Variations on a Contracting Theme
By Karen Kresnik
The Nebraska Health Network (NHN) is an Accountable Care Organization (ACO) established in 2010 between Nebraska Methodist Health System and Nebraska Medicine both located in Omaha, Nebraska. This ACO was created in order to coordinate care between physicians and other care givers to drive a higher quality of care, efficiencies to maximize payments, and eventually achieve clinical integration. Through this relationship the opportunity to combine volumes and contract together for better pricing on supplies and services was also initiated. “…from the very beginning, we talked about how we could leverage our combined volumes insofar as purchasing is concerned. So I would almost say we dual-tracked it” said Linda Burt, Chief Financial Officer-Nebraska Methodist Health System (The Journal of Healthcare Contracting, February 2012). To this day, the task force meets monthly to discuss savings and contracting opportunities. The hospital systems have collaborated on agreements for medical-surgical disposables including implant as well as patient and non-patient services. Overall, the collaboration has saved nearly $25 million in supply costs.
High dollar physician preference implants were an obvious target for this task force. A mutual Cardiac Rhythm Management contract was obtained leveraging the buying power and academic medical center status of the facilities. Even with each health system having unique primary vendors, the collaboration was able to capitate pricing and obtain benchmark low costs. This one initiative resulted in $3.5 Million dollars in savings and would not have been possible without the collaboration between the physician groups and support of the health systems’ executive leadership.
Next, the group worked to outsource a costly service for both organizations. They began work on an agreement to outsource dialysis with a single supplier. After a request for proposal and formal selection process defining quality assurance measures managed with the combined efforts of the nursing leadership and supply chain professionals, the team members were able to choose one vendor and save the their organizations $5.8 million jointly.
Blood products such as leukoreduced red blood cells, Cryoprecipitated AHF, platelets, and plasma were jointly identified as a contracting opportunity. Again, the goal was standardization of service with a consistency of quality while eliminating unnecessary expenses. By contracting together for blood products the systems were able to reduce $7.4 million in supply spending. This contract was then followed an agreement to standardize reference lab outsource for a combined savings of $2.9 million.
With the creation of The Nebraska Health Network, and utilizing existing community relationships, an Accountable Care Organization was able to use this functional bedrock to build supplier agreements that not only benefit the health systems but also physicians and patients. Linda Burt said it best, “the work we’re doing now is proving that we can deliver high quality care at low cost, and keep people well.” (The Journal of Healthcare Contracting, February 2012).
Karen Kresnik’s essay was submitted as part of the 2015 Costs of Care, HFMA, Strata Decision Technology, and Yale New Haven Health’s contest entitled The Best Care, The Lowest Cost – One Idea at a Time.