Becker’s spoke to Mike Halmrast, executive director for strategic sourcing at Banner Health, about the impact the system’s GPO has had as it works to mitigate expenses while maintaining high-quality care.
Question: What were some of the primary goals when Banner Health decided to form its own GPO in 2018?
Mike Halmrast: Our main goal was to bring cost savings to Banner and our affiliates with the goal of reducing the overall cost of healthcare. Supply Chain Value Network has also allowed us to connect more routinely with those we now have an affiliate relationship with and share best practices. Aggregating purchasing volume benefits both providers and suppliers.
Q: How has creating this internal GPO continued to have an impact on operational efficiency at Banner Health?
MH: From a contracting standpoint I wouldn’t say this has really had any impact on operating efficiency as we are still doing the same contracting, just utilizing a different contract template and focusing on aggregation with affiliated partners. I do believe there to be operating efficiency for our affiliates as our GPO contracts allow them to join our contracts instead of creating their own local contracts.
Q: How have rising supply costs in the healthcare sector affected Banner Health’s operations in recent years?
MH: The rising costs have resulted in us having to look for creative solutions to continue to drive cost savings to offset rising costs in various areas. One area of focus is looking at the impact of moving from an all-play contracting strategy to offering more limited choice to our clinicians. Renewed focus on reprocessing opportunities is another area we are working with our facilities on. The last area would be around focus on utilization and how that is impacting our supply costs and what opportunities we can address to impact our utilization.
Q: Have there been any noticeable improvements in cost savings or supply chain resilience since its establishment?
MH: Aggregation of purchasing volume allows Banner to make better offers to suppliers, which benefits both Banner and SCVN members in the long run. Overall as we expand the number of affiliates under Supply Chain Value Network, the intent would be for us to have more spend to be able to provide enhanced pricing. As it relates to supply chain resilience, I wouldn’t say that our GPO contracts have had an impact on that.
Q: Are there any plans to expand or modify the GPO structure moving forward?
MH: We would like to continue to bring on affiliates where we can bring value to the sites from a cost perspective and to create a relationship of improving overall supply chain performance.
Q: What are some of the biggest lessons learned since establishing the GPO and how have they shaped future supply chain strategies?
MH: It has been interesting, as we have contracted with many suppliers who aren’t accustomed to working with GPOs. We have had to educate them on the affiliate relationships and GPO contracting structure. We have also learned that with aggregation comes an additional responsibility for data collection, analysis and general support of those programs to ensure all the business partners are fully compliant to their commitments.
