In search of forward-thinking leaders, The Journal of Healthcare Contracting staff set out, in its inaugural issue, to collect the names of 15 People to Watch – executives in our marketplace who are making a difference. Thanks to your enthusiastic responses and insightful interviews with the people you nominated, we’re pleased to present part one of a two-part series.
Here are seven of the 15 thought leaders in our industry as determined by JHC readers. Stay tuned for interviews with the remaining eight People to Watch in our next issue.
John Strong
President and CEO,
Consorta
Schaumburg, Ill.
Consorta Inc., a healthcare resource management and group purchasing organization, currently provides services to nearly 500 acute care hospitals and 1,700 alternate care facilities in 35 states. Prior to joining Consorta, John Strong was senior vice president with Concepts in Healthcare, an Ashland, Mass.-based consulting firm. He also previously served as COO with Premier Purchasing Partners and president of Health Care Materials Corp.
JHC: Name the two or three most important lessons you’ve learned from your past professional experiences. How do they affect the way you approach your job and the industry today?
Strong: The most important thing – whether you’re working for a GPO or a hospital – is to put yourself in the customer’s shoes. The customer is anybody in the hospital or organization for whom you’re writing contracts. You need to understand their issues and problems, and write contracts that fill a need and are sensitive to the clinical aspects of their jobs, as well as provide the basic fundamental functions they’re seeking from products. Second, you have to engage and listen to your staff, whether you’re working in a healthcare facility, a GPO or any business. Ultimately, your staff are the experts. You need to listen and take their counsel before making decisions. Third, you have to engage physicians immediately in capital equipment and product evaluations that will affect them. Unfortunately, many folks are afraid to do this because they’re fearful that physicians won’t listen. But physicians are scientists; they also want the best for their patients. That combination means you have to get them involved in order to make good product decisions and to negotiate effectively with suppliers – particularly capital equipment suppliers. By doing so, you have experts at the table who can agree with or debunk arguments that can make portions of the acquisition questionable. In other words, you’re not listening to simply a sales pitch, but to the features and benefits that go into the selection process.
JHC: What’s the major thing that’s right with healthcare (products) contracting today? What can be done to reinforce and improve upon it?
Strong: Customers – meaning healthcare providers and group purchasing organizations – are becoming more empowered. We’re beginning to develop a better sense of the qualities we’re looking for in products, and we’re doing prospective evaluation of products vs. simply buying products specified by manufacturers. For the last 30 years or so, we have defined what we’re looking for based on specs that manufacturers tell us we want. Now we’re doing a much better job of evaluating what we need, elucidating that, and telling manufacturers what we want to buy. We have better data than we’ve ever had, although it’s still not enough.
JHC: What’s the major thing that’s wrong with healthcare (products) contracting today? What can be done to change it?
Strong: The biggest thing that’s wrong is that after 40 years of discussion, we still have no common numbering system or nomenclature for medical products. It makes our job that much more difficult. It won’t change until either the major purchasers demand that we come up with a system (and it gets implemented by manufacturers), or the government mandates it. Major purchasers have been demanding such a system for some time, so the question is, why can’t we get it done? It appears to me that a common numbering system isn’t necessarily in the interests of many manufacturers. As a result, I feel they have slowed the process toward coming together to establish a system. [Such a system] would allow for ready comparisons of product, purchase quantity and price. That’s invaluable if you’re a healthcare system or group purchasing organization that wants to standardize, or that wants to ensure that you’re paying accurate prices for the products for which you’ve contracted.
JHC: Name one or two key directions in which healthcare contracting is headed, and where you expect that trend to take the industry in five years.
Strong: First, large healthcare systems are tired of a one-size-fits-all group purchasing model. The notion of flexibility and custom contracting will continue to grow, as will the demand for it. These types of programs furnish the customer with best-demonstrated practice. They can use the standard GPO portfolio where it makes sense, and they can develop their own contracts on a geographic or national basis for clinical-preference or other items, where group purchasing has been traditionally weak. The second direction concerns the environment. As an industry, I see a tremendous amount of momentum for specifying and purchasing products that are safer for the patients and staff of our facilities, and gentler on the environment. This extends to the need for manufacturers to look at their processes and how they produce products, and to actively participate in reducing the waste stream. These do involve legitimate costs. But in a number of cases, companies have been able to produce environmentally friendly products that cost less and perform better than current ones.
