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Nashville, Tn.April 301, 2012
John I. Pritchard
Objective: Objective: To Better Understand the To Better Understand the
Increasingly Complex Increasingly Complex Healthcare Supply ChainHealthcare Supply Chain
Medical Distribution Solutions, Inc.
Distribution Products Contracting Products
The MAX by the Numbers…The MAX by the Numbers…
• 161,000 facilities….
Laboratory 28,020
Clinic/Physicians-Primary Care 18,308
Supplier 17,442
SNF/long-term care (LTC) unit 17,117
Home health (HHA) 13,817
Surgery center/ASC 9071
Assisted living center 5886
Hospital (Acute + Specialty Acute) 5679
Imaging Location 5230
The State of Healthcare The State of Healthcare Contracting-IDN’sContracting-IDN’s
Total IDNs Shareholders of a GPO
System IV 122 68
System III 688 146
System IIIA 458 46
System II 116 9
System I 66 1
Medical Distribution Medical Distribution Solutions, Inc.Solutions, Inc.
HIDA GPO Report
Average # of GPOs per Hospital is 2.4
Average # of GPOs per IDN is 1.7
Estimated GPO Compliance is 55%-60%
Overall Comparison of Major GPOs 2009 and 2010
Rank by Volume GPO
Contract Volume ($B) Acute* Non-acute
2009 2010 (est.) 2009 2010 2009 2010
1 Novation $37.8 $39.0 1,600 1620^ 23,000^ 30,000^
2 Premier $36.0 $39.0 2,400 2,400 79,388 80,000^
3 MedAssets** $24.0 $25.0 2,595 3,071^^ 32,278 36,6844 Healthtrust $17.0 $18.0 1,339 1,370 3,880 6,416
5 Broadlane** 10.3^ $11.0 1,132 1,100^ 43,377 45,000^6 US Govt $8.7 $9.4 212 210^ 134,900 134,8637 Amerinet $7.0 $7.5 2,092 2,613 39,602 33,451
*Hospitals + IDNs; **MedAssets & Broadlane to merge by 2011; ^Estimated;
^^ Includes Spend-Management members
Memberships from member lists except Novation and Premier -- from company PRs. Govt includes DoD & VA, from 2010 Federal Budget Request.
Copyright MDSI 2010. All rights reserved.
2010 Alternate Care Types by GPO
GPO Acute LTC Alt Care PhysiciansTotal Alt
CareTotal
Healthcare
US Govt 212 226 1,137 133,500 134,863 135,075
Premier 2,410 14,826 24,289 40,273 79,388 81,798
Broadlane 1,132 n/a 43,377 n/a 43,377 44,509
MedAssets 3,199 6,442 3,199 27,043 36,684 39,883
Amerinet 2,614 4,697 2,176 26,578 33,451 36,065
Novation 1,600 n/a 30,000 n/a 30,000 31,600
HealthTrust 1,695 274 1,390 4,752 6,416 8,111
GPO VolumeGPO Volume
GPO Name Location 2011 APV
1. MedAssets Alpharetta, GA $45.0B
2. Premier Inc. Charlotte, NC $43.0B
3. Novation LLC* Irving, TX $40.1B
4. HealthTrust Purchasing Group Nashville $19.0B
5. Amerinet Inc. St. Louis $7.6B
7. U.S. Department of Veterans Affairs Washington $5.4B
8. U.S. Department of Defense Washington $4.8B
9. Resource Optimization & Innovation St. Louis $693M
Source: Healthcare Purchasing News October, 2011
September 2008 September 2008 MeltdownMeltdown
:The Advisory Board, Implications for Hospitals The Financial Meltdown 2008
Catholic Contracting GroupCatholic Contracting Group5 IDNs (200 hospitals, 2,600 Alt.
Site)
-Bon Secours
-Catholic Healthcare West
-Catholic Healthcare Partners
-PeaceHealth
-SSM Healthcare
$16b in Net Patient Revenue
$3b in Supply Expense Budgets
$40m in Savings
80 Contracts
Regional Purchasing CoalitionsRegional Purchasing Coalitions
We Have Identified 157 RPCs that Represent
• 1.06m Beds
• 34m Admissions
• 161m Outpatient visits
Co-operative Services of Florida (LeeSar)
Carolinas Shared Services
Illinois Purchasing Collaborative
Coastal Cooperative of New Jersey
AL - 2
AZ - 1 AR - 1
CA - 6CO - 4
FL - 7
GA - 4
ID - 0
IL - 3 IN - 3
IA - 2
KS - 3 KY - 1
LA - 5
ME - 2
MA - 3 MI -6
MN -2
MS - 0
MO - 2
MT - 0
NE - 1 NV - 1
NH – 1
NM - 0
NY – 10
NC - 6
ND - 1
OH - 7
OK - 2
OR - 0
PA - 7
SC - 0
SD - 2
TN - 1
TX - 7
UT - 0
VT - 1
VA - 2
WA - 6
WV – 2
WI - 2
WY - 0
CT - 1
DE - 0MD - 5
NJ – 5
RI – 1
HI - 0
AK - 0
Regional Purchasing Coalitions by StateCopyright 2010 MDSI.
