Confused About GPOs and IDNs...? You're Not Alone.
INSTALLMENT 1 of 2
In Installment 1 of this 2-part blog series, we’ll share with you the current state-of-affairs in the world of GPOs and IDNs. Other than being confusing, complex and rapidly changing with a dash of aloofness tossed in for good measure, it’s really quite simple … or not.
By DAVID FINLEY
Managing Partner
[January 9, 2024] – I recently caught up with Mark Dixon, President of The Mark Dixon Group, a former C-Suite exec at a major Integrated Delivery Network [IDN], and a man well-known and highly respected in the healthcare industry. Many have credited Mark [me included] with being the architect of a graph validating the shift from fee-based to value-based healthcare.
We were chatting about today’s world of IDNs and Group Purchasing Organizations [GPO] and how things have changed so drastically over the years, especially so in recent years. Mark shared with me eight broad themes he’s seeing in the industry:
Ongoing consolidation of health systems, driven by mergers and acquisitions
IDNs moving away from a holding company model to an operating company model
Purchasing decisions shifting from user/clinical buyers toward economic buyers
Centralized decision-making and supply chain
Reduction in the variation of unnecessary care
Enhanced physician leadership
Increased consumerism, and …
Increased use of Artificial Intelligence [AI] in operations, analysis and strategy development
Let’s look at health system consolidation …
Fewer Players, Bigger Players
There was once a time [actually not too long ago] when it was estimated there were more than 300 IDNs and an understood benchmark of $3 billion in revenue to be considered a key player in the industry. Back then, gaining access to key influencers and purchasing decision-makers was much, much easier.
Ah, the good ol’ days …
Now, the number of IDNs, through mergers and acquisitions that Mark mentioned, has resulted in a smaller number of bigger players in the industry. And getting in the door these days is like trying to break into Fort Knox or crash a Taylor Swift concert.
Mark and others have pointed toward the current consolidation trends eventually resulting in an estimated 100-150 IDNs and the benchmark in revenue has increased from $3 billion to an often-quoted $10 billion. [And there are some mack-daddy key players within that group, including Kaiser Permanente, the largest nonprofit health system in the country at an eye-popping $95 billion.] All indications are that there will be more major mergers and acquisitions on the not-too-distant horizon as organizations chase scale, integration, influence and ultimately financial strength.
Kaiser’s bold announcement in April regarding the creation of a new national healthcare organization – Risant Health – along with the proposed acquisition of Pennsylvania’s Geisinger Health [currently under regulators’ review and forecast to close in 2024] have a lot of healthcare players taking notice. Kaiser’s plans to invest $5 billion and add as many as six more non-profit health systems over the next five years are integral to its plan to create the first nationwide, value-based care [VBC] nonprofit healthcare organization. Although Kaiser will face competition from UnitedHealth’s Optum, which employs more than 70,000 physicians, the move is expected to allow Kaiser to more effectively compete with players like Amazon, Aetna CVS Health and Walmart Health for large, corporate customers.
Consider Advocate Health, the recently combined Advocate Aurora Health and Atrium Health now covering six states. It wasn’t long ago that Advocate Health and Aurora Health came together. Many leadership changes have occurred with this evolution within the health system and with the parent GPO Premier, including a key system supply chain executive taking over Premier’s Sourcing operations.
Other health systems are expected to, or have already, responded. Not too long ago, Novant Health, a Super Regional in the southeast, acquired New Hanover Regional Medical Center for $5.3 billion. And last month, Novant acquired three additional hospitals in South Carolina from Tenet [Hilton Head Hospital in Beaufort County, Coastal Carolina Hospital in Jasper County, and East Cooper Medical Center in Charleston County] boosting its portfolio.
As a result of all this consolidation, the IDN model has completely changed. Everything is different. What you knew to be this kind of entity yesterday is likely entirely different today. Not only has the playing field changed, the players have changed [and continue to change all the time]. Further, the way the players play has changed, and to make matters even more challenging, the way they play differs from system to system, hospital to hospital.
Because health systems are reinventing themselves, in many ways suppliers have had to adjust the manner in which they call on the market and therein lies the challenge [well, one of them].
“Who ya gonna call …?”
