IMDA 2012
Nashville, Tn.
April 301, 2012
John I. Pritchard
Objective:
To Better Understand the
Increasingly Complex
Healthcare Supply Chain
Medical Distribution Solutions, Inc.
Distribution Products
Contracting Products
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
Contracting-IDN’s
Total IDNs
System IV
122
Shareholders
of a GPO
68
System III
688
146
System IIIA
458
46
System II
116
9
System I
66
1
Medical Distribution
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
Contract Volume ($B)
Acute*
Non-acute
Rank by
Volume
GPO
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
4
MedAssets**
Healthtrust
$24.0
$17.0
$25.0
$18.0
2,595
1,339
3,071^^
1,370
32,278
3,880
36,684
6,416
5
6
7
Broadlane**
US Govt
Amerinet
10.3^
$8.7
$7.0
$11.0
$9.4
$7.5
1,132
212
2,092
1,100^
210^
2,613
43,377
134,900
39,602
45,000^
134,863
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
Total Alt
Total
Alt Care Physicians Care 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
MedAssets 3,199
43,377
n/a
43,377 44,509
6,442
3,199 27,043 36,684 39,883
2,176 26,578 33,451 36,065
Amerinet
2,614
4,697
Novation
1,600
n/a
30,000
n/a
HealthTrust 1,695
274
1,390
4,752
30,000 31,600
6,416
8,111
GPO 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
Meltdown
:The Advisory Board, Implications for Hospitals
The Financial Meltdown 2008
Catholic Contracting Group
5 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 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
Regional Purchasing Coalitions by State
Copyright 2010 MDSI.
All rights reserved.
WA - 6
MT - 0
ME - 2
ND - 1
MN -2
OR - 0
ID - 0
WI - 2
SD - 2
NE - 1
NV - 1
IA - 2
UT - 0
IL - 3
CO - 4
CA - 6
KS - 3
IN - 3
MO - 2
KY - 1
AZ - 1
NY – 10
MI -6
WY - 0
OK - 2
NM - 0
TN - 1
AR - 1
MS - 0
PA - 7
OH - 7
WV – 2
VA - 2
NH – 1
VT - 1
MA - 3
RI – 1
CT - 1
NJ – 5
DE - 0
MD - 5
DC- 2
NC - 6
SC - 0
AL - 2
GA - 4
TX - 7
LA - 5
FL - 7
HI - 0
AK - 0
RPC Alignments by Estimated
Discharges
2010
Alignment of RPCs with
Beds and Discharges
Rank by
Est.
Discharge Primary Minimum
Alignment # of RPCs Est. Beds Discharges
s
1
Novation
26
12,000,000
10,000,000
268,568 11,776,177
8,000,000
2
MedAssets
15
185,548
7,379,547
3
Premier
34
147,405
5,799,292
4
Nonaligned
8
35,662
1,605,925
Amerinet
12
41,002
1,480,523
MHA
2
24,236
994,906
Govt
19
7,290
861,618
HealthTrust
11
11,759
540,650
Broadlane
1
448
18,948
5
6
7
8
9
Copyright 2010, MDSI.
All Rights Reserved
6,000,000
4,000,000
2,000,000
0
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
Medtronic
Accountable Care Organizations
Health Reform - A Different Strategic
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
http://www.ncqa.org/tabid/1266/Default.aspx
23
October 2012
Final Regulations Published
• Greatly Softened for Wider Adoption
• Higher Rewards and Less Risk
• Less Measures
• IT Requirements Reduced
• Advanced Payment Program
Cost 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 ACOs
• Physician Practice Managed
• Hospital-IDN Managed
• Employer Managed
ACO Insights
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
How Reform and ACOs will
Affect 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.
Preparing for Reform?
Hospital CEOs’ Priorities According to ACHE Survey:
Reduce Operating Costs
80%
Study Avoidable Readmission to Avoid Penalties
76%
More Closely Align with Physicians
72%
Obtain Stimulus Law Funding for Electronic Records
68%
Study Avoidable Infections to Avoid Penalties
66%
2011 ACHE Survey
Top Financial Worries of Hospital CEOs’ as Identified by Latest ACHE Survey
Concern
Percentage of Respondents
Medicaid Reimbursement
88%
Government Funding Costs
88%
Medicare Reimbursement
78%
Bad Debt
71%
Decreasing Inpatient Volume
54%
Source: American College of Healthcare Executives
Physician Alignment
Study
Key Drivers:
• 46% Survive Reform
• 35% Managing Practice and Delivering
Exceptional Care is Too Difficult
• 12% Other
Physician Alignment
Study
• Changing Expectations of
Distribution
• System Wide Service
• Class of Trade Pricing Collapsing
• Low UOM
• Self Distribution is an Option
IMDA 2012
Atlanta, Ga.
March 15, 2012
John I. Pritchard