Amerinet Seeks to Expand its Footprint
Edition: December 2003 - Vol 11 Number 12
ST. LOUIS -- It may no longer be enough for GPOs to negotiate contracts and then pass them on to their members. Today, providers are asking their GPOs to go one step further, namely, to make sure that the prices they see on their invoices actually match the prices specified in the GPO contracts. At least that's what one GPO - St. Louis-based Amerinet - is hearing from its members.
"When [providers] check their invoices, they see they're not getting the contract price," said Victor Samolovitch, president, Amerinet Central, speaking at Amerinet's Annual Supplier Conference in St. Louis. "And they're blaming GPOs for not paying attention."
Providers have another beef, Samolovitch said - namely, that GPOs haven't done enough to "normalize data," that is, to come up with and enforce a common nomenclature and numbering systems for the products they buy. "The data they're trying to manage is so corrupted that they have to rely on the vendors for much of that information. And they're wondering, 'Where are our GPOs?"
Amerinet executives used the conference as a venue to determine new directions for the GPO. And at the top of the list for 2004 will be data management.
New Look, New Direction
At the meeting, Bud Bowen, president of Amerinet, unveiled a new logo and tagline for the GPO, which was founded 17 years ago through the merger of several independent purchasing groups. The new tagline, "Delivering a network of solutions," points to a new direction for Amerinet, said Bowen. "Our footprint within our customers is going to grow dramatically in this next year," he said. "We're going to expand our responsibility and role. No longer are we simply going to produce good, aggressively priced contracts, distribute them and then say we're done.
"Those contracts are pretty meaningless if they're not properly implemented, if the members are not getting the full benefit from them. And if our agreements are not properly used and adopted, then our vendors won't get full value either."
The new tagline replaces the old one: "Choice, voice and value." But Bowen said that those three words remain "an integral part of the Amerinet culture."
Amerinet executives said that a data management tool is being tested now and will be provided to members in the first quarter of 2004. The tool reportedly will help providers interface purchase order and accounts payable information, all in an effort to help them resolve pricing discrepancies.
Concurrently, Amerinet will launch an initiative to clean up providers' item master files, said Bowen.
"Our members are expecting our help, and the supplier community will be brought into the process as well," noted Bowen. "Data cleansing and data management will unearth a number of pricing inconsistencies, particularly within health systems, where multiple members of a single system have no consistency of pricing." Not only will providers be assured of receiving consistent contract pricing on the products they buy, but vendors will benefit as well, because as the data cleansing takes place, opportunities for additional contracts will reveal themselves, said Bowen. "These might be product areas that the hospital or system is buying off the shelf from a random group of suppliers.
Amerinet has contracted with Knoxville, Tenn.-based Inobis to help categorize its contract items. Inobis's database will be the basis of all information supplied to members, said Bowen. Vendors will be expected to comply with the Inobis data structure.
"We're hearing more and more the frustration our members have with this incredibly complex and disjointed industry in which we reside, in which standardization among suppliers of comparable products is unheard of," said Bowen. "You're taking a black eye and so are we. Shame on all of us for continuing to allow the industry to work in such an inefficient manner."
In addition, the GPO is developing the capability of tracking line-item detail purchasing information from its members, using distributors and wholesalers as the data sources. Beginning with pharmaceuticals and later with medical/surgical and lab products, "we will be assembling a much more meaningful piece of information for ... manufacturers and distributors to bid on - much more specific information about Amerinet's purchase patterns and history than we've ever had before," said Bowen.
A Sense of Urgency
Amerinet experienced a banner year in 2003, with $6 billion in member contract purchases -a 6.2 percent climb from the year before. Even so, the GPO is facing some challenges. For example, competition among the major GPOs has grown fierce, putting more pressure on Amerinet to excel, said Samolovitch.
"But we're preparing to boldly go forward," said Todd Ebert, Amerinet's executive vice president. "We will tell a very solid story because we have a very solid value proposition."
