SUCCESS STORY | Supply Chain Solutions
Intalere and Stratum Med Leverage Buying Power to Maximize Savings – Reduce Costs by $633,000
Stratum Med, Inc. is a physician-owned and governed services company headquartered in Urbana, Ill. which consists of independent or hospital-owned multi-specialty group practices of more than 6,000 physicians from 50 healthcare organizations across the nation. As part of its mission, Stratum strives to advance the quality of care, improve financial performance and optimize operational efficiency for its members in the areas of group purchasing, insurance, recruitment and shared services.
Among the most challenging issues facing Stratum’s materials management program have been how to maximize savings for each clinic and how best to leverage Stratum Med’s collective buying power. “We are constantly working to maximize our leverage to get the best pricing tiers for all our members and participants,” said Lisa Pellum, executive director for purchasing at Stratum. “The volume, diverse product mix, price volatility, group purchasing and distributor choices have traditionally made this difficult.”
To attack this initiative, Pellum, who since joining Stratum has driven a cohesive approach to maximize the value a group purchasing relationship can bring, enlisted a collaborative team with dedicated resources from Stratum, Intalere, their primary supplier and the individual clinics.
To address the issue of how to leverage Stratum Med’s collective buying power, the team undertook an analysis to identify items of common spend to aggregate volumes and engage suppliers to achieve tier enhancements and pricing standardization for all Stratum Med facilities.
“My philosophy has always been that you can’t truly manage properly without analytics,” said Pellum. “We needed to know all the data, really investigate and take a deep dive, so that we could then build a path that was most beneficial for all.”
A customized report was developed that identified the combined contract spend for all Stratum facilities. Utilizing this information, Intalere designated a special contracting team to work with Stratum in identifying specific areas and contracts where they could work with suppliers to negotiate enhanced tier contracts based on aggregated volumes.
In order to maximize savings for each clinic, Intalere acquired sales data from the primary distributor to develop a price catalog report, which provided extended detail for each clinic’s contract and non-contract sales for all line items. A utilization analysis was built using the price catalog report and another customized report, the Total Spend Analysis, which collectively provided data which allowed for the development of a work plan for clinics to identify contract and non-contract savings opportunities based on best price and value.
Using the new reports to analyze both contract and non-contract spend identified savings opportunities of $500,000, or 10 percent derived from identifying Intalere contract savings versus other group purchasing organizations or local contracts, incorrect pricing issues, connectivity issues and incorrect markups. In addition, the Intalere and Stratum contracting team negotiated 14 contracts with suppliers that, through enhanced tiers and pricing, resulted in an additional savings of $133,000.
Although the model is in place, and initial results are good, Pellum stresses this is just the tip of the iceberg. Now that the best practice models and resources have been built, Stratum and Intalere representatives continue to carry the message and educate individual clinics, getting them connected to the proper contracts to maximize their savings opportunities.
As long time partners, this is just one of many cost reduction initiatives that Stratum Med and Intalere have collaborated on. The success of the projects illustrates the importance of the engaged, personal and customized partnership that Intalere takes with all of its members.