Consorta Takes the Long View
Edition: January 2002 - Vol 10 Number 01
For years, group purchasing organizations have been criticized for sidestepping the big supply chain issues and focusing instead on just a narrow sliver of them- product prices. But critics might be hard-pressed to say the same about Rolling Meadows, IL-based Consorta Catholic Resource Partners.
Consorta embraces a number of initiatives only indirectly related to negotiating product prices, at the same time making sure these programs amount to more than just hot air. ''We want to pursue programs that have a quantifiable impact on our members' supply expenses,'' says Consorta President John Strong, a former hospital materials manager and distribution executive. ''So, they are tightly built around applying resource management to the acquisition of goods and services. We don't want to pursue it in esoteric areas.''
Consorta members operate more than half of all Catholic hospitals in the country. The organization comprises more than 400 acute care facilities and 1,700 non-hospital sites. Some examples of its non-price-driven initiatives are:
- Reimbursement, particularly outpatient prospective payment.
- Environmental responsibility.
- Outcomes studies.
- Sharing ''leading practices.''
- Technology assessment.
In an effort to help its shareholders collect all the revenues to which they are entitled, Consorta has meticulously reviewed the federal government's list of devices and technologies for which hospitals can be reimbursed on a pass-through basis (as part of the new outpatient prospective payment system). ''Most of the codes neglect to include the manufacturers' name and product number,'' says Strong. Consequently, hospitals' accounts receivables departments have had difficulty selecting the proper codes in their reports, thus missing out on some revenue opportunities. Consorta has added that information to its on-line database of approximately 27,000 pass-through items.
Another Consorta initiative is environmental responsibility. ''A number of our shareholders are very serious about identifying products that are better for the environment and safer for health care workers,'' says Strong. Consorta identifies in its electronic catalog those contracted products that are environmentally preferred, and has taken advantage of a group called Health Care Without Harm (www.noharm.org) to educate it in such matters. Health Care Without Harm is a coalition of 300 organizations committed to reforming the environmental practices of the health care industry.
Linking the Clinical and Operational Sides
Under the direction of Jean Livingston, Consorta's Organizational Effectiveness department reflects the organization's willingness to tackle big supply chain challenges. Consorta defines the goal of the department to be the ''[facilitation of] value-based resource management by linking products and diverse services in an integrated operational and clinical outcomes improvement strategy.''
Livingston is well-suited to the task, possessing not only a nursing degree, but a dual master's degree in hospital administration and community health nursing, as well as a Ph.D. in organization development. Prior to joining Consorta in 1999, she had been executive director at the University HealthSystem Consortium.
Resource management comprises far more than materials, says Livingston. Rather, it covers people, supplies, medical devices, even time and knowledge. In fact, for Consorta, effective resource management means that the health care organization is:
- doing the right thing
- for the right patient
- at the right time
- in the right setting
- with the right provider
- using the right resources.
Key to Consorta's approach to resource management is linking together operational and clinical outcomes. ''Clinical processes drive the operational and financial outcomes of an organization,'' says Livingston, who calls any separation between the clinical and operational side of health care ''artificial.''
''Our approach is to look at all sides, all the different components of health care delivery,'' she says. ''When you really deconstruct the way processes occur in health care organizations, you see that it truly is the clinical decision that drives operations and the resulting financial outcomes.''
Helping drive resource management is Consorta's Clinical Leadership Council. With representatives from each of Consorta's shareholders, the council comprises those persons who are responsible for or influential in making the clinical and operational links in their organizations, says Livingston. These people might have the title of vice president of resource management, vice president of process improvement, vice president of organizational improvement, vice president of clinical practice, etc.
The organizational effectiveness initiative includes many components, one of which is benchmarking. To date, Consorta has focused on benchmarking orthopedic and, to a lesser extent, cardiovascular procedures. The organization collects and compares hospitals' data on such things as clinical issues, technologies used and the cost of performing procedures, such as total joint implants. Consorta works with GE Medical Systems Healthcare Solutions, which has large national databases of clinical and cost information.
Closely related to benchmarking is sharing evidence-based leading practices. The organization is creating a shared learning site on its website on which these success stories from Consorta hospitals will be posted, says Livingston.
Another component of resource management is technology assessment. Consorta relies on the services of Hayes Inc., Lansdale, PA, for help in this area. Unlike other technology assessment services, Hayes looks at medical technologies devices, drugs, biologicals, tests and procedures and measures their effect on clinical and financial outcomes. In the end, such assessments help providers decide whether they should or should not buy and implement a given technology.
Grounded in Group Purchasing
Despite the long view of its mission, Consorta remains grounded in group purchasing. It has to, says Strong.
''Our shareholders continue to be under severe economic stress as a result of reimbursement cutbacks and the environment in which they have to operate,'' he says. ''Their expectations of us continue to grow. We believe we need to work with distributors and manufacturers to deliver cost-effective solutions.''
''We're willing to consider all manufacturers, all products, as we contract, but our shareholders expect us to continue to watch every penny. That's not going away.'' The group is planning 48 new contracts in the year ahead and will revisit 67 that are due to expire.
After beginning with a focus on big-ticket imaging equipment, Consorta is expanding its pre-committed group buys for capital equipment. Now, the organization is moving into anesthesia equipment, computer equipment and other product areas.
Consorta continues to upgrade its electronic presence as well, having recently released its OPUS 2.0, an online system offering expanded contract, membership, catalog and reporting functions. It allows members to put onto Consorta's ''WINGS'' Web-based electronic catalog their own regional contracts, thus creating what Strong calls a ''virtual GPO.''
Consorta continues to customize its offerings for large IDNs and other shareholders, who want and demand flexibility, says Strong. But the GPO believes it has a place of lasting value among even its largest shareholders. The cost of going it alone and managing portfolios for 400 or 500 contracts just doesn't make economic sense for individual IDNs or hospitals, he says. ''It has been proven that over time, the group pricing and the value proposition that the group brings by having people on staff keeping current on products, provides a great deal of value to members.''
Consorta Pays Dividends
Consorta Catholic Resource Partners distributed $20 million in patronage dividends for the 2001 fiscal year, or 68 cents of every revenue dollar. Shareholders of the Rolling Meadows, IL-based GPO also received another $20 million in cash rebates from contract purchases.
On average, Consorta's patronage dividends for 2001 will increase 28 percent compared to the 2000 fiscal year, with some shareholders realizing increases as great as 69 percent, according to the organization. Shareholders will receive 96 percent of the dividend in cash. Consorta, formed in 1998 from the merger of two existing group purchasing organizations, has paid patronage dividends since 1999.
''This gives us a three-year track record of sustained operational and financial success,'' said Consorta President John Strong.