Guest Column: Chris Dugan
At CAO, one of our greatest assets is strength in numbers. Due to our compelling size – and the incredible expertise we can offer within one organization – we have the clout to negotiate with insurers and vendors, hold a leadership position within key circles and even develop a strong internal referral network. None of this could be attained as individual practices, and we should be proud of how much we have accomplished together.
I have led the negotiation of purchasing agreements with our top suppliers for the past several years, and it’s given me the opportunity to witness the power of our combined strength. We now have significant leverage to negotiate favorable contracts, and earning discounts on our basic expenses – from paper goods to durable medical equipment – can add up to significant savings. In turn, these savings can be re-invested in growing our company. Here’s an overview of the savings we have negotiated in our purchasing agreements:
- McKesson: I’ve negotiated purchasing contracts with McKesson twice since we launched CAO. Because we purchase nearly all of our common supplies – from gowns to needles to gloves – from this one vendor, we were in a strong position to realize savings. In return, they created a Group Purchasing Organization specifically for us, and signed a contract that reduced costs by about 15%. Once we joined OrthoForum earlier this year, I renegotiated the contract with McKesson to save an additional 12%.
- Durable Medical Equipment: As our physicians have specific preferences for the type and supplier of the equipment they use, we didn’t want to achieve savings by forcing care centers to use a specific supplier. So instead, I negotiated contracts with third-party vendors, including Ancillary Advantage and Kinetics. Our care centers can purchase their preferred equipment through these vendors, who then negotiate buying discounts on our behalf. We’ve realized significant savings of about 21% through these contracts.
This type of agreement stands in stark contrast to the position of doctors who are bought out by a large health system or hospital, where you’re typically forced to use a specific brand of DME. This arrangement allows us to keep our autonomous culture while still receiving the discounts appropriate for a large organization.
- OrthoForum: As a member of OrthoForum, we now have access to its purchasing partner, Provista. This has been a win-win situation for both of us, because OrthoForum has gained increased bargaining power due to our membership. In turn, we have access to discounted rates across a wide variety of office and medical needs, from common medications to copy machines. Through this arrangement, CAO has saved about 18% on the cost of medicine we use on a daily basis, such as Lidocaine and Marcaine.
These purchasing discounts are a distinct advantage to being a part of a group as large as CAO. And now that we have developed these contracts with our top suppliers, it’s important that each division take advantage of these discounts. As the contracts are renegotiated every two years or so, we have the opportunity to realize even further savings – or lose some of our discounts – based on how frequently our members are leveraging the purchasing agreements. Hopefully, as an organization we’ll maximize the savings potential, leading to even better purchasing contracts in the future.