EXECUTIVE BRIEF
pricing to hospitals to receive market share and volume commitment. This market pricing strategy, deployed by most suppliers, creates market pricing variation in many product categories, and therefore requires constant moni- torization of current market pricing provided in numerous categories.
Data drives pricing comparison, competitive negotiation and costs savings for healthcare organization Mosaic Life Care1
Five Myths 1. Suppliers provide most competitive market pricing to GPOs. 2. Long-term, committed contracts deliver the most competitive market pricing. 3. Available benchmark pricing data and technology offered by GPOs and third- party vendors ensures alignment with most competitive market pricing.
4. Suppliers ensure pricing parity throughout a health system. 5. Focusing on product utilization versus product pricing is the fastest way to cost savings.
, for example, is one
healthcare organization that has inte- grated technology to help monitor current marketing pricing and keep costs down in their supply chain operations. Mosaic is nationally recognized for quality, value and patient experience in traditional healthcare and wellness support for resi- dents in the St. Joseph, MO region. Their services include family care, urgent care, emergency care and a large variety of specialty care, therefore their staff must always have access to standard and spe- cialty medical equipment.
As PPI typically account for a high per- centage of supply chain expense, Mosaic wanted an easy, effi cient way to monitor medical-surgical product pricing in order to ensure that their pricing was competi- tive across all vendors and to speed up the negotiation process for new product contracts.
Mosaic employed BroadJump’s Auto- Pricer and PriceChecker solutions to better understand their supply chain expenses. They were able to track current medical-surgical pricing to discover sav- ings opportunities through pricing of peer facilities with similar spend, volume and market share, as well as analyze quotes and proposals to negotiate lower pricing. In the fi rst month using these solutions, Mosaic realized more than $400,000 in savings without changing one SKU or affecting current clinical practice. Using BroadJump’s real-time repository of expense data from facilities across the nation, they were able to determine realis- tic opportunities with pricelist-to-pricelist comparisons. The supply chain team was able to reduce costs across several PPI, resulting in signifi cant savings.
“I have personally used BroadJump at two different health systems now, and both times the results were outstand- ing,” said Sean Poellnitz, BS, CHRM, Vice President of Supply Chain, Mosaic Life Care. “As a Supply Chain Executive, BroadJump gives us the ability to forecast and bring home the real savings that we promised our CFO.”
GPO contract and spending The traditional hospital sourcing model uses long-term GPO contracts for high dollar purchase volumes and multi- source contracts for PPI. This model, in turn, creates a pricing disadvantage and reduced operating margins since non-labor expenses represent nearly fi fty percent of a hospital’s operating budget. GPO contracts typically apply to about 35 percent of a hospital’s non-labor expenses. These contracts generally carry a three- to fi ve-year term with fi xed tier- level pricing, which often do not offer best market pricing from the onset of the contract. These lengthy contracts uninten- tionally trap hospitals into unfavorable product pricing positions, with very lim- ited resources to negotiate better pricing, thereby causing one to miss out on years of savings opportunities. It is quite pos- sible for a newly negotiated GPO contract to have out-of-market pricing as early as 90 days after the contract start date. The remaining 65 percent of non-labor expenses commonly are purchased out- side of GPO contracts and ideally need to be locally negotiated contracts in order to secure competitive pricing. The larger portion of this spend, representing as much as fi fty percent, falls within the following three areas PPI, purchased ser- vices, and specialty drugs, respectively. Unfortunately, most hospitals and health systems do not have adequate techno-
“BroadJump simply represents a game-changing sourcing intelligence platform that enables us to craft creditable sourcing strategies for medical- surgical product negotiations.”
—Mosaic Life Care’s Vice President of Supply Chain, Sean Poellnitz, BS, CHRM
logical, analytical, or human resources to be able to most effectively address this spend.
Sourcing strategy, effi ciencies and savings The dynamic sourcing model, used by Mosaic Life Care and other organizations, is a best practice for hospital supply chain management. This model, ultimately, opens the door for numerous potential benefi ts and effi ciencies in business opera- tions and fi nancial outcomes, including 1. Promotes periodical pricing negotiation with suppliers.
2. Ensures one is paying the best available market pricing at the point of purchase.
3. Virtually eliminates the need for requests for proposals (RFPs).
4. Reduces supplier negotiation time by as much as 70 percent.
5. Delivers seven to 10 percent in annual supply savings year over year.
6. Reduces annual supply spend by as much as 15 percent.
The healthcare landscape and market-
place will continue to evolve and affect hospitals and healthcare systems. Now is the time for them to take the next step and adopt the dynamic sourcing model as part of their mission-critical supply chains. Their sourcing teams, undoubt- edly, need more tools, insights and resources in order to be operationally and fi nancially successful. This can be real- ized through implementing technology, data and transparency into supply chain management. HPN
References: 1. Mosaic
Life Care saves $400,000 in less than
one month with BroadJump’s solutions without chang- ing one SKU or affecting clinical practice, https://www.
broadjumpllc.com/insights/success-stories-and-papers/ mosaic-life-care-saves-400000-in-less-than-one-month-with- broadjumps-solutions-without-changing-one-sku-or-affecting- clinical-practice/?utm_source=hpn&utm_medium=link&utm_ campaign=successstory&utm_content=mosaiclifecare
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hpnonline.com • HEALTHCARE PURCHASING NEWS • January 2021 47
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