Medical Distribution Solutions, Inc.

Transcription

1 Medical Distribution Solutions, Inc. GPOs Complex Trends in a Changing Market

2 Medical Distribution Solutions, Inc. Distribution Products Contracting Products

3 Objective Present a comprehensive view of the GPO/IDN/RPC contracting arena. Past, Present and Future!

4 GPOs by the numbers GPOs 2008 Contract Throughput 2009 Projected Throughput Hospitals Served 2008 Hospitals Served 2009 Novation $35.6 billion $36.0 billion 2,490 2,530 Premier $32.0 billion $33.0 billion 2,100 2,300 MedAssets $19.0 billion $20.0 billion 3,100 3,300 HealthTrust $14.0 billion $14.0 billion 1,425 1,370 Broadlane $10.0 billion $10.3 billion 1,175 1,130 Amerinet $6.6 billion $7.0 billion 2,350 2,500

5 GPO Market Share GPO 2005 % of Total 2006 % of Total 2007 % of Total 2008 % of Total Novation (VHA, UHC & Provista) 25, % 31, % 33, % 34, % Premier (Incl. Innovatix & GNYHA) 25, % 28, % 30, % 33, % MedAssets 15, % 15, % 17, % 18, % HealthTrust (+Consorta beginning 2007) 7, % 8, % 10, % 13, % Broadlane 6, % 8, % 9, % 10, % Amerinet 6, % 6, % 6, % 6, % Govt (DoD + VA) 3, % 5, % 5, % 6, % Consorta* 4, % 5, % 4, % 2, % Other GPOs 3, % 3, % 4, % 4, % Total GPO Volume 97, % 113, % 122, % 129, % *Consorta joined HealthTrust in 2007 but still does some of its own contracting. Volume is self-reported and includes pharmaceuticals. Grayed cells are estimated values

6 GPO s Now Serve Diverse Provider Types (Beyond Acute Care) Major GPO Membership 2008 [1] GPO Acute & IDN Alt LTC Physicians Total * Amerinet 1,912 2,911 3,089 15,657 23,569 Broadlane 931 4, ,730 10,221 HealthTrust 1,052 1, ,037 3,540 MedAssets 1,673 2,978 7,049 24,074 35,774 Novation 2,866 7,278 1,551 28,161 39,856 Premier 1,781 9,980 13,500 26,056 51,317

7 Contracting for non-acute facilities 63% say alternate sites have become more proactive in contracting 68% say GPOs have marketed to their alternate site facilities 30% believe their purchases on contract will grow over 20% in the next 3-5 years

8 Contracting Members 60,000 50,000 40,000 30,000 20,000 10,000 Fig. 2. Reported GPO Non-Acute Mem bership Non-Acute Members 0 2,600 1,800 MediGroup Onmark Premier (incl. Innovatix & GNYHA) 49,536 1,500 Novation (VHA, UHC & Provista) NOA (National Oncology Alliance) 36,990 34,101 MedAssets GPO 21,657 9,290 Amerinet Broadlane HealthTrust (incl. Consorta) 2,488

9 Operating Income Operating Income ($ Millions) Novation He althtrus t Cons orta MHA Solutions

10 GPO Share back/cash Dividend to Members

11 Leading IDN s in Largest MSA s Top Five Metropolitan Statistical Areas (MSAs) by Population Rank MSA/IDN Local Inpatient Market Share 1 Los Angeles-Long Beach, CA (population 9.14 million) 1 Los Angeles County Department of Health Services 13% 2 Kaiser Permanente 10% 3 USC Health Sciences 8% 2 New York, NY (population 8.57 million) 1 New York Presbyterian Healthcare System 24% 2 NYC Health & Hospitals Corporation 16% 3 Continuum Health Partners 9% 3 Chicago, IL (population 7.72 million) 1 Advocate Health Care 14% 2 Resurrection Health Care Corp 9% 3 Rush System for Health 5% 4 Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH (population 5.77 million) 1 Partners HealthCare System Inc 16% 2 South Shore Health & Educational Corp 10% 3 Caritas Christi Health Care System 10% 5 Philadelphia, PA-NJ (population 4.95 million) 1 Catholic Health East 22% 2 Fox Chase Network 16% 3 Jefferson Health System 16% Source: The MAX ( based on 2000 US Census Bureau population data

12 The State of Healthcare Contracting- IDN s Total IDNs Shareholders of a GPO System IV System III System II System I 30 3

13 Medical Distribution Solutions, Inc. HIDA GPO Report sponsored by The MAX Average # of GPOs per hospital is 2.4 Average # of GPOs per IDN is 1.7 Estimated GPO compliance is 55%-60%

14 The C-Suite and Supply Chain Executives now believe Supply Chain is a strategic initiative 35%-45% of a hospitals budget is supply chain CEOs see the greatest impact on supply chain from; Degree of product standardization Quality of contracts Product pricing Efficiency of supply chain processes Physician cooperation Owens & Minor December, 2008

15 The C-Suite and Supply Chain How are they measuring process efficiency and process improvement? 74% Supply Expense 73% Cost Savings 36% FTE Reductions Hospitals and quality management programs Materials management 26% OR Management 25% Emergency Department 22% CS/Sterile Processing 20% Surgical Supplies 17% Materials Management in Healthcare December 2008

