If anyone questioned whether IPC Group Purchasing could make a go of it six years ago, the coalition’s success has likely quelled their doubts.
When IPC Group Purchasing was started in 2006, the goal was simple, according to Managing Executive Patrick Sonin: Bring together independent hospitals and systems to leverage their collective strength to drive down their supply chain expenses. “The key word was independent,” he points out, noting that there probably were a few skeptics who doubted whether the coalition could succeed. “Not only was it possible, our success has led to several imitations of the model within Premier and other GPOs,” he says “Our members are very proud of their collective work and the respect they have for one another. We have driven significant savings for our members, forged valuable working relationships and created a powerful forum for information sharing among our members.”
Recently, The Journal of Healthcare Contracting interviewed Sonin to learn more about IPC Group Purchasing – its roots, its mission and what lies ahead.
The Journal of Healthcare Contracting: What was the original mission of IPC Group Purchasing?
Patrick Sonin: Since our start in 2006, IPC Group Purchasing’s (IPC) mission has been to be a vehicle for hospitals and health systems to leverage their collective spend, information, and best practices to reduce healthcare supply chain expenses resulting in increased patient care resources. This strategic direction parallels the mission of Illinois Hospital Association (IHA), our parent organization.
JHC: How has the coalition grown since it began?
Sonin: IPC started with a charter membership of 18 hospitals that had a common GPO connection – the Premier healthcare alliance. Each one of those hospitals signed a formal membership agreement with IPC in order to access our contracts, programs and services. Today, IPC is comprised of 33 hospitals covering three states: Illinois, Indiana and Michigan. Together with Premier, IPC is actively recruiting new members to join and take advantage of the collective strength that is offered through our program.
JHC: Have you found the coalition is providing members with more advantages than originally expected?
Sonin: Our members have definitely realized more benefits from IPC membership than they originally expected. During the first four years, we developed a portfolio of over 120 contracts, with member reported average savings of 13 percent, consistent with our initial expectations of five to 15 percent. In several cases, our members realized savings in excess of 25 percent on some large categories of spend, which absolutely exceeded their expectations. In addition, as the members have developed a strong working relationship with each other, the additional value of peer networking, benchmarking and general information sharing has driven value for our members [far beyond] our original expectations.
JHC: What are the leading initiatives your regional purchasing coalition has pursued in the last 12 months?
Sonin: IPC signed a three-year committed agreement this year with a single pharmacy wholesaler, which is projected to save our members in excess of $1.5 million annually. Our members were able to commit as a group, and that allowed us to drive significant value in this key category. In 2012, IPC embarked on a data benchmarking initiative for physician preference items. Savings for our participating members are projected at a minimum of $8 million annually from using benchmark data to drive lower prices on current PPI purchases. In addition, IPC has developed a more robust committed contracting strategy with our members, which is projected to save members $1-2 million in 2013 by driving contracts that commit our volume to a single supplier in specific key contracting categories.
JHC: How has being part of a regional purchasing coalition enabled members to leverage their buying power?
Sonin: IPC was formed to drive savings for hospitals by combining their purchasing power. IPC’s advisory council has definitely refined our process over time. When we started, members aggregated volume to drive savings on existing purchases. Over time, we have been able to move to a more committed contracting model, which allows us to drive significant value by shifting market share to a single supplier. By working together and sending a unified message to the marketplace, our members have been able to use IPC as part of their individual hospitals’ overall cost reduction strategy. IPC has achieved average savings of 12-14 percent on our contracts since our first full year of operation in 2007. Overall, IPC members have saved $1-2 million annually since the start of our program. In the past 12 months, IPC members have saved over $2 million on their supply purchases by using IPC contracts. And with our PPI benchmarking initiative, we are anticipating even greater savings in 2013.
JHC: Please explain your process whereby your supply chain executives meet and make their decisions.
Sonin: The IPC advisory council – a board of supply chain executives from each IPC member hospital – directs all contracting decisions for IPC. The council meets monthly and determines strategic direction, sets contracting priorities and approves all IPC contracts. As an independent network, IPC has a staff that works to negotiate contracts at the direction of the council.
JHC: How do you co-exist with your GPO? For instance, does the purchasing coalition only work off of the GPO’s contracts?
Sonin: IPC works very collaboratively with our national GPO partner, Premier. We use the Premier contracts as the core of our contracting portfolio. [While] we also write direct contracts with non-Premier suppliers at the request of the advisory council, the majority of our contracts are written in concert with Premier. Members ask that we write direct contracts for categories where Premier doesn’t have coverage or where committing and contracting locally can drive more value.
JHC: How do you ensure that the interests of each of your facilities are considered and that each facility’s needs are met?
Sonin: The advisory council provides leadership to the organization, which drives initiatives for IPC. Each council member has an equal vote and voice during our monthly meetings. Annually, we conduct a strategic planning meeting with the members to ensure we are aligned with their goals and objectives as we set the agenda for the following year. These meetings are followed up by routine visits and calls to ensure that our individual members’ needs are being met by IPC’s initiatives. In addition, at the end of each year, we distribute a member satisfaction survey, formally asking the members for their feedback, and we use that feedback to reassess our IPC staff priorities and activities.
JHC: Is it difficult to get buy-in to the coalition’s contracts from each of your facility’s physicians and staff?
Sonin: Gaining the support of physicians and staff is key to our contracting success. The IPC advisory council is the driving force behind getting buy-in from physicians and staff at our member hospitals. The council reviews contracting opportunities at our monthly meetings and then works with their individual hospitals’ own physicians and staff to evaluate the opportunities before making any final decision. This approach, which allows members to gain support from their own organizations before agreeing to participate in an IPC contract, allows us to drive successful contract implementations.
JHC: If you could change one thing about the way your purchasing coalition works, what would that be?
Sonin: We have already begun to change our model, specifically in the way that we contract. As the group purchasing market shifts from volume to commitment, IPC has also revised its contracting strategy from a flexible to a committed approach. We recognize that straight volume aggregation can provide some value, but it’s no surprise that providing suppliers with a pre-commitment in a certain area can return multiples in savings.
JHC: How do you envision your purchasing coalition in five or so years?
Sonin: The continuing consolidation of healthcare providers will change both regional and national GPO programs. For IPC, we recognize that there will be fewer independent hospitals and smaller systems in the market. This creates more opportunity as the remaining independents look toward virtual IDN solutions, like IPC, to meet their collective needs. Opportunities to drive value for member organizations include access to cost and quality benchmarking data, supply contracting, shared services and contracting in non-traditional service categories. IPC looks forward to continuing to evolve with our members as we work to drive down the cost of healthcare.