Hospital purchasing alliances: utilization, services, and performance.

Area of Science:

• Health Care Management
• Supply Chain Management
• Health Economics

Background:

• Hospital purchasing alliances are voluntary consortia that aggregate supply purchases, representing a potential source of economies of scale.
• Despite discussion in literature, pooling alliances have received limited empirical investigation.

Purpose of the Study:

• Conduct the first national survey of hospital purchasing alliances.
• Analyze alliance utilization, services, and performance from the materials management perspective.
• Develop national benchmark statistics and address key issues regarding pooling alliances.

Main Methods:

• Surveyed hospital members of the seven largest purchasing alliances (93% of total purchases).
• Included individual members of the Association of Healthcare Resource & Materials Management.
• Created a database of 5,014 hospital materials managers.

Main Results:

• Alliances reduce health care costs by lowering prices for commodity and pharmaceutical items.
• Transaction costs are reduced via negotiated contracts, and revenues increase through rebates.
• Hospitals demonstrate value through long tenure and high purchase volume, but alliances struggle with physician preference items.

Conclusions:

• Pooling alliances are successful in procuring commodity and pharmaceutical products.
• Similar to trading alliances, pooling alliances encounter difficulties with physician preference items.