Pediatricians have spent the past several years watching their costs climb as their payments drop or stay flat.
While most national efforts have focused on trying to increase the reimbursement side, the Kentucky chapter of the American Academy of Pediatrics has worked out a group purchasing arrangement aimed at reducing costs on everything from medical supplies and equipment to computer hardware and construction materials.
“We realized that pediatricians out in the state quite often were paying quite a bit for medical supplies and vaccines, and there seemed to be a different pricing structure depending on the size of the practice,” said Dr. Rob Revelette, group purchasing chair at the Kentucky chapter of the AAP and the chapter's past president.
The Kentucky chapter's work goes back about 3.5 years, when officials there first started brainstorming about ways to pool the purchasing power of their more than 700 physician members to lower costs for supplies, especially vaccines.
They quickly discovered that even 700 physicians didn't have much leverage when negotiating with large national vendors. So they began investigating national group purchasing organizations, which negotiate prices with preferred vendors for their members.
After a lengthy process of submitting proposals and conducting interviews, the chapter chose to contract with Amerinet, a St. Louis–based group purchasing organization (GPO) that has been around since 1986.
“What we were aiming at was to be able to get a big organization behind us to support our efforts to reduce cost,” he said.
“Pediatricians, and all physicians, are really struggling.”
It's definitely been a lot of work, but Dr. Revelette said that since signing on with Amerinet about 1.5 years ago, pediatricians are saving money.
In his 10-pediatrician practice in Lexington, Dr. Revelette was able to save about 5% on a recent purchase of computer hardware, and he saved about 20% on medical supplies last year.
He's even saved on vaccines by making small adjustments in his purchases.
Finding a way to bring down vaccine costs has been a big focus of the chapter's group purchasing initiative. One way to do this is through competition.
Amerinet has contracts with three of the top vaccines makers (GlaxoSmithKline, Sanofi Pasteur, and Merck & Co.) and Dr. Revelette said they are trying to capitalize on that competition to bring down prices on any vaccines for which there is head-to-head competition among the manufacturers.
At the request of the Kentucky chapter, Amerinet also has set up a vaccine calculator: Physicians input the reimbursement they receive for vaccines, and the calculator automatically tabulates where they may be losing money.
Having the calculator means that pediatricians don't have to rely on vaccine sales reps to explain where they can save money, Dr. Revelette said.
The purchasing program is voluntary; so far, about 20-25 practices in the state have elected to sign up.
For physicians who have joined, the program is free and there are no loyalty clauses, which means that the practices can purchase supplies elsewhere if they can get a better deal. Although the Kentucky chapter itself did have to sign a 3-year contract with Amerinet, there are no costs incurred by the chapter either, Dr. Revelette said.
Physician practices and hospitals sign up as members of Amerinet, but the company earns its money by charging an administrative fee to the vendors for the promotion of their products. That fee is typically 1.5%-3.0%, and Amerinet returns a portion of the fee to the Kentucky AAP chapter.
Those funds go directly to support research and educational initiatives at the chapter, such as efforts to reduce childhood obesity.
Dr. Revelette would not reveal how much money the chapter has received so far, but he said that they hope to double their annual income based on the revenues from Amerinet.
This will help the chapter to fund activities they otherwise wouldn't be able to afford, he said.
Going forward, Dr. Revelette said they hope to fine-tune the model and offer it to other AAP chapters.
The interest is there, he said, but it is a challenge to convince practices to turn away from their current medical suppliers and consider a GPO.
Although Dr. Revelette said he has no intention of pushing the Amerinet product, he said that chapters should consider doing something to help their members.
“Overhead has increased and increased and increased over many years for pediatricians, he said.
“Our goal is to try to cut the cost side of this so that pediatricians are able to sustain their business and maintain the quality of care that they're giving their patients,” Dr. Revelette concluded.