Premier Healthcare Alliance, GNYHA Ventures Identify More Than $317 Billion in Hospital Cost Savings

Potential Cumulative Savings Could Be Realized by 2019

WASHINGTON--()--In a letter sent to President Obama and House and Senate leaders today, the Premier healthcare alliance and GNYHA Ventures, Inc., Greater New York Hospital Association’s supply chain enterprise that includes group purchasing organizations (GPOs), said that hospitals could improve healthcare quality and achieve cumulative savings of $317 billion if certain policies are enacted to create a more competitive and transparent purchasing environment. The savings are based on an analysis conducted by the two groups and projected over 10 years, to be fully realized by 2019.

Premier and GYNHA Ventures identified the savings opportunities by analyzing information from the Premier Perspective™ database, the nation’s largest and most detailed clinical, financial and outcomes database, containing information for one out of every five – or 210 million – patient discharges in the United States. Further savings were identified by analyzing real-world lessons learned from GYNHA Ventures hospitals, including those participating in Premier’s quality and cost improvement collaboratives such as the Hospital Quality Incentive Demonstration (HQID) and the QUEST: High Performing Hospitals initiative.

“As the largest national alliance of hospitals working on the front lines to improve the quality and reduce the cost of healthcare, the Premier healthcare alliance is in a unique position to identify healthcare savings opportunities,” said Susan DeVore, Premier’s incoming president and CEO. “Through our work, we have learned firsthand that sizable savings can be achieved without compromising patient care. These savings will serve as a down payment to help our nation pay for comprehensive healthcare reforms that improve quality, affordability and access to care.”

“Quite simply, we do not believe that healthcare supply costs need to increase,” said GNYHA Ventures President Lee Perlman. “Through sound policy and a commitment to transparent purchasing practices, group purchasing organizations can contribute significantly to slowing the growth of healthcare spending.”

Specifically, savings opportunities identified by Premier and GNYHA Ventures include:

  • Improved alignment between physicians and hospitals – Allowing shared savings programs would align hospital and physician financial incentives to achieve greater consistency and standardization of medical products, which would improve the quality of care and provide more value to healthcare purchasers. If properly structured, 2-4% a year of the approximately $57 billion that is spent annually on physician preference items, such as cardiovascular, orthopedics, spine, intraocular, ophthalmic, ear and other devices, could be saved through improved physician and hospital alignment, yielding 10-year cumulative savings of $68-$128 billion.
  • Transparency in payments to physicians by manufacturers – Requiring manufacturers of drugs, devices and medical supplies to publicly report financial relationships with physicians would help expose payments that could create conflicts of interest. These conflicts can encourage inappropriate and more costly care, such as the greater use of more expensive branded drugs rather than equally effective generics.
  • Removal of price confidentiality contracts – Publicly disclosed prices would provide hospitals with the necessary information to engage with physicians in making informed, evidence-based decisions, while tracking outcomes to ensure quality of care. Further, disclosure of price points would improve hospitals’ ability to negotiate with manufacturers to reduce costs. The power of this type of collaboration is evident in the $36 billion in annual savings achieved through hospitals and clinicians working with GPOs to aggregate supply purchasing and improve systems and processes that maximize efficiency, labor and expenses.
  • FDA evidence-based oversight of reprocessing - FDA currently provides oversight and regulates the reprocessing of single-use devices (SUDs). Despite FDA regulation, many hospitals do not reprocess SUDs because of the single-use label. FDA could require manufacturers to show evidence that a medical device is unable to reused, including studies that indicate reuse would render the device unsafe.
  • Allowing follow-on biologics – Granting manufacturers of biologic products a set number of years of market exclusivity, similar to one that makers of traditional drugs already have, would allow follow-on biologics manufacturers to enter the market and compete to drive down prices. The Congressional Budget Office estimates that follow-on biologics will produce a savings of at least $5.9 billion ($6.6 billion if increased tax revenues are included) over 10 years.
  • Implementation of unique device identification – The creation of a national unique device identification (UDI) system is a large, critical piece to fully recognizing savings and improving patient safety. According to a recently updated Efficient Consumer Response study entitled “Improving the Efficiency of the Healthcare Supply Chain,” $16 billion in annual savings are projected from the adoption of universal product numbers and the identification of standards for electronic data interchange and bar coding.
  • Comparative effectiveness research – Comparative effectiveness research will lay the foundation to produce information that will help healthcare providers and patients evaluate medical innovations and determine which represent added value, which fail to offer enhancements to current choices and which treatments work for some patients and not for others. This will enable the provider community to take the findings and drive greater market competition.

About Premier Inc., 2006 Malcolm Baldrige National Quality Award recipient

The Premier healthcare alliance is more than 2,100 U.S. hospitals and 58,000-plus other healthcare sites working together to improve healthcare quality and affordability. Premier maintains the nation's most comprehensive repository of clinical, financial and outcomes information and operates a leading healthcare purchasing network. A world leader in helping deliver measurable improvements in care, Premier works with the Centers for Medicare & Medicaid Services and the United Kingdom's National Health Service North West to improve hospital performance. Premier has offices in San Diego, Charlotte, N.C., Philadelphia and Washington.

About GNYHA Ventures

GNYHA Ventures, a business subsidiary of the Greater New York Hospital Association (GNYHA), manages an array of healthcare services, consulting and group purchasing programs. GNYHA is a trade association representing more than 250 not-for-profit hospitals and continuing care facilities, both voluntary and public, in the metropolitan area and throughout the state of New York, as well as in New Jersey, Connecticut and Rhode Island.

Contacts

Premier Inc.
Amanda Forster, 202-879-8004
amanda_forster@premierinc.com
or
GNYHA Ventures, Inc.
Brian Conway, 212-506-5477
conway@gnyha.org

Contacts

Premier Inc.
Amanda Forster, 202-879-8004
amanda_forster@premierinc.com
or
GNYHA Ventures, Inc.
Brian Conway, 212-506-5477
conway@gnyha.org