In some cases the organization is converting small, disparate contracts to one national contract with a single vendor to achieve savings even though the specific alternative items may be more expensive. In some cases, that involves getting groups of physicians to agree to common national standards for basic products like catheters used in kidney dialysis.
Kaiser Permanente has also worked with large group purchasing organizations to conduct reverse electronic auctions in which prospective vendors compete online. It's a technique that's been in vogue for about 15 years by Fortune 500 sourcing departments, but has had little traction in the healthcare field until recently.
"Given the 4.9 million IV tubing sets and 9.2 million solution bags KP purchases each year, this conversion affects nearly 100 tons of medical products and is expected to save almost $5 million annually," the nonprofit said in a recent post at the Healthier Hospitals Initiative Web site.
In one case history reported by Kaiser Permanente, the health system converted 36% of respiratory therapy products in its neonatal and pediatric intensive care units (NICU/PICU) products to DEHP-free products. DEHP refers to diethylhexyl phthalate (DEHP), which is used to make polyvinyl chloride (PVC) flexible.
"Kaiser Permanente is taking actions to reduce patient and employee exposure to harmful chemicals that are known to pose health risks," the organization said. "Chief among these is the reduction of DEHP exposure to our most vulnerable patients, those in neonatal and pediatric intensive care units."
According to KP, DEHP "is known to leach from plastic during use and thereby enter the patient... (DEHP) has been shown to cause damage to male patient reproductive systems while undergoing treatment in the intensive care unit." Vinyl industry officials dispute the KP position.
Respiratory therapy is used to assess and treat breathing disorders including chronic lung problems, such as asthma and emphysema, and the respiratory components of heart attacks and stroke. Flexible breathing circuits employed in the therapy use plasticized PVC.
In 2010, a team first identified the DEHP breathing circuits as an opportunity for conversion. The team consisted of Dr. David Goya, chair of the Respiratory Sourcing and Standard Team (SST); Clarisse Lopes, sourcing manager, KP Procurement & Supply; and Keith Johnson of MedAssets, which is a healthcare group purchasing company.
The team decided to change vendors and award a single source national standard that provided access to an increased number of DEHP-free alternatives.
Products covered by the contract include:
- Filtered isolation valve kits,
- Infant nasal CPAP (continuous positive airway pressure) system and cannula,
- Nebulizer adaptors, and
- Water traps.
The remaining 64% of the addressable products are masks, nasal cannulas and nebulizers. "The new vendor demonstrated a strong willingness to work with KP to develop additional DEHP-free products and raw material."
KP has declined to identify the new vendor.
Lessons learned from the investigation include (in KP's words):
- The supplier community has yet to prioritize the elimination of DEHP from products.
- There are high quality clinically acceptable product options available but they are limited in depth and scope.
- Conditioning the supplier community will remain a challenge and priority in all product categories.
Earlier, a KP sourcing team (which also included a representative from a group purchasing organization) used an online reverse auction to find suppliers of PVC-free and DEHP-free catheters. The auction took place after "physicians involved with selecting and sourcing interventional radiology products evaluated split-tip dialysis catheters from all bidders and deemed them all of equal quality and functionality." The new contract delivered 43% annual cost savings.
The organization's buying clout is significant and its success in buying DEHP-free products does not necessary transfer to other hospital groups. KP buys the equivalent of 18 miles of medical tubing annually, for example.
Kaiser Permanente has an "environmentally preferable purchasing policy" that avoids the use of halogenated flame retardants, phthalates (including DEHP), polyvinyl chloride (PVC), bisphenol-A, latex and mercury.
Founded in 1945, Kaiser Permanente (Oakland, CA) has more than nine million patients in nine states and the District of Columbia and is the largest nonprofit health plan in the United States. Operating revenues last year were $50.6 billion.