Karen Barrow
Vice President, Clinical Advantage Program,
Amerinet
St. Louis, Mo.
Karen Barrow began her healthcare career as an OR nurse, and then as a nurse administrator. She left the provider side to work as a sales rep for an orthopedic company, an otolaryngology company and a vendor of radiology equipment. After that, she became a consultant, specializing in ambulatory surgery centers and later, IDNs. She joined Amerinet two years ago. As vice president of the Amerinet Clinical Advantage Program, she works with materials managers, hospital and health system executives, and physicians to control costs on physician-preference items, such as orthopedic and spinal implants, and cardiology-related implantables.
JHC: Name the two or three most important lessons you’ve learned from your past (or current) professional experiences. How do they affect the way you approach your job and the industry today?
Barrow: First, when I worked as an RN, I was a first assistant in surgery. I worked shoulder-to-shoulder with physicians across the field. I became very aware of the challenges of bringing physicians onboard with supply chain costs. They had no idea of finances, because no one gave them that information. No one ever asked them if they were aware of the costs of the items they were using. I knew there was a need to align physicians and hospitals as business partners. Second, I learned that physicians aren’t interested in information based on national data. They want to know what’s happening at their hospital, and they want to know how they compare to their peers. If we don’t engage our physicians now, we’ll have financial issues in the future. Finally, when I worked in the hospital, I learned the importance of having a mission and philosophy – and then talking about it with your employees every day. I’m passionate that we can deliver high quality, cost-effective care. Amerinet believes that, too.
JHC: In your opinion, what’s the major thing that’s right with healthcare (products) contracting today? What can be done to reinforce and improve on it?
Barrow: People are starting to get the data they need to make decisions. Information systems are starting to talk to each other. Information about products and prices is being integrated; this will be a boon to overstretched materials management departments. This allows knowledge-based decision making to take place. Providers can look at their costs vs. reimbursement. It’s hard to find information about true costs, but they need to do it. They need to be able to track their information. But this demands that the corporate suite invest in information systems.
JHC: In your opinion, what’s the major thing that’s wrong with healthcare (products) contracting today? What can be done to change it?
Barrow: Hospitals and health systems are faced with managing costs, quality and access. Yet the participants – physicians, materials managers and executives – have varying incentives and perspectives. We’re misaligned. Still, we can be partners in providing cost-effective quality care by taking control of our business. Some of our members have saved as much as 25 percent in their costs for total joints by engaging the physicians and clinical staff in the RFP and negotiation process. When you get their buy-in up front, the results are amazing.
JHC: Name one or two key directions in which healthcare contracting is headed, and where you expect that trend to take the industry in five years.
Barrow: Meeting the challenges of contracting will require active partnerships between materials managers and physicians. Unless we work side by side with our physicians on cost and quality-of-care issues, we cannot develop comprehensive databases, we cannot respond to initiatives such as the Leapfrog Group (which provides hospitals a set of quality-of-care guidelines), and we cannot offer consumers competitive prices. So we need to reorganize the care delivery system. We need to make sure that our physicians have information to guide them in their decision-making processes. We need to give them information about the impact of new technologies on their facilities. And we need to develop a passion for bringing about improvements in cost and quality.
Jim McManus
Vice President of Finance,
St. Joseph Health System
Orange, Calif.
