In 2007, we started monitoring some regional aggregation activity that hospitals and IDNs were conducting. It seemed reasonable enough that there would be local and regional needs of providing healthcare services, and that the products and services could be sourced well locally. It soon became evident this strategy was gaining momentum and would not be a passing trend.
In early 2009, we conducted a survey of over 100 IDN Supply Chain Leaders whose responsibility was for over 3,000 of our nation’s hospitals. The results came back clear — buyers were joining and entertaining participation in a Regional Purchasing Group, even though little of their volume went through RPC contracts at that time. Only 40 percent of respondents were part of an RPC at that point, and well less than half of their purchases were through their RPC contracts.
Much has changed in five years: gas prices have been reduced in half, the Dow Jones Industrial Average has more than doubled to the 17,000s, and the GDP has grown by $3 trillion. In late 2014, we re-conducted the survey and found some interesting results. Today, 66 percent of the respondents are part of an RPC. Not surprisingly, a much larger portion of their purchases go through an RPC contract.
What surprised me was the product mix changed greatly as to which sector of purchases was bringing them value. In 2009, 78 percent of respondents listed med/surg supplies as the primary focus for why hospitals and IDNs were using RPC contracts. Today, 16 percent list pharmaceuticals, and 11 percent list capital as the main reason for using RPC contracts (up respectively from 8 percent and 1 percent).
The last big shift in responses was that now 96 percent of the respondents believe they will be in an RPC within the next five years. This signals that RPCs are part and parcel to a strategic sourcing and contracting strategy going forward. It will be fascinating to see how the mix of the way hospitals and IDNs buy continues to change and evolve.
Thanks for reading this issue of The Journal of Healthcare Contracting.
John Pritchard
Publisher