By now we’ve all heard stories of hospitals charging hundreds of dollars for an aspirin pill or a bandage, part of the screwy world of medical cost allocation that includes list prices almost no one pays, based on made-up numbers.
But how do hospitals get those aspirin pills and rolls of gauze at the lowest possible prices? The supply chain for hospital supplies, like everything else in health care, is changing fast. On Thursday, an online hospital supply marketplace founded in April is announcing that a coalition of 100 New England hospitals has signed on.
The Northeast Purchasing Coalition includes several in Connecticut: Yale-New Haven, Waterbury, Eastern Connecticut Health Network, Norwalk, Danbury and Charlotte Hungerford in Torrington. The group has joined Irving, Texas-based aptitude LLC, which claims to be the hospital industry’s first online market allowing direct contracting between suppliers and buyers.
Hospitals largely buy their supplies now through very large “group purchasing organizations” that sign long-term contracts with suppliers, allowing hospitals to benefit from scale. But about 40 percent of hospital supply purchases are still made through individual contracts — a $55 billion slice of the industry including such bigger-ticket items as pacemakers and artificial heart valves, according to aptitude, which was formed by Novation, one of the group purchasing organizations.
Hospitals using its market can save 10 percent to 15 percent over individual contracts, said Justin Hibbs, a co-founder of aptitude — which works with hospitals to analyze purchasing patterns. “We’re being told by both the hospitals and the suppliers that they can do more with less,” he said, meaning they can cut administrative costs on top of saving direct costs.
All of this matters because it’s part of the industry’s response to intense cost pressures. Whether this new model of purchasing can cut the listed “chargemaster” price of that Band-Aid by hundreds of dollars is anyone’s guess.