VHA/UHC and MedAssets

The reasons behind the VHA/UHC decision to acquire the group purchasing and clinical resource management arms of MedAssets

Scale matters, right? More members, greater volume, lower prices. That has been the bedrock of group purchasing.

But today, with the major GPOs already boasting thousands of members representing billions of dollars in purchasing volume, attracting more members may not necessarily be the key to growth.

How then to explain the recent decision by VHA/UHC to acquire the group purchasing and clinical resource management arms of MedAssets, including Sg2, the Skokie, Ill.-based analytics and consulting firm? After all, VHA/UHC (formed in February 2015 with the merger of VHA and UHC) already claims $50 billion in purchasing volume, and MedAssets, $59 billion.

The new, combined purchasing volume “wasn’t the primary deal driver,” says Jody Hatcher, VHA/UHC president, offering delivery and operations. “It’s more associated with data, best practices, performance improvement. These are far more important than scale related to purchasing volume.”

VHA/UHC announced in November that it would buy the MedAssets business from investment firm Pamplona Capital Management, probably in the first quarter of 2016, after the federal government has OK’ed Pamplona’s acquisition of MedAssets’ revenue cycle management business.

Cost and quality
“When Novation was created in 1997-1998, the way healthcare looked at things was different,” says Hatcher. “Things were primarily driven by the way providers got paid. The clinical enterprise operated independently from the cost enterprise for years.

“Fast forward the tape. Look at what has occurred with the Affordable Care Act – a catalyst driving a different payment scheme, and forcing hospitals to bring together their decisions about cost and quality.”

That’s why VHA/UHC has focused many of its recent efforts on providing its members solutions for making decisions about cost and quality, says Hatcher, adding, “That will be fundamentally advanced by this acquisition.” The VHA/UHC clinical database – primarily a legacy UHC offering – will be supplemented and enhanced by the MedAssets offerings, including Sg2.

“The question is, do you as a provider have the systems, processes and capabilities to measure, manage and track how you’re performing in an alternative payment scheme?” he says. “Our view is, we should be an indispensable partner providing solutions to enable organizations to perform better.” One way the purchasing group can be that partner is through data and analytics. Another is simply by bringing together provider members to share best practices. “We learn, improve and build together, and by doing that, we will accelerate [our members’] collective performance. Hospitals can’t operate in isolation anymore; we can to be a catalyst.”

MedAssets and VHA/UHC make a good fit in many other ways, continues Hatcher. For example, together, they offer hundreds of advisory services and insights, he says. “They have an interesting workforce capability that we don’t have, and a procurement platform as well.”

Impact on group purchasing
While much of the focus of the transaction will be on analytics, the fact is, group purchasing operations will be affected by VHA/UHC’s acquisition of the MedAssets group purchasing program. But it was difficult, at press time, to say exactly how, particularly since the transaction wasn’t likely to be completed until early 2016.

“We still continue to operate as competitors until we can do otherwise,” says Hatcher. One thing he could promise: VHA/UHC will do everything it can to move the integration along rapidly and orderly.

“We have folks in each organization who have the relevant experience to make that happen,” he says, pointing to the integration of VHA and UHC beginning in 2015, and the integration of Broadlane into MedAssets in 2010.

The merger is unlikely to change one thing: the formation and development of regional purchasing coalitions. “It’s a highly competitive marketplace, and will continue to be so,” says Hatcher. “Our ability to service members as they show up differently – through regional groups or through other types of relationships – will be important.

“Years ago, in the 1990s, the thought was, GPOs will be put out of business by IDNs. That was assuming the GPOs wouldn’t adapt. But GPOs did adapt. Similarly, we have been adapting to the regional groups, and that will continue.”

But for Hatcher, most roads lead back to analytics.

Contracting aside, “we have to present our customers with options as to how to reduce variation and more clinical insights into the performance of the products they are using.”

But over time, the greatest cost-saving measure isn’t lower prices so much as not using some products at all, he says. “In order to not use a product, you need data to show how you are performing and how that affects clinical variation and practice.”

Outdated is the notion that contracting, analytics and advisory services should be run independently of each other, he adds. “You have to integrate all those aspects, because our customers have to behave differently. The GPO business is transitioning from being price-focused to utilization-focused.”

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VHA-UHC Alliance NewCo Inc to become Vizient Inc

VHA-UHC Alliance NewCo Inc, the recently combined company of VHA Inc and UHC, announced that its new name will be Vizient Inc (Irving, TX). The combined organization, which includes Novation LLC (Irving, TX), will officially align under the Vizient brand beginning January 2016. According to the company, the new name represents the full capabilities of the combined organization, from supply-chain expertise to insights into cost and quality performance. The comprehensive products, services, and expertise of Vizient will help members significantly improve their financial, clinical, and operational performance and achieve greater value for patients and communities. VHA-UHC announced November 2, 2015 its intention to acquire MedAssets Inc’s (Alpharetta, GA) Spend and Clinical Resource Management Segment.