Purchasing plus: one organization's networking initiative.

PHI/Presbyterian Homes, Inc.'s involvement with multiple purchasing groups and alliances has allowed this not-for-profit organization to enrich its core services 

PHI/Presbyterian Homes, Inc., has enjoyed the benefits of membership in group purchasing organizations (GPOs) for approximately 10 years, but about two years ago, the organization reevaluated its business strategy and determined there were additional ways to control costs and improve its services.

One offshoot of that assessment was the formation of alliances with two hospitals: Chester County Hospital, in West Chester, PA, and St. Luke's Hospital in Bethlehem, PA. These partnerships allow PHI and the two hospitals both to expand their services and improve purchasing ability. PHI realigned senior management to establish a new position: director of systems integration. This new position and our partnership with St. Luke's opened the door for our membership in Premier Health Care Alliance, one of the nation's largest healthcare GPOs.

This relationship with Premier, which has become our primary purchasing group, has been extremely beneficial. based on our size (a total of 12 skilled nursing facilities [either free-standing or part of a CCRC], 3 independent living facilities, 4 free-standing assisted living residences and home health care in two locations), PHI would not have qualified for membership in Premier, but through our link to St. Luke's - a founding member of Premier - we did qualify.

One advantage Premier offers is that it primarily negotiates directly with manufacturers, rather than with individual distributors. In many cases we can choose from among various products that can be obtained through Premier, and then choose which distributor will deliver it.

We rely on Premier to acquire a wide variety of goods and services - from pharmaceuticals, which are distributed through our own pharmacy (CCRx), to wound care equipment from Hill-Rom, to cleaning equipment and supplies from ResourceNet, to trash removal and hazardous waste management (various providers).

Many of these relationships formed through Premier have a value-added component. For instance, in addition to providing cleaning equipment and supplies, ResourceNet is developing training and monitoring programs for our facilities' environmental services. We also benefit from a great deal of consulting and networking with the other vendors whose goods and services we obtain through Premier.

Our alliances don't stop there. For example, our membership in Premier led to a relationship with another GPO, RedLine Medical Supplies. We obtain more than 80% of all our medical supplies through Redline. We have the option of using either RedLine's or Premier's pricing, whichever is most advantageous, but in either case RedLine distributes these supplies to our facilities.

Another component of PHI's network is with Nutrition Management Services Company (NMSC), a food services management company based in Kimberton, PA. Our relationship with NMSC has evolved since it started - from the company's being our principal vendor of food services to its entering into a risk-sharing contract with us. NMSC established a separate business unit to deal exclusively with our organization, and besides managing the process for NMSC, its business unit leader functions as part of our senior staff, making NMSC an active participant in PHI's strategic decision-making process.

Rehabilitation services is another area where forming a business alliance has been beneficial to PHI. Theracor, a national rehab provider, provides therapy services in most of our facilities. Having one primary, centralized provider for rehab is particularly helpful, now that we're on the threshold of PPS; having to negotiate and plan for this with multiple providers would have been difficult at best. Finally, for diagnostic testing and laboratory services, we have alliances with Symphony Health Care. For some of our facilities, we purchase these services from nearby hospitals.

Besides alliances and GPOs, PHI also belongs to the Hospital Services Cooperative, based in Bethlehem, PA. HSC provides linen services for most of our facilities, with the value-added services of collection and credit bureau programs.

PHI has also formed alliances with Kairos - an organization of not-for-profit nursing facilities and aging services providers in three states that have joined together for the purposes of negotiating managed care contracts - and with the group purchasing plans of the American Association of Homes and Services for the Aging (AAHSA) and the Pennsylvania Association of Not-for-Profit Homes for the Aged.

In overall results, our heightened involvement with alliances and GPOs during the past two years has saved PHI roughly $500,000 a year. It's not all about money, though. We've been able to develop new product lines, such as special dining service programs - now being developed for our independent living and assisted living facilities - and new rehab delivery systems being established in preparation for PPS. We've also been able to improve our pharmacy services. Furthermore, PHI has achieved considerable time savings, primarily because of new technology and products made available through our various partnerships.

These positive results demonstrate the advantages of developing networks and systems through a group purchasing process - advantages that would fall outside the grasp of an organization attempting to competitively shop each purchase on its own. It is a strategy, however, that takes careful forethought and planning. Some suggestions:

1. Start by identifying your organization's particular strategies and needs. It is tempting to try to modify your organization's approach to fit what's available, but that approach is backwards. You have to decide where you want to be and then decide what kinds of products and services will help you get there.

2. Keep your options open when considering a purchasing group or an alliance. Make sure that what is offered is consistent with the way you do business. Also, remember that your aim is not simply to find lower-cost products, but to add significant value to the services you provide.

3. Evaluate the range of alliances available. There are many differences among them. Some may require your organization to be part of a larger system in order to qualify to participate. Others may simply not be right for you. For example, some GPOs impose minimum purchase requirements that might prove burdensome.

4. Consider the state association connection. Many associations have relationships with GPOs, and as an association member, you might be able to share in that benefit.

5. Learn which purchasing groups some of the large providers in your area are using. Is there any way you can network with these organizations to avail yourself of their group purchasing plans as, for example, PHI did with nearby hospitals?

6. Have an active product review committee in place. This will guide you toward or away from particular alliances before the networking process begins.

When the time comes to make decisions about alliances and purchasing arrangements, a number of key staff people should be involved: not only the administrator or executive director and the purchasing director (if your organization has one), but also managers of departments that are "consumers" of major categories of products (e.g., food services, environmental services and nursing).

In today's long-term care business climate, 1 suggest that it is wise to take advantage of partnerships with purchasing groups and alliances, regardless of whether your organization is not-for-profit or for-profit. The key to doing so successfully lies in clearly identifying your goals and carefully examining what is available to help meet them. You may be surprised at the amount of help that is out there.

Jim Bernardo, chief operating officer, PHI/Presbyterian Homes, Inc., based in Camp Hill, PA, has 21 years' experience in healthcare, including 12 years overseeing a single-site facility.