St. Joseph Health System is a healthcare system that owns 14 hospitals and manages 12 more. The IDN spends approximately $550+ million a year on medical products, equipment and pharmaceuticals. In 1997, McManus entered the St. Joseph Health System, when he became CFO for St. Mary Medical Center in Apple Valley, Calif. Two years later, he joined the St. Joseph Health System corporate office in Orange. In 2001, he was asked to develop a strategy to help the IDN control supply costs, improve distribution and become more proactive in contracting. As a result, St. Joseph Health System formed strategic relationships with Cardinal Health, Dublin, Ohio; and MedAssets, the Alpharetta, Ga.-based GPO. Additionally, the Health System successfully installed a new materials management system and has executed a strategy that has substantially reduced the cost of physician preference products.
JHC: Name the two or three most important lessons you’ve learned from your past professional experiences. How do they affect the way you approach your job and the industry today?
McManus: First, success in healthcare (like most other businesses) comes from the building and maintenance of strong relationships with the primary people (physicians, clinicians, vendors, distributors, GPOs) who touch your organization, as well as those who have an impact on the healthcare industry. We focus on the development of relationships with those parties that impact our supply chain operations. Part of this relationship development is understanding the needs of the other parties as well as educating them on our Health System’s goals, mission, vision and values. This mutual educational process paves the way for a smoother negotiation, which in most cases benefits both parties. Second, in order for a contract or initiative to benefit an organization, it’s important to know and understand as much of the clinical and financial details as possible. Including all relevant stakeholders in the decision-making process is also important. Furthermore, it is important to set up monitoring systems to determine if the organization is receiving the expected benefits from the actions taken. In our System, we establish monitoring systems to track the results of our major initiatives, so we can take timely action if the expected outcomes are not being achieved.
JHC: In your opinion, what’s the major thing that’s right with healthcare (products) contracting today? What can be done to reinforce and improve on it?
McManus: Recent developments in information technology (such as centralized materials management databases, financial reporting systems, e-commerce and GPO custom catalogs with validation reporting) have allowed providers to collect much of the same data as vendors in a more timely fashion, allowing them to substantiate the vendors’ data. Having timely information has resulted in shortening the time of negotiation and execution of contracts for several product lines. This information also allows an organization to identify and aggregate non-contract purchases and negotiate contracts with more attractive pricing. A central loading point for contracts that would simultaneously notify all parties (GPO, manufacturer, distributor and provider) would ensure that line-item pricing is accurate. Currently, contracts are loaded by each party and at different times, which leads to inaccurate pricing and invoicing challenges for providers.
JHC: In your opinion, what’s the major thing that’s wrong with healthcare (products) contracting today? What can be done to change it?
McManus: Many vendors of physician-preference products and pharmaceuticals market new technology directly to physicians without including the hospital or health system. Vendors avoid providers as much as possible in an effort to keep their products at list price and to promote utilization. Incentives are not aligned at all in this area, since providers are focused on providing clinically acceptable and appropriate products for patient care, while the vendors’ sales representatives are charging towards a quarterly quota to meet their companies’ shareholders’ expectations. Hospitals and health systems need to establish clear guidelines (sales rep policies) and a process (clinical product evaluation and pricing) to evaluate current and future technology with regard to physician-preference items. This process needs to be communicated to vendors via an orientation program, along with the corresponding ramifications if the vendor fails to follow the process. This education also needs to be extended to the physician community to ensure that there is support for the program.
JHC: Name one or two key directions in which healthcare contracting is headed and where you expect that trend to take the industry in five years.
McManus: With increased information technology, especially in e-commerce and ERP systems, providers will be able to aggregate data easier for analysis and proactive contract negotiations. Providers will provide guidance to their GPO and other parties who may negotiate contracts on their behalf in order to obtain contracts that will directly benefit their organization. More reliance for physician-preference contracting will be placed on parties external to the hospital or healthcare system that are considered neutral and have the ability to effectively communicate strategy with hospital executive teams and clinical and financial data to physicians. The impact here will be improvement in clinical utilization of these products combined with appropriate pricing.
John Walker
Director of National Accounts,
Pharmion
Boulder, Colo.
As director of national accounts for Pharmion, John Walker is responsible for the sales, contracting and marketing to all non-physician customer segments, including payers, wholesalers and distributors, GPOs, retail and specialty pharmacies, long-term care customers, IDNs and the federal government.