It’s more confusing than ever to figure out where to turn, which IDN or GPO to target, who the purchasing decision-makers are, how to capture their attention once you do gain access, and ultimately what it will take to get your innovation to contract. And that’s assuming, of course, you can get decision-makers to respond to an email, return a phone call, or grant a request for a meeting.
Excelerant recently polled leaders from a number of small to mid-sized Medical Device companies. We asked, “Given your significant role in the Medical Device industry, what is your biggest hurdle when working with IDNs and GPOs?”
The question obviously resonated because we received a lot of responses, all of them interesting and telling at the same time. Answers included: Lack of clarity around myriad processes and procedures for gaining access, pricing that serves all parties, an inability to compete with bigger players who are able to bundle supplemental products and deliver greater value, slow sales cycle, a desire within IDNs and GPOs to work with fewer suppliers, purchasing decision-makers lacking a clinical understanding and appreciation for a product’s performance and value, slow approvals and, of course, getting paid on a timely basis.
With all this change in recent years, it’s understandable why many small and mid-sized healthcare suppliers simply don’t know how to wrangle today’s GPOs and IDNs.
“I had no idea …”
On a recent call with a promising, mid-sized healthcare supplier, a gentlemen on the other end asked, “If we were to work with you, how would you manage our account? What would you do, what would it look like? What would be involved?”
I responded, “We would start by doing a top-to-bottom, total assessment including where you are today, your current value prop, your team and structure, your strategy and tactics, your key messaging, and your success rate.
“We would then work with you to tweak and refine [or reinvent altogether] those areas that aren’t up to snuff for today’s market. The next part would be to develop a sales plan that drives home your key messaging and clearly articulates your value prop then work with you to develop your Pitch Deck. We would also put together sales training based on best practices for sales methodologies.
“The next step would be to engage with your team to identify key IDNs and GPOs to target or NOT target, and within those entities, identify key decision-makers, many of whom we already know. We also have sophisticated data analytics including the industry benchmark Definitive Health Care. We would then make introductions on your behalf within those target organizations in order to expedite and enhance your chances of making a strong impression that leads to a contract being signed.”
There was pause before he said, “I had no idea …”, his voice trailing off.
One size does not fit all
It’s also critically important to understand the specific Mission, Vision and structure of each IDN and their relationship to the parent GPO. Otherwise, you will not know how to approach them. As an example, Premier has a Strategic Advisory Committee consisting of their 26-28 largest health systems. This committee has ultimate approval authority for all strategic agreements [ >$100M in category value] and you must work within their framework to even be considered. Other GPOs and member IDNs have their own protocols that must be honored if you are to have a shot at success.
Finally, you’ll need to understand and embrace the notion that everyone in the industry is focused on value-based care these days. You’ll need to clearly articulate your role in co-creating greater value for all involved – be it in pricing, product performance, or improved patient outcomes [or all three].
“In an era marked by the shift towards value-based care in our nation’s largest health systems, progressive pharmaceutical companies are embracing the importance of value co-creation through the lens of strategic account management,” says Myla Maloney, Chief Growth Officer at PINC AI Applied Sciences. “What started as a way for life sciences to maintain access with primary care providers has become standard practice across all therapeutic areas, including oncology and rare disease.”
If you don’t have a Strategic Account Team focusing on large health systems, as well as an effective strategy to manage national accounts, IDNs and GPOs, you will, in my humble opinion, struggle to maintain and grow your business. It’s that challenging.
In a post-pandemic world, access to purchasing decision-makers is often a long, slow and arduous process if you choose to go it alone. And there are no guarantees you’ll succeed. Most small to mid-sized healthcare suppliers aren’t equipped and/or simply don’t know how to deal with today’s IDNs and GPOs and, as I mentioned earlier, that’s completely understandable [no judgment here].
At Excelerant, we can guide you through the quagmire. We have the knowledge, understanding and expertise you will need. We also have the key relationships within major IDNs and GPOs and, most importantly, a track record of success and hard-earned credibility.
Don’t go it alone. Contact Excelerant Consulting at info@excelerantconsulting.com
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NEXT UP -- In Installment 2, we’ll share the key to getting in the door, making the right impression, and getting to contract with GPOs and IDNs.