Amerinet executives identified a number of "core business strategies" (in addition to data management) for the coming year:
Portfolio refinement. "While many in our business are working hard to expand the number of sources of contracts for their members - not necessarily for all the right reasons - we're going the other way," said Bowen. While "recognizing the value of maintaining an open and level playing field [among suppliers], we're all about delivering value to our members and suppliers," he said. "In cases where it's appropriate to reduce the number of suppliers, if that's what will deliver value to our members and suppliers, then that's what we'll do." That said, Amerinet has opened doors to manufacturers of innovative technologies, primarily through its Web site. "About 200 new companies have come on our radar as a result of a new Web site feature," said Bowen.
In addition, Amerinet has reviewed 250 contracts (predominantly in the medical/surgical area) and eliminated approximately 10 percent for various reasons. "There are a lot of contracts that are difficult to understand, digest and use," said Ebert. "So we've taken a lot of time to dissect them and make them easier to use."
Supplier diversity. "This is something that has become very important to us," said Bowen. Amerinet is a founding member of the National Minority Supplier Development Council, which is designed to facilitate the exposure, advancement and awareness of minority-owned firms in the industry. Amerinet's Barb Conte, who heads up the GPO's non-acute care program, sits on the alliance's board of directors. In addition, Amerinet has its own supplier diversity program, which fosters business relationships with historically underutilized businesses (HUBs).
Competitive bidding. This will continue to be a core strategy, said Bowen. "We're bidding more than ever. It's the best tool to ensure that we're always where we should be in the marketplace." In addition, the company has staged several reverse auctions and will continue to do so in limited applications.
Private labeling. The Amerinet Choice private label program "continues to prove its value to our members day in and day out," said Bowen. The program accounts for more than $62 million in contract sales, a 185 percent increase over last year. More than 830 members use the program. New and expanded contracts are being developed in wound care, gloves, sequential compression devices, pharmaceuticals and other product areas.
Clinical preference contracting. The Amerinet Clinical Advantage Program brings Amerinet staff together with clinicians from individual members to negotiate custom contracts for clinician-preference items. "We recognize that when you get into areas such as orthopedics and cardiology, many times, one size doesn't fit all," said Ebert. Amerinet has negotiated more than $30 million in contracts through this process, with more lined up, he said. Success stories include a community hospital that generated savings of $280,000 in orthopedic implants, and a for-profit hospital that saved 28 percent in interventional cardiology.
Contracting on behalf of IDNs. In the Amerinet Options program, Amerinet staff negotiate contracts on behalf of individual IDNs. The program "reflects the desire and need of our system members to play a more active role in high-ticket, high-spend items," said Bowen. "We work with them to determine what additional value they can bring to the supplier community to yield better results."
Member recruitment. Saying that approximately 30 percent of the nation's IDNs will be assessing their existing GPO relationships in the coming year, Bowen promised that Amerinet would vigorously pursue integrated health systems for membership. Acute-care hospitals will continue to be the GPO's main focus, but its non-acute care program is growing as well.
Supply chain optimization. Working with BD Healthcare Consulting, Amerinet will continue to offer members its Supply Chain Optimization Report Program, or SCORe. In seven days, BD Healthcare Consulting collects and analyzes data regarding the individual facility's supply chain costs, and outlines supply chain opportunities and benchmark facilities. "We have engaged a number of facilities to go through the process with tremendous results,"said Bowen. "It's an indication that we're expanding our footprint in these organizations."
Branding. "Our new look is a symbol of a new invigoration of our company," said Bowen. "We have a lot of lofty goals and expectations for the coming year and the next 17 years. But it means we'll have to change our behavior. And [the new logo and tagline] are a symbol and constant reminder of that."
In addition, Amerinet will continue to build its programs in non-acute care (which accounted for $1.6 billion in sales this past year, or a 19 percent increase over the year before); administrative services/information resources; nutrition and facility services, laboratory/diagnostic imaging; and pharmacy.
"You'll see a bold company in 2004 that will re-create the GPO value proposition," said Samolovitch.