Ten years ago, The Journal of Healthcare Contracting visited with John Bardis and Rand Ballard of MedAssets to discuss their approach to the market. Ten years later, we asked MedAssets executives to reflect on that conversation. Participating were Mike Nolte, chief operating office; Rand Ballard, office of the chief executive, senior executive vice president and chief customer officer; Keith Thurgood, president, spend and clinical resource management; and Les Popiolek, senior vice president, strategic sourcing.
The Journal of Healthcare Contracting: Ten years ago, you classified MedAssets as a provider of cash improvement solutions, more so than a GPO. Still true today?
Mike Nolte: Our GPO remains core to reducing the total cost of care, but we have evolved as the scale of our clients’ business challenges and the industry’s impact on our national economy grew.
Today, we are a total performance improvement management company that helps clients to better align the price of supplies, processes, payment and patient care to succeed and create sustainable business operations. We offer differentiated supply chain, procurement and clinical resource management capabilities, including disruptive approaches to supply sourcing and physician engagement. We provide cloud-based, technology solutions for revenue cycle and purchasing, and we deliver other services as varied as embedded management and full outsourcing.
The Journal of Healthcare Contracting: Ten years ago, you made the comment that GPOs had missed opportunities to serve their customers’ needs and create savings for them. How does MedAssets differentiate itself from its competitors?
Rand Ballard: We distinguish ourselves with our breadth of data, analytics and service expertise in supply chain operations, Lean healthcare process improvement, procurement, labor utilization, clinical resource management, contract modeling and more.
We offer the industry’s most comprehensive electronic commerce platform (which we now offer to our non-GPO clients), including requisition-to-purchase-order transmission, shipment notification, invoice transmission and reconciliation workflow automation, expense posting, supplier payment and early-pay discount solutions. We’re unique in our ability to tie together PPI cost, patient-level data, reimbursement per case, and clinical data – and use this approach to work directly with medical staff to achieve meaningful change in resource consumption and PPI cost. We have successfully used our proven PPI approach to save more than $2.5 billion in the last 10 years with over 2.6 million encounters where PPI was used in the treatment of patients.
Our full portfolio of SaaS technology, process improvement and outsourcing services for the revenue cycle, including differentiating episode-of-care solutions, help calculate risk to support a successful transition from fee-for-service to value-based/bundled reimbursements.
The Journal of Healthcare Contracting: In 2007, MedAssets raised more than $200 million through an IPO. How has being a public company affected MedAssets and your offerings to your customers?
Nolte: The IPO’s cash proceeds, in combination with our business’s cash flow characteristics, enabled MedAssets to consistently invest in services, technologies and infrastructure. The equity of a public company also positioned MedAssets to expand our suite of performance improvement solutions through the acquisition of strategic business enterprises. In addition, the IPO allowed clients and prospects to view a transparent business model without the risk of conflict of interest seen in some other models.
Journal of Healthcare Contracting: How has the industry – including MedAssets and your customers – been affected, if at all, by Steven Brill’s March 2013 “Time” magazine piece, “Bitter Pill: Why Medical Bills Are Killing Us.”
Nolte: [T]he issues raised are not new to the healthcare industry, though the article did draw some odd conclusions. For example, the article paints some technologies, specifically chargemasters, as part of the problem, when the issue is more related to the data that is in the technology vs. the technology itself. The good news is that the article did accelerate many conversations on defensible pricing, which is an approach we’ve taken for many years.
One way we support our clients is by connecting the supply chain (item master) to the revenue cycle (chargemaster) to create a complete picture of a provider’s pricing strategy in action. We also use broad national benchmarking to ensure that pricing falls within a regional or national norm. Another key strategy in reducing the variable costs per case for procedures – linked ultimately to the price charged – is a collaborative strategy for physician preference items.
At the end of the day, a combination of controlling costs and understanding benchmarks makes pricing more defensible and rational.
The Journal of Healthcare Contracting: Ten years ago, MedAssets believed that a national GPO couldn’t provide value by contracting for physician-preference items on a national level. Has your approach to PPI changed in the past 10 years?
Keith Thurgood: Yes, it absolutely has. Ten years ago, providers seeking physician engagement on PPI were considered outliers, pioneers; but today there’s incredible market demand, and we’re seeing the focus move away from focusing on just price to addressing utilization and standardization, and successfully engaging physicians in clinical resource management strategies. Over the past ten years, we’ve also been successful in promoting the commoditization of certain PPI categories where contracting at the national level does provide value to participants in the supply chain. Our GPO now has broad coverage for cardiac, orthopedic, trauma and spine implants products.
Journal of Healthcare Contracting: Ten years ago, you discussed how appropriate medication utilization can improve patient care and decrease costs. Given the progression of analytics (and today’s emphasis on outcomes), how has this process improved, expanded or changed in the past 10 years?
