Editor’s note: The Journal of Healthcare Contracting is 10 years old. This year, we revisit some of the people and the issues we covered in our inaugural year.
Ten years ago, Jim McManus, vice president of finance, St. Joseph Health System, Orange, Calif., was in JHC’s inaugural class of “Fifteen People [now Ten] to Watch in Healthcare Contracting.” He spoke about the need to develop strong relationships with key players – physicians, clinicians, vendors, distributors, GPOs, etc. – in order to achieve success in healthcare, including 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,” he said.
The Journal of Healthcare Contracting touched base with McManus recently, to check in on how his thoughts and predictions from ten years ago are holding up today.
McManus remains vice president of finance for St. Joseph Health System. The IDN still owns 14 hospitals, as it did 10 years ago, and has affiliated with Hoag in Newport Beach, Calif. St. Joseph still manages hospitals in west Texas and eastern New Mexico, and its annual supply chain spend is now approximately $650 million.
Journal of Healthcare Contracting: Ten years ago, you spoke about the need to build strong relationships with the primary people who touch your organization – physicians, clinicians, vendors, distributors, GPOs. “Part of this relationship development is understanding the needs of the other parties as well as educating them on our health system’s goals,” you said. Do you have a different or new understanding of this, based on your experiences of the past 10 years?
Jim McManus: I still believe the same, and I believe it is important to bring the parties to the table up front and have them be a part of the strategy development of our initiatives, assisting with reviews and making the decisions on who we contract with, for what products and services, and for how long.
Journal of Healthcare Contracting: Ten years ago, you spoke about the importance of setting up monitoring systems to determine if the organization is receiving expected benefits from actions taken. Anything to add, based on experiences over the past 10 years?
McManus: Monitoring systems – metrics – are very important to ensure that decisions made were the best ones for the organization. Two developments in the last 10 years include the movement toward measuring performance on a cost-per-adjusted-discharge/CMI [case mix index] basis and the integration of quality metrics as part of the measurement standards.
Journal of Healthcare Contracting: Ten years ago, you spoke about recent developments in information technology – e.g., centralized materials management databases, e-commerce, GPO custom catalogs, etc. – which led to shortened negotiations with vendors, shortened time to execute contracts, the ability to aggregate data on non-contract purchases, the ability to collect much the same data as vendors, in a more timely fashion, and more. Anything to add about the role of information technology in the supply chain?
McManus: The evolvement and adoption of information technology in the supply chain environment has allowed more IDNs to pursue shared services centers encompassing procure-to-pay solutions. Additionally, with cloud technology, there are now more entrants to the market that allow for more competitive pricing, faster processing and the discussion of a “make or buy” for services.
Journal of Healthcare Contracting: Ten years ago, you criticized vendors of physician-preference products for marketing new technology directly to physicians and trying to maintain their products at list price. How has contracting for physician preference items changed, if at all, in the last decade?
McManus: In many respects, suppliers have improved in their acknowledgement of the protocols of the provider. Improvement was spurred on with many IDNs now contracting centrally and focusing on clinical acceptability of the product over physician or personal preference. Suppliers who employ aggressive tactics in this area have been expelled from the provider institutions.
Journal of Healthcare Contracting: You made the following comment 10 years ago: “Incentives are not aligned at all in this area [physician preference], 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.” What has changed, if anything, in the past 10 years?
McManus: There has been more alignment in this area, but not as much as hoped for in the industry. With the introduction of gainsharing and co-management models for engaging physicians in clinical quality and cost, we have seen more successful partnerships develop that focus on procurement of the clinically appropriate product at a reasonable price.
Journal of Healthcare Contracting: Ten years ago, you made the following prediction; “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.” Has this occurred?
McManus: There has been some development in this area, but slower than expected. One example is Shared Clarity, a third-party organization that seeks to lead with clinical information to communicate with provider organization physicians in an effort to improve cost and increase quality. [See June 2013 Journal of Healthcare Contracting for more information on Shared Clarity.]
Journal of Healthcare Contracting: What else have you learned in the past 10 years?
McManus: As we have evolved with technology, more stakeholders (clinicians, physicians, patients, etc.) are becoming more educated on their healthcare needs. This can be a good or a bad thing, depending on what information is available and is accessed. We also need to ensure that, with population health management, we develop the networks that will allow for people to be treated in the appropriate environment at the right time, thereby avoiding costly visits to emergency rooms or delaying care until an acute episode results in a hospital admission.