The Healthcare Debate Rages On: What Does This Mean for Healthcare Manufacturers and Distributors?

My colleague Jim Roe and I had the opportunity to attend the Health Industry Distributor Association (HIDA) Executive Conference last week in Florida. It was a great conference that brought together leaders from healthcare manufacturing and distribution for strategic discussions about the state of the industry and its current challenges.

Considering the debate surrounding healthcare regulation in Washington D.C., the conference could not have started off in a more relevant fashion. Attendees got to hear a firsthand debate between Republican Senator Tom Coburn and former Democratic National Committee Chair Howard Dean. The healthy consideration of both sides of the conversation was great to witness in person. Both laid out convincing arguments that justify why the perspectives on how healthcare challenges should be addressed continue to be heavily deliberated in Washington today.

But what was clearly agreed upon was that healthcare companies need to address current and near-term challenges resulting from changing expectations of patients and payers; the implications of consolidation across the supply chain; and a new era of price transparency and the digitization of data.

Changing Patient Expectations

With 19% of millennial patients asking for discounts or cheaper treatment options, the burden of pricing pressure throughout the supply chain is not going away. In fact, I believe it’s ever more present and will continue to rise. According to HIDA’s survey Horizon: Millennials as Healthcare Consumers, this new generation has greater expectations for speed and quality in service pushing providers to accelerate their Modern Commerce initiatives.

It’s clear that the younger generation is driving a great deal of the focus on value-based outcomes as they are more willing to switch providers and make up a higher proportion of users of high-deductible insurance plans.

Effects of Consolidation

Group Purchasing Organizations (GPOs) have been a vital partner in helping providers leverage the efficiencies of “cooperative buying” since the early 1900s. In fact, it is estimated that GPOs will drive about $200B in purchase volume this year alone, while helping member entities save about 10-15% on those purchases.

However, with greater consolidation among the providers themselves, buyers are finding they can sometimes negotiate better prices directly with their vendors. It’s fair to say that vendors who do not carefully manage pricing across the intricate network of the healthcare supply chain may find themselves at great risk for price exposure. And even those who do carefully manage pricing may find themselves at the mercy of a merger of two large conglomerates who want the “best of both worlds” pricing when they pool contracts together.

Price Transparency and Visibility into Price Quality

These mergers, combined with advances in data collection and pricing science, have helped consumers and purchasers move beyond the previous walls of pricing opacity. Providers are leveraging both GPOs and expert procurement teams who are armed with much more information and can cherry-pick their way to the lowered costs that payers are pushing for, driven in large measure by pressure from both regulation and the consumer.

Some may say that the patient wins here as the system is bending near the point of breakage to accommodate their emerging requirements. But taking a closer look, it’s incredibly difficult to assess whether the prices patients pay have any correlation to quality of outcome.

Taking Action

These are important conversations that should continue. We’re excited to be not only a participant but also an innovator in helping healthcare companies gain visibility into the data that drives profitable growth through dynamic pricing science and algorithmic machine learning, what we often refer to as the new world of Modern Commerce. That’s why PROS is committed to keeping you abreast of the latest Modern Commerce trends and sharing information on what Fortune 50 healthcare manufacturing and distribution leaders are doing to stay ahead of the curve. We’ve consolidated this learning in one easy-to-use place: . Check it out, let us know what you think, and I hope to see you at HIDA’s upcoming conference on contract administration later this month.

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