Thurgood: We offer analytics that improve clinical utilization management, optimize operational processes, and improve patient satisfaction and safety. Two primary areas where we excel are supply chain and value-based reimbursement.
Our framework offers six value drivers for a highly efficient supply chain program: 1) consolidate number of suppliers, 2) increase contract compliance, 3) pay the right price, 4) capture payment discounts, 5) improve inventory performance, and 6) improve labor efficiency.
MedAssets offers multiple analytics tools and solutions to quantify clinical, financial and resource allocation improvements needed to transition to risk-based payment methodologies. We help with comparative value analysis of resource utilization and help providers in modeling potential reimbursements under a bundled payment scenario. [W]e support analytics for a variety of episode payment methodologies to help manage multiple payor scenarios.
The Journal of Healthcare Contracting: What are the challenges facing small, start-up vendors today?
Les Popiolek: We often see that some of the smaller vendors have challenges in basic infrastructure to compete with the larger, more established suppliers – e.g. sales force, marketing departments, etc. Smaller vendors also often run into regulatory hurdles, such as FDA clearance. For small vendors to be successful, they need to validate their clinical outcome enhancements and be able to show that their products and services can deliver financial improvement through lower costs (pricing, reduced utilization, process improvement, etc).
Each year, MedAssets hosts a Technology & Innovation Expo, which offers suppliers the opportunity to showcase their innovative products and services to our client purchasers. Over the past 10 years, this venue has given nearly 600 suppliers the ability to promote and demonstrate their latest technologies directly to clinicians and buyers. We also offer a Supplier Diversity Program, which is designed to support growth and sustainability among diverse suppliers in the MedAssets contract portfolio, create opportunities for the entry of qualified diverse suppliers in the healthcare marketplace, assist member healthcare organizations in meeting their supplier diversity goals, and support our clients’ initiatives to build strong and diverse communities. It is our policy to solicit bids from certified diversity suppliers in our efforts to award contracts to minority, small disadvantaged, veteran and women-owned businesses.
The Journal of Healthcare Contracting: Has your approach to serving the non-acute market changed in the past 10 years?
Thurgood: Offering solutions to non-acute healthcare providers is a high priority for us, as is providing solutions that support our acute care clients in building successful business relationships with physicians and ancillary service organizations. As healthcare reform changes the industry into population health management and accountable care delivery models, and incents more services into non-acute care settings, we expect the importance of the non-acute market to only increase. In a recent polling of C-suite executives conducted by MedAssets at our annual Healthcare Executive Forum, held Jan. 30 to Feb. 1, 2014, in Scottsdale, Ariz., 89 percent of attendees reported their health systems will acquire and engage in non-hospital growth strategies over the next two years, up from 63 percent in 2013.
Although diverse in scope, all non-acute care organizations face similar challenges –rising costs, margin pressures and shrinking reimbursements. More than 122,000 non-acute-care providers, such as physician groups, outpatient medical and surgery centers, diagnostic laboratories and home health and long-term care providers currently leverage MedAssets technology solutions, sourcing strategies and collective purchasing power…
The Journal of Healthcare Contracting: Over the past 10 years, MedAssets has fought for transparency of pricing, that is, the right for providers to share pricing with one another. Has that battle been won or lost?
Nolte: It isn’t so much providers sharing information with one another, as it is providers being able to “comparison shop.” Ideally, they should be able to assess the true market price of a device based on the value to the patient. In fact, providers should be able to see similar information about the price and terms of medical devices just as they can about a vehicle or an appliance. Some progress has been made in a few states – particularly with pharmaceuticals – and some members of Congress have become interested in more transparent pricing, which led to the passage of the Physician Payments Sunshine Act. That’s a step in the right direction, but the bigger battle is still ongoing.
The Journal of Healthcare Contracting: How has the rise of regional purchasing cooperatives affected your product/service offerings?
Popiolek: The cooperative approach has been a part of MedAssets’s national GPO sourcing strategy for over eight years now. Our National Sourcing Collaborative strategy is centered on our clients aggregating their volume before our national GPO contracts are awarded. Our national sourcing collaboratives typically line up 15 percent to 40 percent of our entire membership’s spend to be awarded to one supplier during the GPO sourcing process.
Over the past three years, the MedAssets National Sourcing Collaborative program has delivered a cumulative savings of $135 million – a 24 percent savings across multiple product categories, including contrast media, enteral nutritionals, fecal management products, exam gloves and non-invasive blood pressure cuffs. More than 300 clients have participated in six events over the past year. My prediction for RPCs is that they’ll narrow in number and focus.
MedAssets national approach for consumable products has demonstrated that sourcing cooperatives do not need to be bound by geography. I think the focus for RPCs will shift to categories that are localized/regionalized, such as purchased services. We’ve had a good deal of success collaborating with multiple clients in consolidating the number of suppliers they use in areas like outsourced dietary, environmental services, waste management, landscaping services, etc.