purchases that are now made in larger volume by the Spectrum Health Regional Network that consists of the Grand Rapids-based health system and several other hospitals and health systems in West Michigan.

Linda Erickson, the regional network’s director, believes the $1.1 million in annualized savings already generated can grow by another $1 million in supply purchases in the next six months alone.

“We have only begun,” Erickson said. “I think this is just the tip of the iceberg. We have a lot more savings we can do in the area of supplies.”

Formed last April, the Spectrum Health Regional Network is designed to strengthen the formal and informal cooperation that previously existed among community hospitals in West Michigan and Spectrum Health, the region’s largest tertiary and acute-care provider. Preserving the independence and economic strength of the community hospitals are the “cornerstones of the network,” according to Spectrum Health.

“Working together has made each entity in the network stronger on multiple levels. At the same time, Spectrum Health benefits from having strong community hospitals in the surrounding areas. Whenever possible, it’s better to provide care to patients close to home,” Spectrum Health Senior Vice President John Mosley said.

The immediate benefit for network participants is the potential for the smaller hospitals to leverage Spectrum Heath’s sizeable buying power to generate cost savings on group purchases of medical supplies and equipment.

Long term, participants are working to improve communications and collaboration on major medical and operational issues. Among them are the sharing of best medical and administrative practices, referral patterns and practices between hospitals, a streamlined physician credentialing process, regulatory compliance, safety and quality initiatives, preventing costly service duplications, and crafting common clinical protocols.

Work teams from participating network members are now focusing on communications, cost savings, care coordination, quality improvements, staff training, risk and compliance, physician recruitment and community health initiatives.

“The network gives us the opportunity to design a rational delivery system for our communities,” said Dale Sowders, president and chief executive officer at Holland Community Hospital.

Of the $1.1 million in savings generated since April, $300,000 came in the purchase of blood from the American Red Cross and Michigan Community Blood Centers, Erickson said. Other savings came from the group purchase of medical, surgical, pharmaceutical and laboratory supplies, she said.

The network will launch a partnership early this year with West Michigan Imaging Center, which provides mobile MRI services in Ottawa and Muskegon counties. The partnership will make the center’s mobile MRI services accessible to all network members.

Participants in the regional network are Spectrum Health and its nine hospitals: Metropolitan Hospital in Grand Rapids, Holland Community Hospital, Zeeland Community Hospital, North Ottawa Community Hospital in Grand Haven, Mary Free Bed Hospital & Rehabilitation Center and Pine Rest Christian Mental Health Services in Grand Rapids, Ionia County Memorial Hospital, Gerber Memorial Health Services in Fremont, Memorial Medical Center of West Michigan in Ludington, and Pennock Health Services in Hastings.               

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