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6/17/2010
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Hospital Order Management Platform Slashes Purchasing Costs

Seventeen hospitals will save millions of dollars by combining their purchase orders through VHA SupplyNetworks ordering system.

In an effort to reduce hospital costs and improve operational efficiency, 17 community-based hospitals in New Jersey and Pennsylvania have agreed to use an order management platform that combines their purchases for everything from food to drugs to medical equipment.

The hospitals, members of Irving, Texas-based VHA, a national healthcare network, will be using VHA SupplyNetworks, an order management platform that combines several orders into a single transaction.

The 17 hospitals, which are part of VHA's East Coast Purchasing Coalition, represent more than $1.3 billion in combined annual supply purchases. The network acts as a single entity to leverage VHA's contracting support and supply chain management expertise in order to drive savings, improve supply chain efficiency, and obtain better prices on aggregated purchases.

"If I've created one order to a distributor instead of 17, I've created some efficiency in the supply chain," said Scott Downing, executive VP of supply chain management at VHA. "What we are trying to do is drive behavior and standardization among those 17 organizations to act as one entity, thereby standardizing their processes at a high level, and what comes out of that is a single order."

Through VHA's SupplyNetworks, members can lower prices, improve inventory management, and reduce transportation costs throughout the entire supply chain process. According to Downing, VHA estimates that the 17 hospitals could save anywhere from $8 to $12 million per year.

Hospitals can also develop contract strategies that standardize and improve orders tailored to the needs of hospital staff, facilitate peer-to-peer connections to rapidly transfer and apply best practices, and enhance relationships with key suppliers and distributors.

The healthcare industry is driven by clinical choice, set by the preferences of physicians and nurses who pride themselves on their ability to treat illnesses that patients have, Downing explains.

"Our healthcare challenge is that the physician and nurses drive the healthcare supply chain. You can't dictate what's on the shelf for them, you have to have what they need, at the point they need it, for the type of patient that they are treating," Downing said.

Downing also noted that VHA intends to use the data it captures to build analytics into its supply chain decisions which will help negotiate better prices.

"We are in the business of negotiating with suppliers and I always want us to be in a better position than a supplier. I want to know more about their price discipline than they do," Downing said. "I think there are lots of endless possibilities relative to clinical comparative data and episodes of care and what really drives costs," Downing added.

The 17 hospitals participating in the East Coast Purchasing Coalition are: Abington Health Abington, Abington, Pa.; Capital Health System, Trenton, N.J.; Chester County Health System, West Chester, Pa.; Chilton Memorial Hospital, Pompton Plains, N.J.; Crozer-Keystone Health System, Springfield, Pa.; Grand View Hospital, Sellersville, Pa.; Holy Redeemer Health System, Huntingdon Valley, Pa. ; Hunterdon Healthcare System, Flemington, N.J.; Lehigh Valley Health Network, Allentown, Pa.; Newton Memorial Hospital, Newton, N.J.; Penn Medicine, Philadelphia; Pocono Health System, East Stroudsburg, Pa.; Shore Memorial Health System, Somers Point, N.J.; Solaris Health System, Edison, N.J.; South Jersey Healthcare, Vineland, N.J.; Underwood-Memorial Hospital, Woodbury, N.J.; and Warren Hospital, Phillipsburg, N.J.

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