Smart strategizing has helped one small network grow beyond its expectations.
When the Louisiana Hospital Rural Network launched in January 2010, its mission was to aid small, rural hospitals in Louisiana in obtaining improved pricing through collaboration. In its first year of operation, the network had three participants. Today, it boasts 18 member facilities, and in 2012 alone, its membership sales increased by 22.9 percent.
Indeed, the Louisiana Hospital Rural Network sales have increased at a much faster pace than its founders projected, which has contributed to its success at providing improved pricing to more hospitals than originally expected. In addition, network leaders point to member perks, such as improved networking and greater hospital participation in committee work.
Recently, The Journal of Healthcare Contracting spoke with C.J. Tuminello, Amerinet director of member solutions, and Rebecca Bradley, associate vice president of Rural Health Programs, Louisiana Hospital Association, about the network’s initiatives and accomplishments.
The Journal of Healthcare Contracting: What are the top three initiatives your network has pursued in the last 12 months?
C.J. Tuminello and Rebecca Bradley: The top three initiatives our network has pursued include growth in the network membership, improvements in aggregation of volumes and recognizing a need to work together to drive better pricing among our hospital members.
JHC: How much savings has the Louisiana Hospital Rural Network realized?
Tuminello and Bradley: Amerinet’s Savings Roadmap cost study analysis has shown that, through participation in Louisiana Hospital Rural Network, we have demonstrated savings on average of approximately 15-18 percent through utilization of the committed regional portfolio. Our network has experienced savings by reducing distribution cost of goods (COG). We have reduced the markup from med/surg distributors by as much as 15 percent by utilizing a committed regional portfolio.
JHC: How has being part of a regional purchasing coalition enabled members to leverage their buying power?
Tuminello and Bradley: Being part of a regional coalition has helped leverage buying power through the formation of a lab task force, developed to address lab distribution and reference lab contracts. The task force is soliciting responses to a tailored RFP, specific to the needs of the participating hospitals. The expectation is improved leveraging of buying power.
JHC: Can you explain the process whereby your supply chain executives meet and make their decisions?
Tuminello and Bradley: We bring the action to the hospitals through individual meetings. This has allowed us to focus on savings at the hospital level, while keeping the total project moving forward. We discovered early in the project phase that our supply chain managers are wearing several hats, and with healthcare reform changes being implemented, several hospitals have been forced to reduce overall travel budgets. This has made it very difficult for the supply chain managers to get outside of the hospitals, so we have brought the project to them.
JHC: How do you co-exist with your GPO?
Tuminello and Bradley: The Louisiana Hospital Rural Network co-exists with Amerinet through member participation in the GPO. Our affiliation with Amerinet has put the network in the position of allowing the GPO to negotiate on behalf of the Louisiana Hospital Rural Network for contracts not currently in place.
JHC: How do you ensure that the interests of each of your facilities are considered and that each facility’s needs are met?
Tuminello and Bradley: The Louisiana Hospital Rural Network is managed by a board of representatives. Each participating hospital has a seat on the board and an active voting voice. Through this methodology, we actively keep a finger on the pulse of our members’ needs.
JHC: Is it difficult to get buy-in to the coalition’s contracts from each of your facility’s physicians and staff?
Tuminello and Bradley: Yes, we do experience pushback at times on physician preference items. However, by conducting a cost study analysis, we are able to develop a strategic plan of action for the network, and have illustrated a direct path to savings.
JHC: What have been the greatest rewards your network has experienced?
Tuminello and Bradley: One of the greatest rewards has been an improved awareness of opportunity to control cost in struggling facilities. Also, the close relationship celebrated by the GPO, the Louisiana Hospital Association and our network members has been priceless.
JHC: If you could change one thing about the way your organization works, what would that be?
Tuminello and Bradley: In developing this coalition, we would like to see the members move into more of a driving role, [as Louisiana Hospital Rural Network] becomes their coalition. We expect this to be a work in progress, and that is certainly where our attention is focused moving forward.
JHC: How do you envision the Louisiana Hospital Rural Network in five or so years?
Tuminello and Bradley: We envision our network to continue to grow both through added members and the development of [new] committees. We expect to increase the amount of unique contracting opportunities that meet the direct needs of the network members. And we expect to still be enjoying the journey!