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How 4 Health Systems Rein in Supply Costs

Rene Letourneau, for HealthLeaders Media, April 22, 2013

Hospital executives know they have to get smart about the supply chain if they are to hone strategies to rein in spending. In the HealthLeaders Media Industry Survey 2013: Strategic Imperative for an Evolving Industry, 57% of respondents identified expense reduction via supply chain efficiencies as one of the top three areas their organization will focus on this year to control costs.

Four Northeast Ohio-based health systems recently formed a purchasing collaborative called the Purchasing Organization of the Western Reserve (POWR) in an effort to do just that. The systems hope to leverage economies of scale through the Premier healthcare alliance to drive down their individual supply costs. Collaborative members also gain access to Premier's comparative effectiveness research, which enables purchasing decisions to be based on evidence of value.

The health systems in the collaborative are University Hospitals, EMH Healthcare, Parma Community General Hospital, and Southwest General. Collectively, the four systems report that they have saved nearly $700,000 in the roughly four months since launching the collaborative, including $250,000 on physician preference items.

In 2011, the latter three health systems formed the Community Health Collaborative, but were not able to purchase in large enough volume levels to achieve big cost savings until University Hospitals—one of the nation's largest systems—decided to participate in a collaborative with them.

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