Hospital group purchasing cuts costs
Zeeland Community Hospital has saved $300,000 on purchasing since it joined with Spectrum Health and 15 other hospitals in a regional network in 2003.
“The soft dollar savings is probably equivalent, if not more than that,” said Dennis Barber, director of material management for the 57-bed hospital in Ottawa County.
Spectrum Health Regional Hospital Network this month marked $10 million in savings for its members, which stretch from Berrien Center to Ludington to Mt. Pleasant. The network was formed in 2003 to band the seven Spectrum Health facilities with 15 independent community hospitals for group purchasing of medical-surgical, laboratory and pharmacy supplies.
Today the group does $300 million in business annually with Novation, the goods and services purchasing organization formed by two national hospital associations.
“We’re always looking for how do we deliver value for hospital network members, how do we improve quality or costs or savings,” said Christina Freese-Decker, executive director of the network.
Achieving savings requires the hospitals purchase standard items, for example, exam gloves. That allows for bulk purchasing, which saves the most money, Freese-Decker explained. That’s not always an easy task, given the vast array of items and individual preferences, but the network has managed to stick with standardization 97 percent of the time, one of the highest compliance rates at Novation.
“This level of collaboration among so many independent community hospitals to strengthen purchasing power is remarkable,” she added.
For example, the network agreed to a three-contract for x-ray film through 2009 that saves 15 percent to 20 percent for the average hospital member. The total savings for the 15 community hospitals and seven Spectrum Health hospitals amounts to $230,000 annually, or nearly $700,000 over the life of the contract.
“It is challenging to try to find a product we all would like to go toward and then bring everybody on the same page so we can migrate toward the same goal,” Barber added. “Once we do that, the savings is very significant.”
The number of different goods and services is staggering, added Christopher Baskel, director of supply chain management for Spectrum Health. “Tons of things, from blood to needles and syringes, a multitude of specific medical type supplies, X-ray film, and on and on and on. There are some non-medical things as well — for example, the shredding of paper.”
Hospitals pay a standard annual fee of $7,500 to join the Spectrum Health Regional Hospital Network, Freese-Decker said. Optional membership in VHA, one of Novation’s parent agencies, is extra, she added.
Mecosta County Medical Center joined the network in April, when its relationship with another group purchasing organization ended along with a management agreement, CFO Joe Hohenburger said. He said the 74-bed hospital in Big Rapids had saved $400,000 by the end of September.
Freese-Decker said the network has expanded from its purchasing focus to bring together various hospital functions, such as laboratories, radiation and marketing, to discuss best practices and quality.
“It’s really brought a lot of people together to talk about what is of interest to them,” Barber said. “Materials people like myself, we care about dollar savings. Every group has a different arena that is near and dear to them. We can talk to our peers about how those issues are solved.”