Over the last five years, hospital consolidations have soared. Between 2007 and 2012, more than 400 mergers, acquisitions, partnerships and affiliations impacted more than 800 hospitals. This trend shows no signs of slowing down. In fact, last year saw the biggest deal by far with the acquisition of Vanguard Health System by Tenet Healthcare Corporation for a total transaction valued at $4.3 billion.
Many hospital leaders view these mergers and acquisitions as a way to expand their geographical footprint, increase their offerings or capabilities, better and more quickly realize the benefits of healthcare reform and leverage their new scale to increase profits.
Consider this: The average hospital has tens of thousands of supplies – from bandages to cardiac stents – on its inventory list. Multiply that by several hospitals in a health system and supply management quickly adds up to massive – and massively expensive – undertaking. Given the scale, it comes as no surprise that medical supplies are a major investment that account for 30 to 40 percent of most operating budgets and are the second largest expense, next to labor.
Consolidation offers hospital leaders an opportune moment to improve efficiencies and reduce costs by re-evaluating how supplies are purchased, delivered and stored. And since physician preference items account for the largest part of medical-device spend in the orthopedics department, merging hospitals must critically evaluate and implement the most effective purchasing processes to benefit all stakeholders.
Partnering with physicians and other clinicians to make the best decisions around supplies, particularly medical devices is imperative during a hospital merger, acquisition or consolidation. When working with clinicians to make device selections, be sure to highlight data that supports effective purchasing decisions, such as how much each surgeon typically spends on an operation based on their devices of choice, as this data can drive behavior. Creating transparency to the greatest extent possible around the impact on outcomes and cost is also important. Finally, when in the midst of a merger, be sure to evaluate all vendors to ensure you’re getting the best partner for efficient and cost-effective purchasing.