Prior to joining Pharmion almost two years ago, Walker spent 20 years with Dupont, including 11 years in national accounts positions for several of the company’s medical businesses.
Based in Boulder, Colo., Pharmion licenses, develops and commercializes therapeutic products for the treatment of hematology and oncology patients.
JHC: Name the two or three most important lessons you’ve learned from your past (or current) professional experiences. How do they affect the way you approach your job and the industry today?
Walker: First, before you do anything, you must identity your customer and ask if whatever you’re about to do is going to be good for that customer. To quote a famous frontiersman, Davy Crockett: “Be always sure you’re right, then go ahead.” Today’s business environment is complicated, and you have to look at your decisions from all different angles. That means balancing your decisions with respect to all your customers – including purchasers, users, patients, contracting entities, employees, stockholders and investors. Second, I’ve learned that there’s almost no business problem that can’t be solved by a small, empowered team of professionals. Surround yourself with competent and self-managing people; provide them with a mission, a framework, and financial and emotional support; then let them go at it. And third, nothing strengthens your relationship with a customer more than increasing that customer’s value to their customers. This means that you have to understand the business environment your customers are working in. For example, [people working for GPOs] might not be in the IDN or hospital offices as much as we are. So keep your eyes open for things that the IDN or hospital might need or want, then work with the GPO to come up with ideas and provide the services.
JHC: In your opinion, what’s the major thing that’s right with healthcare (products) contracting today? What can be done to reinforce and improve on it?
Walker: Manufacturers and contracting entities are working together to broaden the product choices available to clinicians and healthcare organizations. The days of more restrictive contract portfolios are diminishing. We have to keep the market open to all who want to participate. That’s especially important for us as a small company.
JHC: In your opinion, what’s the major thing that’s wrong with healthcare (products) contracting today? What can be done to change it?
Walker: There’s a great deal of complexity in the language and design of many contracts and pricing agreements today. Some are 50 or 60 pages long. What makes things more frustrating is that some of the terminology and customer classifications are inconsistent across the industry. For instance, the definitions of class-of-trade vary from one GPO to the next. This causes a lot of confusion for the manufacturer, who might make prices available for one class of trade in one agreement, only to find that they’re defined differently in another. Work in the contracting area would be simpler for all concerned if each of the various trade associations created some sort of standardization in this area.
JHC: Name one or two key directions in which healthcare contracting is headed, and where you expect that trend to take the industry in five years.
Walker: I’ve always thought that the concept of risk/reward-sharing could find more utility in healthcare contracting. Price differentiation has become increasingly stripped away. Now, I expect to see customers and manufacturers share the benefits of increased efficiency, improved outcomes or reduced costs, as well as the possible risks and costs associated with conversion, training and start-up. I could see a contract in the future in which [buyer and seller] would share in the cost of implementing a new product, but also share in the rewards of using the product (for example, reduced length of stay). In addition, healthcare purchasing has gone through a lot of fits and starts in bringing e-commerce to the forefront. But I’m confident that in the next couple of years, we’ll see as many as 50 percent of healthcare purchases going through e-commerce. This will bring efficiency and better data to all involved.
Rand Ballard
Executive Vice President,
President of the Supply Chain and Business Services Group
MedAssets
Alpharetta, Ga.
Rand Ballard is responsible for the supply chain business and has overall sales and customer growth accountability for MedAssets. Immediately prior to joining the company, he served as vice president, health systems supplier economics and distribution for Allegiance Healthcare (now the Medical Products and Services Group of Cardinal Health), where he was accountable for implementing contracts with subsequent annual sales of $1.6 billion.
JHC: Name the two or three most important lessons you’ve learned from your past (or current) professional experiences. How do they affect the way you approach your job and the industry today?
