Ah, 2018. Everyone is back to work, and many have committed to a New Year’s resolution or two. On the job, talk may have turned to professional performance goals or new exercise regimens, and Vizient has a suggestion that can contribute to your organization’s “fiscal fitness”: aggregation groups.
Membership in an aggregation group aligns your hospital or health system with other like-minded health care organizations to maximize purchasing power within the Vizient national contracts. The group dynamic also facilitates greater learning and more informed decision-making.
If your organization already belongs to an aggregation group, there are a few things you can do to maximize the financial benefit this year. If your organization isn’t participating, this is the year to assess the opportunity.
Cost savings for new and existing members
“There is usually a multimillion-dollar opportunity for a hospital or health system to join a group because of the aggregation of spend,” said Kevin Galyean, director of member business ventures at Vizient. “Commitment to the group’s purchase volumes creates access to new pricing tiers that accelerate savings. It’s not uncommon for a new member to immediately save 8 to 10 percent on the same products they were buying from the same vendors. Then, there is a second wave of savings as contracts are converted to vendors that are affiliated with the group.”
Hospitals that have been involved with aggregation groups for a while should look for new savings in categories where they may have bypassed opportunities when initially joining,” Galyean explained. “They should go back and review contracts to see what else can be leveraged. As a result, we see members saving, on average, 10 to 12 percent in a given category through the collective bargaining power of their aggregation group.”
Collaboration is a membership benefit
In addition to the cost savings, membership in an aggregation group creates a forum for the exchange of ideas. Such peer collaboration is critical for supply chain professionals, who are called upon with greater frequency to evaluate new products or technologies and manage change to achieve organizational cost savings.
Galyean said members consult on a variety of topics including implementation plans, benchmarking and vendor-announced price increases. “Members commonly rely on each other to benchmark their organizations when rolling out a product conversion, appraising their value analysis capabilities or reviewing spend,” he said.
What to look for in a group
“Selecting the best group for an organization is part art and part science,” said Rebecca Morrill, senior director of member business ventures at Vizient, who explained how member alignment is central to success within an aggregation group.
“Based on the member’s unique objectives and goals, it’s critical that they join the right aggregation group where they can realize the most value. An organization is going to have the greatest success when they join a group that best aligns with their culture, their ability to commit and their internal leadership structure.”
Accountability is central to the aggregation philosophy. The most successful groups are made up of members who look out for the success of the greater group. “When your peers are depending on you and you are depending on them to gain value, decisions are made more carefully and through a wider lens,” Morrill said.
Vizient encourages aggregation when it aligns with members’ strategic business objectives. Hospitals and health systems interested in joining an aggregation group should first consider the following points, provided in a popular prior article:
- Strategy: An organization must be willing and able to think beyond price to recognize all available value. How innovative is your organization? How willing would it be to develop and execute a plan with out-of-the-box strategies?
- Participation: Members must be willing to embrace the group mentality to maintain a brand reputation. This is particularly important related to utilization and/or operational improvements. Is your organization able to be a compliant participant and follow through on contract execution?
- Leadership: Strong executive involvement characterizes the most effective groups. Clinically integrated contracting requires leadership champions within the C-suite, and among physicians, service line and supply chain managers. Is your organization able to make decisions based on evidence-based criteria? Can market share be moved, if necessary, so suppliers might offer additional value?
Make 2018 the year of aggregation
The decision to join an aggregation group requires planning and evaluation, but it can bring benefits that distinguish 2018 as the best year yet for your organization. To learn more, contact Rebecca Morrill.