Collaboration cuts costs

A small investment in collaboration is paying big dividends for the Genesis Health System.

The system, which operates three hospitals in Illinois and Iowa, has seen its investment in the Supply Chain Collaborative, a program of Premier Inc., pay off in the past 12 months.

The organization invested about $30,000 in 2005 and realized about $2.7 million in cost savings and reductions in expenses, said Steven Smith, director of material services for Genesis Health.

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 "It's been an excellent return on investment for our organization," he said.

The collaborative uses the collective purchasing power and influence of participating hospitals to seek lower prices for supplies. But it goes a step further, as participants commit to work closely with peers from other healthcare organizations to accelerate supply chain improvements.

Each year, the collaborative focuses on what it calls a breakthrough series, a slate of several initiatives that it wants to tackle. Through next June, the collaborative's breakthrough series - its sixth - will address perioperative, cardiovascular and orthopedic services; blood and blood products; contract administration; and gaining margin through the revenue cycle and supply chain continuum.

Smith, who has participated in some committee work on the collaborative, said the effort draws together 30 to 50 hospitals and health systems from throughout the country.

 "We look to identify quality improvement opportunities and expense reduction opportunities," he said.  "And we do that by sharing information and telling the others, 'This is how we do this.' "

Participating organizations do more than talk to each other. During the nine-month program, they commit to making changes designed to improve operations and eliminate millions of dollars of unnecessary supply-related expenses, said Hunter Kome, spokesman for Premier, Inc.

For example, last year the hospitals, with cardiologists' assistance, approached vendors of drug-eluding stents and helped negotiate a better price, Smith said.

Additionally, providers worked with physicians to develop better pricing for balloon-tipped catheters for cardiology procedures, and seven of eight vendors approached with the revised prices agreed to participate.

 "The supply chain has not been a real glamorous area, but the focus on the supply chain has been significantly more intense over the last several years, as we see revenues declining due to reimbursement cuts and managed-care contracting," he said. "We have a wealth of knowledge in the industry, and this is one way to share it."