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Expert panel on health-care procurement a move toward consolidation

It is prudent that Ontario is looking at further consolidating the procurement process of goods and services for health care through the Health-care Sector Supply Chain Strategy Expert Panel, says Toronto health lawyer Michael Gleeson.

“It makes sense to look at increasing buying power across the province and it could bring significant benefit,” he tells AdvocateDaily.com

“It can mean a much more efficient use of health-care dollars.”

Gleeson, who is senior corporate counsel with DDO Health Law, explains the panel is meant to be a short-term review that would have results by this fall.

He says the panel is looking at the possibility of a province-wide procurement strategy and how it would be implemented.

“It is reviewing existing procurement structures and the role of shared services organizations, as well as group-purchasing organizations,” Gleeson says. 

A government website describes the current supply chain management and procurement as “disparate, fragmented and non-integrated.”

The website says a province-wide approach “can optimize efficiencies, identify savings and contain on-going costs, and support innovative advances in patient care to promote improved health-care outcomes.”

The expert panel's advice and recommendations to the government will consider:

  • A province-wide health care strategic focus;
  • Review of existing strategic procurement structures;
  • A future governance model;
  • Shared Service Organizations role and function;
  • Health-care sector participation in structured group purchasing;
  • A robust procurement costing and savings model; and
  • An aggressive implementation plan to deliver strategic opportunities.

Gleeson says there has been a significant amount of collaboration already in this area. He says it’s likely the government is investigating the possibility of additional collaboration as a way to use taxpayer dollars most efficiently. 

“The more buying power they have, and the more hospitals that get together to purchase goods and services, the more leverage those organizations are going to have — the more likely they are going to get competitive and good pricing for the things that they are looking to buy,” he says. 

Currently, some hospitals have their own procurement organizations that have relationships with group-purchasing organizations.

“So sometimes they jump onto contracts that have been negotiated by the group-purchasing organization, but much of what they do is though their own negotiations and their own procurement group within the hospitals,” Gleeson says. 

Other hospitals are part of shared-services organizations — there are about 10 across Ontario — that consolidate the procurement groups for all of its member hospitals. 

“This saves on administrative costs because you have one organization doing the procurement work for all of the different hospitals,” Gleeson says. “It also increases the buying power. The vendors have more incentive to get the work from a shared-services organization than they would from individual hospitals.”

While shared-services organizations have different governing structures, one is to be set up as a not-for-profit organization that has hospitals as members; the shared-services organization would then handle the procurement for goods and services for its member hospitals. 

Gleeson says it makes sense to increase this collaboration. 

“Rather than having 100 individual silos — each hospital being independent — and having 10 different shared-services organizations, why not combine common needs through collaboration or a smaller handful of organizations to increase buying power and reduce administrative costs," he says. 

For example, instead of having 10 different organizations go out and make a request for proposals for a CT scanner, have one organization do that with the ability of the other organizations to piggyback onto that agreement, he says. 

Gleeson says it will be interesting to see the panel’s recommendations in terms of the amount of consolidation. 

“Is there going to be one organization that will handle procurements for health in all of Ontario or is there going to be consolidation within regions, what will it be?” he says. 

Gleeson says it will be important to consider a number of things, including how to make sure the consolidation gives vendors opportunities to fairly bid on the work that needs to be done across the province.

“We need to be careful that the more we get into bigger dollar-value procurements, the more those procurements will be scrutinized and the more likelihood that failed bidders will challenge those procurements,” he says. “It will become even more important to ensure that procurements are done based on required regulations and legislation and that they are done fairly. This is not a bad thing and the organizations that take on these procurements will have to be diligent.”

 

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