Ballard: The most important thing is treating people with honesty, integrity, openness and transparency. I still adhere to the age-old adage: “Treat others as you would want them to treat you.” If you’re open and honest, 99 times out of a hundred, people will respond in the same way. Second, you have to be better than your competition in some way. There will always be somebody smarter than you are, or more creative. But you can always work harder. I’ve found that working hard with a passion for what you believe in, brings rewards.
JHC: In your opinion, what’s the major thing that’s right with healthcare (products) contracting today? What can be done to reinforce and improve on it?
Ballard: Most providers, suppliers and GPOs have done a very good job in commodity product pricing. The majority of people in this arena are trying to do the right thing. They understand that you have to make sure that hospitals survive. We need to continually make sure that we understand providers’ financials. When we have new technology, we need to understand how it will affect hospitals’ financial viability.
JHC: In your opinion, what’s the major thing that’s wrong with healthcare (products) contracting today? What can be done to change it?
Ballard: A very small minority of vendors are doing whatever it takes to maximize profits from hospitals. They fail to understand the relationship between hospitals’ supply costs and revenues. If a vendor is making healthy profits on a device, it has an obligation to make sure its customers are appropriately reimbursed for it. We’re all for technology. But we believe it needs to be paid for, and that there must be transparency in terms of the total cost of that technology.
JHC: Name one or two key directions in which healthcare contracting is headed, and where you expect that trend to take the industry in five years.
Ballard: We believe very strongly that traditional healthcare contracting is changing. It is evolving to a linkage between supply costs and revenues. Hospitals are clamoring to understand their clinical product-line costs, as well as profitability by physician, payer and procedure. If a vendor is marketing a product that costs substantially more than current technology, but whose clinical outcomes or total costs are actually better, it must give that information to hospitals in a way that they can measure it. And because costs and revenues constantly change, hospitals need a system that allows them to constantly analyze clinical profitability.
Charles Saunders, M.D.
CEO
Broadlane
San Francisco
JHC: Name the two or three most important lessons you’ve learned from your past professional experiences. How do they affect the way you approach your job and the industry today?
Saunders: As a practicing physician, I saw how hospitals and physicians’ offices function (or malfunction) and where institutions lack efficient and effective business processes. I saw how frustrations and inefficiencies directly affect the cost and quality of patient care. Challenging clinical problems – such as the rising cost of clinical technologies and drugs – must be addressed in collaboration with healthcare professionals. As a principal in a startup company, I learned what it takes to be innovative and fast-moving, but at the same time, how to maintain growth and profitability. I saw the power of e-health and e-commerce to reduce costs and improve business efficiencies. In my role at EDS, I worked with major health systems around the world and saw how different approaches to healthcare, and more fully integrated healthcare care systems, create real benefits for the patient. Lessons learned from other settings and other industries can be applied to healthcare in the United States.
JHC: In your opinion, what’s the major thing that’s right with healthcare (products) contracting today? What can be done to reinforce and improve on it?
Saunders: Product innovation. Drug-eluting stents and genetically customized drugs and other treatments are the hottest examples. Medical innovations are popping up faster now than at any other time in history. These offer enormous hope for individual patients but also unparalleled cost pressure on providers, our healthcare system, and on society’s ability to fund every new product or marginal drug improvement. Our customers – hospitals, physicians and those in other clinical settings – see both the hope and the pressure first hand. A second factor that is right is the maturing of e-technologies for managing the procurement process and assuring that the right price is paid. It does little good to contract at a favorable price if that price is not utilized when the purchase is made.
JHC: In your opinion, what’s the major thing that’s wrong with healthcare (products) contracting today? What can be done to change it?
Saunders: Lack of accountability, often driven by bad data. For decades, senior executives in many hospitals have failed to be engaged in managing their supply chains. This was often the result of failing to fully understand the purchasing process or lacking access to accurate, real-time data on costs and potential savings. That is changing.
JHC: Name one or two key directions in which healthcare contracting is headed, and where you expect that trend to take the industry in five years.
