GHX cuts over $155.6M in healthcare costs during first-quarter

GHX and its participating suppliers and providers are on target to cut a total of $5 billion in healthcare costs in the next 5 years by improving supply chain efficiencies, visibility and trading partner collaboration. GHX provides technology and services to automate and optimize business processes throughout the healthcare supply chain, and has achieved its first-quarter goal of cutting more than $155.6 million in healthcare costs.

“With our knowledge of global supply chain practices across various verticals, we readily recognize how the GHX approach to introducing greater efficiency and collaboration to the healthcare supply chain will continue to have significant impact”

The model GHX is utilizing to measure progress toward its "5 in 5" goal was validated by PRTM, the global management consulting firm that developed the Supply-Chain Operations Reference-model (SCOR®), a process reference model that enables users to address, improve and communicate supply-chain management practices. PRTM concluded that if GHX maintains its historic volume growth and achieves moderate additional product penetration, GHX and its customers would realize $5 billion in savings by the end of 2014. PRTM believes GHX can lower healthcare costs even further if it exceeds anticipated goals.

"With our knowledge of global supply chain practices across various verticals, we readily recognize how the GHX approach to introducing greater efficiency and collaboration to the healthcare supply chain will continue to have significant impact," said Rick Hoole, a director in PRTM's healthcare practice and a supply chain thought leader for the firm. "Recurring savings achieved through currently available GHX products, combined with savings from the introduction of additional products and expansion into new areas in healthcare, indicate that GHX is well positioned to attain, and more than likely exceed, its $5 billion goal."

The success of the GHX "5 in 5" savings model is based largely on GHX's ability to lower connectivity and labor costs, as well as drive hard-dollar savings in areas such as price validation, contract price activation and management, achievement of early pay discounts and reduction in days sales outstanding, through greater utilization of current GHX products and services. In addition to an electronic trading exchange that connects buying and selling organizations, GHX offers products and services to optimize supply chain processes through greater visibility to more accurate and timely data for better decision making. Incremental savings of at least $1 billion are also feasible through the introduction of new product and service categories.

"Healthcare reform efforts have not yet recognized the full potential of the healthcare supply chain as an effective way to reduce the cost of healthcare," said Bruce Johnson, CEO of GHX. "Manual processes are a key cost driver in healthcare. The resulting inefficiencies and lack of visibility not only compromise the financial well being of our healthcare system but also impact the safety of patients."

"For the past 10 years, GHX and its participating healthcare suppliers and providers have focused on cutting billions of dollars in waste from the healthcare supply chain," Johnson said. "With a critical mass of providers and suppliers working together through the infrastructure we have established, we are poised to drive the level of change necessary to reform the healthcare industry from within."

GHX has cut $1.3 billion in costs in the last few years and is uniquely qualified to effect and sustain improvements in the industry, working with the majority of hospitals in North America and the suppliers from which they buy 90 percent of their products. GHX purchase-order volume represents more than 40 percent of the total amount spent by U.S. acute-care hospitals on medical-surgical products.

PRTM's assessment of the feasibility of the "5 in 5" goal involved development of a bottom-up model to establish a baseline for provider and supplier savings generated through the use of GHX products currently in the market. PRTM then leveraged the model to identify the key drivers of savings, such as increased purchase order and invoice volume, as well as the growth and product penetration needed to achieve the "5 in 5" goal. Finally, PRTM further evaluated the feasibility of "5 in 5" by conducting a top-down validation utilizing its industry-specific benchmarks of core business process areas.