All rights reserved.
DC- 2
2010
Alignment of RPCs with Beds and Discharges
Rank by Discharge
sPrimary
AlignmentMinimum # of RPCs Est. Beds
Est. Discharges
1 Novation 26 268,568 11,776,177
2 MedAssets 15 185,548 7,379,547
3 Premier 34 147,405 5,799,292
4 Nonaligned 8 35,662 1,605,925
5 Amerinet 12 41,002 1,480,523
6 MHA 2 24,236 994,906
7 Govt 19 7,290 861,618
8 HealthTrust 11 11,759 540,650
9 Broadlane 1 448 18,948
RPCs by the NumbersRPCs 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
MedtronicMedtronic
Accountable Care OrganizationsAccountable Care Organizations
Health Reform - A Different Strategic Health Reform - A Different Strategic Posture?Posture?
• The Triple Aim Focuses on Cost, Quality and Patient Experience, key elements in the evaluation of ACOs.
• 5 Guiding Principles have been Framed to Guide the Development of Qualifying and Monitoring Criteria :• ACOs Have a Strong Foundation of Primary Care
• ACOs Report Reliable Measures to Support Quality Improvement and Eliminate Waste and Inefficiencies to Reduce Cost
• ACOs are Committed to Improving Quality, Improving Patient Experience and Reducing Per Capita Costs
• ACOs Work Cooperatively Towards these Goals with Stakeholders in a Community
• ACOs Create and Support a Sustainable Workforce
• Pursuing these Objectives Requires a Review of Operational Services to Align and Develop Functional Competencies with an ACO Model
23
http://www.ncqa.org/tabid/1266/Default.aspx
October 2012 October 2012 Final Regulations PublishedFinal Regulations Published
• Greatly Softened for Wider Adoption
• Higher Rewards and Less Risk
• Less Measures
• IT Requirements Reduced
• Advanced Payment Program
Cost vs. ReturnCost vs. Return
• According to CMS, Start-Up Costs for New ACOs Would be $1.8 Million in the First Year; according to the American Hospital Association that is Too Low
– The Real Costs Will Be Anywhere from $11.6 Million to $26.1 Million for the First Year — Per ACO.
Types of ACOsTypes of ACOs
• Physician Practice Managed
• Hospital-IDN Managed
• Employer Managed
Launched September 2010
•Received by Over 23,000 Stakeholders
•3 Issues in 2010
•9 in 2011
•The Only Publication Dedicated Solely to ACO Development
WWW.ACOInsights.com
ACO InsightsACO Insights
How Reform and ACOs will How Reform and ACOs will Affect the Supply ChainAffect the Supply Chain
• Consolidation (MedAssets/Broadlane)
• Regionalization of Contracting
• Alternate Site Standardization
• Share Services with ACO Model
• Physician Preference Items Power Shift with Docs Joining Hospitals?
• Will Price Outweigh Preference?
How Are Health Systems Across the U.S. How Are Health Systems Across the U.S. Preparing for Reform?Preparing for Reform?
Reduce Operating Costs
Study Avoidable Readmission to Avoid Penalties
Obtain Stimulus Law Funding for Electronic Records
Study Avoidable Infections to Avoid Penalties
80%
76%
68%
66%
72%More Closely Align with Physicians
Hospital CEOs’ Priorities According to ACHE Survey:
Top Financial Worries of Hospital CEOs’ as Identified by Latest ACHE Survey
2011 ACHE Survey2011 ACHE Survey
Source: American College of Healthcare Executives
Medicaid Reimbursement88%
Government Funding Costs88%
Medicare Reimbursement
Bad Debt
Decreasing Inpatient Volume
78%
71%
54%
Concern Percentage of Respondents
Physician Alignment Physician Alignment StudyStudy
Key Drivers:
• 46% Survive Reform
• 35% Managing Practice and Delivering Exceptional Care is Too Difficult
• 12% Other
Physician Alignment Physician Alignment StudyStudy
• Changing Expectations of Distribution
• System Wide Service
• Class of Trade Pricing Collapsing
• Low UOM
• Self Distribution is an Option
Atlanta, Ga.March 15, 2012
John I. Pritchard
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