Saunders: First, giant leaps in supply chain technology. We believe that automation, integration and intelligent systems will transform the industry and reduce cost, redundancy and errors. We are working to integrate more and more of the purchasing processes electronically, and to provide real-time monitoring and intelligence in the system, which we believe will become the norm for healthcare providers over the next decade. Another key direction will be the increasing use of evidence-based medicine and physician collaboration in custom contracting approaches to high-cost clinical technologies. National contracts and corporate bundling approaches will give way to highly regionalized and flexible approaches. Third, basic changes in the relationships between suppliers and supply chain partners. The recent Congressional hearings on GPO conflicts of interest exposed some legitimate problems in the way GPOs relate to suppliers. I believe that we will need to shift, over time, to a fee-for-service system in which providers…pay for services provided by supply chain partners. As providers see increased value and savings from innovative supply chain partners, they will be more and more willing to pay directly for these services. This will finally free these partners to do much more aggressive negotiating with suppliers, further reducing costs to customers and to the healthcare system in general.
Jody Hatcher
Senior Vice President, Marketing,
Custom Services and Service Delivery
Novation
Irving, Texas
Jody Hatcher oversees all activities related to public relations, marketing and communications, competitive intelligence, strategic planning, market research, service delivery, custom services and business development for Novation. Prior to joining Novation in 1998, Hatcher was director of supply chain management marketing for VHA Inc. for two years. He joined VHA in 1989 and served for seven years as manager of marketing and information services for the VHA Satellite Network, now called VHATV. Prior to joining VHA, he worked in the advertising industry primarily dealing with healthcare clients.
JHC: Name the two or three most important lessons you have learned from your past experiences. How do they affect the way you approach your job and the industry today?
Hatcher: First, worry only about the things you can control. There are so many things we want to spend our time on, even though doing so won’t affect the outcome. Second is the old kindergarten lesson: Deal with people the way you want to be dealt with. It’s very basic, but you don’t always see it. The third thing is related to three values that relate to how we want to work with one another here at Novation. We have tried to instill the idea that being collaborative, being adaptive to the environment and being resourceful are the crucial values that people here have to employ. We’ve aligned our competencies around these values. We’re in the service business, and our key asset is people.
JHC: What’s the major thing that’s right with healthcare (products) contracting today? What can be done to reinforce and improve upon it?
Hatcher: The industry has stepped up to the scrutiny it has faced over the past couple of years. Everyone – suppliers, GPOs, providers – have increased their sensitivity to being open and fair to all suppliers. An open and fair marketplace means you also have a competitive marketplace – and that leads to better value to end-users. Still, there’s room for improvement.
JHC: What’s the major thing that’s wrong with healthcare (products) contracting today? What can be done to change it?
Hatcher: The first thing is that there’s probably too much of a focus on contracting and sourcing products, and not enough on managing members’ supply chain processes. Every hospital has a procure-to-pay cycle. Sourcing is up front. But all the other elements – logistics, usage, disposal, payment – get far less attention than they should. The danger is that a contact that we perceive to save a lot of money might actually result in increased costs associated with labor, usage or disposal. So we need to look across the entire procure-to-pay cycle. Second, we are still challenged as an industry to create broad-based standards and an equal footing with buyer-centric purchasing information. Clearly, standards are an issue, and CHES has begun to address that. But just as important is this: Manufacturers and distributors still tend to have much more information about what’s being bought in the marketplace than the buyer, that is, the constituent who has to use them to deliver patient care. So we want to provide members with information about contracts, product usage, variation in the use of products, etc. It’s crucial to provide equal footing. In my view, the market is clearly ready for this.
JHC: Name one or two key directions in which healthcare contracting is headed, and where you expect that trend to take the industry in five years.
Hatcher: Healthcare executives are paying more attention to the supply chain. In the past, hospitals looked at purchasing as simply the department that gets stuff – not as a critical component of patient care. But today, providers are bridging the gap between the clinical enterprise and the operational enterprise. They’ve come to realize that outcomes and cost are affected by the cost and usage of supplies. This is a real catalyst for change, and has significant implications for contracting. In fact, we have health systems in which physicians have gained the responsibility for dealing with supplies.