A risk-based supply chain partnership led an Ohio hospital to standardize across an entire product category and improve patient outcomes. Learn the recipe for building successful value-based contracts.
As the market incents healthcare providers to improve outcomes, suppliers are raising their hands to go at risk with hospitals and guarantee their products’ performance. In supply chain value-based contracts (VBCs), the agreements assure clinical outcomes, such as a 30 percent reduction in CAUTI, and reimburse the product spend or the subsequent care required if results are not met.
Hospitals, for their part, are interested in risk-sharing but uncertain how to proceed. In a Premier Inc. survey of 203 c-suite leaders, nearly three out of four respondents ranked VBCs as a priority, but only 38 percent said they participate in this style of contracting with suppliers or pharmaceutical companies. The biggest deterrent is that providers have not been engaged by suppliers, according to the survey.
How a VBC Standardized a Product Category at an Ohio Hospital
Healthcare improvement company Premier connected Firelands Regional Medical Center, a 400-bed hospital in Sandusky, Ohio, and Avadim Health, a North Carolina-based supplier whose products include a skin biotherapy line for cleansing and bathing. Avadim engaged with Premier to create more strategic supply chain contracts that guarantee the positive effect of its biotherapy line on the continuum of care and total costs.
Firelands took Avadim’s product to its value analysis committee and tested it on multiple units before signing the value-based contract. Firelands’ supply chain analyst collaborated with the clinical team to compare the value of Avadim’s product to other similar ones on contract, considering price as well as outcomes and utility.
“While supply chain used to be about how much a product costs compared to competitors, it’s now about clinical evaluation, outcomes and standardization,” said Susan Cramer, Director of Infection Control and Patient Safety at Firelands, who helped pilot the product. The product performed as promised – allowing Firelands to discontinue six other therapies and standardize around one.
A Recipe for Building Successful VBCs
In its work convening hospitals and suppliers, Premier has identified four key factors that yield successful VBCs.
- Alignment. Providers should seek VBCs that address their organizations’ opportunity areas and pain points, and gain multi-stakeholder internal alignment and sponsorship around the true value of the contract. For example, if a VBC helps improve CLABSI rates but the system already performs well in reducing CLABSI, it’s likely not a good fit. Stakeholders should also agree on the value proposition. If the product has higher upfront costs but ultimately improves total outcomes and reduces costs over the episode of care, it yields greater value.
- Data. Of the providers that have participated in these agreements, data remains the top challenge to implementing VBCs across the market, according to Premier’s survey.
“Organizations need a robust data and analytics infrastructure to track interventions and outcomes over time. A value-based contract has to demonstrate measurable outcomes that are aligned to the goals that healthcare systems are focused on,” said Myla Maloney, Vice President, Strategic Accounts, Premier Applied Sciences. “Rather than have the hospital reallocate time and resources, a data partner like Premier can easily capture the impact of products, services and evidence-based interventions.”
- Culture. Team members must agree to driving standardization through both product and care delivery. The organizations that are successful with this work with suppliers and their group purchasing organization to demonstrate how a product measurably contributes to high-quality outcomes. They also have a value analysis team in place, uniting multiple stakeholders who are accustomed to working together to assess the utility of products.
- Partnership. Both providers and suppliers agree it’s essential to collaborate with a partner capable of connecting suppliers with risk-ready hospitals. An industry partner helps the provider assess its readiness and data infrastructure to uphold these contracts; connects suppliers with mature organizations that have the structure and executive support; and creates clear guidelines for outcomes expected and how the supplier will protect the provider if the item does not deliver.
“Our value-based agreements are a way for us to bring value to a marketplace that’s operating under a model that’s not sustainable,” said Rick R. Suarez, Senior Vice President, US Market Access at AstraZeneca, which has entered into more than 50 VBCs across its portfolio. “Our endpoint is not driving volume; it's affecting patient outcomes. Rather than try to gain a commitment directly with a hospital system based solely on our positioning, we've found that partnering with Premier to identify meaningful outcomes for their members and patients in advance provides confidence to hospitals that the agreement has been well thought-out.”
To make it easier for hospitals and health systems to say yes to clinical improvement through their supply chain, Premier is taking some of the risk off suppliers’ shoulders. Likewise, Premier is helping providers continue to evaluate how to leverage the movement to value-based care to improve outcomes. Learn more here.