Its total clinical spend in 2007 was about $1.2 million (not including purchase order costs), broken down by the following:
- Physician-preference items: 32 percent
- Medical/Surgical spend: 28 percent
- Packs: 26 percent
- Pharmaceuticals: 11 percent
- Miscellaneous (gases, linens, etc.): 3 percent
The ASC’s total spend on distributed products and prescriptions was about $464,500. Of that, $332,000 was in medical/surgical distribution and $133,000 in prescription wholesaler costs.
The ASC found savings by monitoring their pricing and working closely with the distributor and the drug wholesaler.
The ASC recognized the following four saving opportunities.
1. Accessing GPO’s contract pricing. Just becoming a member of a GPO is not necessarily enough for you to take advantage of savings found through the GPO’s contracts, says Mr. Lane. Some GPOs will require that you sign letters of commitment. In other instances, you must show to vendors that you are now a part of a GPO. The ASC in this case study had never signed several of the GPO’s contracts, so its vendors were not recognizing and granting the price savings found through the contracts.
2. Buying drugs from wholesaler. This ASC was buying drugs directly from a manufacturer, and one that did not have a contract with the ASC’s GPO. When prices on generics went lower in the GPO’s contract than those offered by the manufacturer, the ASC could not receive those savings. By switching from the manufacturer to a wholesaler that had a contract with the GPO, the ASC saw a reduction in the costs of its generic drugs, Mr. Lane says.
3. Negotiating better prices on non-physician-preference items. This ASC was purchasing non-physician-preference items (such as gowns, masks and sometimes gloves) through its distributor at little savings. Most distributors have their own private label product, which are simply the distributor’s version of these brand-name items. Since most private label products are under a GPO’s contracts, by the ASC switching over to this label, it was able to save around 10 percent on its non-physician-preference items spend, Mr. Lane says.
4. Reducing number of physician-preference item vendors by specialty. The ASC in this case study was using dozens of vendors for its many physician-preference items. With so many vendors, the ASC could not effectively negotiate savings when purchasing these items because the facility lacked standardization and bulk purchasing power. The ASC conducted a study and grouped all of the physician-preference items by specialty. With the information, it discussed with the physicians where standardization would be possible and acceptable. The ASC was then able to reduce the number of vendors it used for physician-preference items to a single-digit, which Mr. Lane says is preferable for ASCs looking to better manage and negotiate savings for their physician-preference items.
Through these opportunities, the ASC achieved about $14,600 in cost savings.
— Mr. Lane is a partner with InstraMed Technology. Contact him at indy_lane@msn.com or call (317) 862-5251.
