Rural hospital saves $1.2M+ by becoming Adventist Health affiliate Last Updated: September 19, 2014
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Challenge

El Centro Regional Medical Center (ECRMC), El Centro, CA, is an acute care medical center, serving the healthcare needs of the Imperial Valley since 1956. After a $44 million expansion, what started as a 34-bed licensed hospital has grown to 165 beds. The expansion project allowed for a state of the art facility, including a new trauma center and rooftop heliport for superior trauma care.

Small, independent rural hospitals trudge a difficult path. Achieving financial security is more daunting than ever with reform and growing state and federal reimbursement cuts. Hospitals with high Medicare and Medicaid rates are even more vulnerable. ECRMC must operate as efficiently as possible, but reducing supply expense was a challenge with the hospital’s former group purchasing organization. Its former GPO’s membership fees exceeded rebates and volume aggregation did not achieve anywhere near best-tier pricing.

Solution

Two years ago Supply Chain Management Senior Director Tony Hinds began to look at options: stay with the former GPO or become an affiliate of Adventist Health and Premier, Inc. Both did market basket analyses. Adventist Health’s affiliate program offered potential savings of about $800,000 a year excluding pharmacy and dietary.

ECRMC chose to become an Adventist Health affiliate. “We signed a simple agreement that did not tie our hands,” Hinds said. “It offered us better pricing in return for aggregating our volume with Adventist Health, plus a seat at the table.”

There are no membership fees, compliance requirements or long-term contract. A special team services affiliates, communicates with them regularly, analyzes spend for opportunities, resolves conflicts and ensures affiliates are getting the right prices. Affiliates participate in contracting decisions. Affiliate department heads can participate in monthly Adventist Health department calls and once-a-year, face-to-face meetings at Adventist Health headquarters in Roseville, CA – twice a year for materials managers.

Result

“So far they have far exceeded our expectations with $1.2 million in documented savings in the first calendar year,” Hinds said. “It’s shocking. I was looking for something in the $600,000 range. When I presented the proposal to our administrative team, they cut $600,000 from the supply budget. We almost doubled that. You can’t beat that with a stick.”

Hinds especially likes Adventist Health’s special interest groups. “Our dietary director just got back from her first meeting. She was ecstatic. She’s told everybody how pleased she was with being part of the process and hearing what others had to say.

“We have a voice with Adventist Health,” he continued. “We meet with our peers to find out what they are doing, what’s working for them. At an affiliate meeting, you learn firsthand what direction Adventist Health is taking. There are no surprises.”