Long-Term-Care GPO Takes the Next Step

Edition: November 2001 - Vol 9 Number 11
Article#: 1097
Author: Repertoire

After several years of vigorous growth, the group purchasing program of the American Association of Homes and Services for the Aging is poised to take another step forward.


At press time, the Washington, DC-based association of not-for-profit long-term-care providers was preparing to announce an agreement with an unnamed national group purchasing organization that would bring to AAHSA members the benefits of well-established portfolios in med/surg, food, pharmacy and non-medical items. At the same time, AAHSA would bring its experience in long-term-care group purchasing to the national group, which up until now has focused primarily on the acute care sector.


Steady Growth


The AAHSA program has been on a steady growth path since Scot Scurlock became director of group purchasing in 1999.


From 1993 to 1996, Scurlock was director of corporate purchasing with Sun Healthcare, a long-term-care company based in Albuquerque, NM. In 1996, he moved to Atlanta to assist in the development of a national distribution company for Sun, to be called SunChoice. But the venture ultimately failed and Scurlock left to join AAHSA.


At the time, AAHSA's eight-year-old group purchasing program had about 20 contracts, most geared to medical products. But AAHSA's 5,600 members run the gamut from nursing homes to assisted living to government-subsidized housing to adult day care and more, says Scurlock. So, he began broadening the program to include such non-medical products and services as flooring, appliances and pre-employment screening.


Although he couldn't promise vendors the full compliance of his facilities, he could promise them that if they performed well for AAHSA, he would refrain from negotiating contracts with their competitors. ''We gradually put together some really strong programs,'' he says.


Choices


Today, AAHSA members can choose from several group-purchasing options. The first are committed-volume programs with three distributors: Gulf South Medical Supply (Madison, MS) for medical supplies, U.S. Foodservice (Columbia, MD) for food service and equipment, and Network Services Co. (Woodbridge, VA) for paper and janitorial supplies. Members sign separate enrollment forms for each distribution agreement. For the medical supply program, they must agree to buy 80 percent of their total monthly expenditures through the agreement; for food, 70 percent; and for paper, a simple majority.


AAHSA members who don't want to make commitments upfront can use the association's voluntary program. The association has signed contracts with 47 vendors covering a variety of goods and services. They include Angelica, Carrington Labs, Briggs Corp., Alpha-Med, Coloplast, Ecolab, General Injectables and Vaccines, Gojo Industries, Hill-Rom, Ross Laboratories, Smith & Nephew Rehabilitation Products, Standard Textile and Sunrise Medical. The agreements range from simple pricing and set discount contracts, to tiered programs offering additional discounts to members based on participation.


AAHSA also has ''manufacturer end-user pricing contracts'' with BG Industries (maker of Maxifloat® pressure management and support surfaces), Abbott Laboratories Inc., MediSense. (glucose monitors and test strips), First Quality Products (disposable incontinence products) and SCA Hygiene (disposable incontinence and hygiene products).


In addition, AAHSA has an agreement with Milwaukee-based Direct Supply for medical and non-medical equipment.


From the Facilities


Last year, 2,700 AAHSA member facilities used the program to some extent. Sales have gone up 60 percent in the past two years, says Scurlock. But getting members to use the program isn't easy.


Just as with hospitals and physicians, Scurlock has found that once long-term-caregivers get comfortable using a particular brand of, say, briefs, they don't want to change, regardless of how competitive another vendor is. ''The easiest thing for [caregivers] to do is to keep using what they always have,'' he says. ''That's why I lean on our vendors and expect them to make a pitch [for their products] to the facilities.''


But long-term-care facilities have their own unique issues. In many cases, for example, a certified nursing assistant may have responsibility for placing medical supply orders, says Scurlock, while the maintenance worker is often responsible for ordering janitorial supplies.


''Long-term care as an industry has a difficult time maintaining staff,'' he says. ''The majority of the employees in long-term care and assisted living are there because they enjoy what they're doing, and they have real compassion for the residents. If they didn't, they could find easier, less demanding work at a higher wage down the street.'' Consequently, purchasing can be low on their priority list.


''We have a hard time getting people to see the value of what we're offering them,'' says Scurlock. ''It's not a matter of lack of interest so much as a lack of time.''


That's why marketing materials for the group-purchasing program are sent to administrators and business office managers. ''They can see the monetary value of the program and bring it to the attention of the end user,'' says Scurlock.


''But the bottom line is that we contract for quality products that the caregiver feels good about, and that ultimately increases the quality of life for residents. That's the reason we're all here.''


Nursing Home Companies Battle Back


At least two of the five big nursing home chains that filed for protection under Chapter 11 of the U.S. Bankruptcy Code between September 1999 and June 2000 have emerged successfully.


The first out of the box was Vencor (renamed Kindred Healthcare), which emerged from Chapter 11 in April 2001. ''We look forward to continuing to serve the more than 36,000 residents and patients whose care and well-being are entrusted to us,'' said Edward L. Kuntz, chairman, CEO and president. Throughout the Chapter 11 process, the company maintained normal operations in its nursing centers and hospitals, he said.


The second to emerge was Kennett Square, PA-based Genesis Health Ventures, which had filed for bankruptcy protection in June 2000. Genesis provides eldercare in the eastern United States through a network of Genesis ElderCare skilled nursing and assisted living facilities plus long-term-care support services nationwide, including pharmacy, medical equipment and supplies, rehabilitation, group purchasing, consulting and facility management. As part of its plan for recovery, Genesis merged with Multicare, an operator of 155 nursing homes and assisted living centers in whom it had a partial ownership share.


Still operating under Chapter 11 are Sun Healthcare Group, Albuquerque, NM; Mariner Post-Acute Network, Atlanta; and Integrated Health Services, Sparks, MD.












































































CompanyFiled Chapter 11Emerged from Chapter 11
Vencor (now Kindred Healthcare), Louisville, KYSeptember 1999April 2001
Sun Healthcare Group, Albuquerque, NMOctober 1999Has not emerged
Mariner Post-Acute Network, AtlantaJanuary 2000Has not emerged
Integrated Health Services, Sparks, MDFebruary 2000Has not emerged
Genesis Health Ventures, Kennett Square, PAJune 2000October 2001