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17 What is a Regional Purchasing Coalition? Group of healthcare providers Voluntarily combining purchasing volume To access higher tier pricing Through their GPO or Directly with suppliers

18 What is a Regional Purchasing Coalition? RPC members almost always in same GPO Premier members band together to aggregate volume against an existing Premier contract Vary in size and institution type Small independent hospitals Large IDNs Membership through parent IDN Physician practices Ambulatory surgery centers Long-Term Care Facilities

19 Regional Purchasing Coalitions We have identified 125 RPCs that represent 820k Beds 29m Admissions 127m Outpatient visits Co-operative Services of Florida (LeeSar) Carolinas Shared Services Illinois Purchasing Collaborative Coastal Cooperative of New Jersey

20 RPC Facts* The MAX identifies 125 Regional Purchasing Cooperatives nationally However: 19 sites are subsets of various federal government procurement functions DOD, VA, DOJ, FSS, TRI-CARE 9 are HCA Regional Purchasing and Distribution Centers Leaving 97 Open Market RPC s

21 RPC Facts Open Market RPC Breakdown GPO RPC Sites Amerinet 14 Broadlane 2 MedAssets 13 Novation 23 Premier 34 Total of 97 Open Market RPC s are aligned with at least one major national GPO 89% Of 86 RPC s aligned with national GPO s, all but 4 are aligned with a single GPO 95% have exclusive GPO loyalties

22 RPCs by the numbers We surveyed 226 Hospital/IDN Supply chain executives 40% were not part of an RPC Less than 25% of their purchases are currently through RPC Contracts Very high level of satisfaction for their RPC

23 How Suppliers Can Be Successful with RPCs 1) Look at RPCs as opportunity rather than obstacle 2) Recognize RPCs as systems and aggregators 3) Respect boundaries: RPC members commit to not hold discussions with vendors until initiative is final Approaching individual members won t get you the sale--will make a bad impression

24 Quarterly survey to pool of 290 Supply Chain Executives 44% of respondents have been in the healthcare contracting arena for over 20 years. 71% of the respondents consider Novation (VHA-UHC-Provista), Premier or MedAssets their primary GPO. Over 160 are in an IDN.

25 How satisfied are you with your primary GPO? Very Satisfied 50% Somewhat Satisfied 37% Neutral 7% Somewhat Dissatisfied 4.5% Very Dissatisfied.5%

26 Over the next 1-3 years, do you expect your purchases for supplies and services from your primary GPOs contracts.. to be significantly less than 2007 volume 5% to be slightly less than 2007 volume 3% to be about the same as 2007 volume 19% to increase by 1-9% annually 50% to increase 10-14% annually 14% to increase by 15% or more annually 6%

27 Many contracted suppliers are often under-whelmed by the sales volume they see from GPO contracts. Why do you think this happens? 19% say Suppliers have unrealistic expectations. 20% say Suppliers do not do enough to drive compliance of contracts.

28 What are some characteristics of your very best suppliers? Too many suppliers don't want to do the work needed to sell their product once they have a GPO contract Getting the GPO contract gives them the license to sell, but it still requires effort and good representation. They know the contracts. They understand group purchasing. My best suppliers can help me maximize the contract, not just improve their sales. They get to know our organization and how we operate. They focus on patient safety and improving patient outcomes in the most effective ways. They work through distributors & the GPO representatives to identify true opportunities as opposed to force feeding contract "terms" regarding compliance. It's not always about the $'s...

29 People are talking greater transparency and better tools for evaluating and weighing clinical benefits vs. the cost of devices, equipment and products will play a role in successfully meeting the challenges Karyn Gattermann Corporate Vice President Continuum Health Partners Inc. New York, N.Y.

30 People are talking We will probably see IDNs band together, work in small groups, and increase volume for better pricing. They will do this with or without GPOs ~George Hersch Norton Healthcare

31 People are talking The ability to commit has provided us with access to significant discounts and programs that would otherwise be unobtainable... Mark Grove Associate Executive Director, supply chain and alliance services Scott & White Healthcare Temple, Texas

32 People are talking Our industry will see company goals and incentives tied to their degree of success in helping hospitals and care givers improve patient outcomes, patient safety, operational efficiencies and costs Gary McMann Director supply chain operations Billings Clinic Billings, Mont.

33 Trends to Watch We identified 284 Hospitals/IDNs that eliminated 23,233 jobs in 2008

34 2009 Job cut results Minimum # job cuts Q4/Q4 14,000 12,000 10,000 8,000 6,000 4,000 2, ,711 3,314 Q Q4 2009

35 Trends to watch Regional Purchasing Coalitions Catholic Contracting Group Western NC Health Network Upper Midwest Consolidated Services Center Healthcare Coalition of Texas

36 Trends to watch Integrated Delivery Networks

37 Trends to watch

38 What does the future hold? Aggregation will increase Alternate site contracting is here to stay Connecting Quality and Cost is the new consumerism of healthcare. GPOs will continue to differentiate and grow Reform..got me

39 Medical Distribution Solutions, Inc. Questions? Thank you! John Pritchard