A conversation with Mike Alkire, Premier, Inc.

Pharmaceutical CommercePharmaceutical Commerce - September/October 2012

Premier, one of the leading group purchasing organizations (GPOs), is a vital linkage point between nearly 90,000 healthcare sites in the US, and the drug, device and hospital-supply vendors that serve them. Pharmaceutical Commerce sat down with Mike Alkire, chief operating officer of the company, to hear about what's driving GPO evolution today, and how it interacts with pharma manufacturers. Here's what he had to say:


Tell us about Premier’s position in the healthcare industry, and your role in Premier.

Premier is a hospital-owned alliance, uniting more than 40%—or 2,600—of the hospitals and 84,000 other care sites in the US. These providers collaborate to improve their performance and deliver high-value healthcare. Supported by the nation’s most comprehensive comparative database containing one in four hospital discharges and a leading purchasing network, the alliance is continuously setting new standards of care for others to follow suit. Our ultimate goal is to transform healthcare across America, and improve the health of our communities.

I joined Premier in 2003, coming from a background in operations and development organizations at Deloitte & Touche and Cap Gemini Ernst & Young. Now, as chief operating officer for the Premier healthcare alliance, I work to continue the integration of Premier’s clinical, financial and operational performance improvement offerings in supply chain, healthcare informatics, consulting, and insurance management services. Before becoming COO, I was president of Premier’s purchasing network—offering group purchasing, supply chain services and resource utilization data to the alliance.


Premier literature indicates that many of your members belong to multiple GPOs, and some negotiate with manufacturers directly. How does Premier position itself to be the preferred GPO, and to be the preferred intermediary?

Today’s healthcare challenges are driving organizations to develop new approaches to quality and cost improvement. The Affordable Care Act creates an imperative for organizations to accelerate these efforts. By joining Premier, you become part of a performance improvement alliance focused on getting ahead of reform, and managing implications and ensuring future success. We measure our performance based on the performance of our members. We believe the members of the Premier healthcare alliance will not only successfully manage through reform, but will lead health systems to set new standards of excellence.

In this time of change, providers need a strategic partner that can marry clinical effectiveness with cost efficiencies to achieve total value. No other organization has the integrated data, collaborative philosophy and experience to positively impact your cost, quality, and market position, even in these changing times.

We use integrated data to identify trends and pinpoint opportunities for change, achieving quality and cost effectiveness within our comparative database. To give an example, it’s one thing for a GPO to be able to reduce prices by 1 or 2%, but it’s quite another to drive the price point to zero. However, in many cases, that’s what we are able to do. Using clinical evidence, we have been able to work with members to prove that using a particular supply is not having an impact on their quality, and is just adding cost. If they can discontinue using a supply that isn’t driving to a desirable outcome, their price goes to zero.

For instance, Banner Health saved $41.5 million in one year in partnership with us to reduce supply chain costs, eliminate clinical variations, and improve the overall quality of care delivery. To consider one example of this work in practice—after mining data, Banner’s Obstetrics/Gynecology review group discovered that surgeons were using an abdominal adhesion barrier in up to 61% of all C-sections. Top performers in the severity-adjusted Premier quality database were using it in only 1% of cases, with no discernible difference in patient outcomes. They were, in essence, wasting money every time they used this product. Now discontinued in C-sections and used only in a small number of other Banner surgical procedures, they are saving $1 million a year on this single surgical supply—funds that can be better used to provide other services to our patients.

This is how we focus on collaboration among our members, so that a good idea found in one hospital network is shared among all the membership so that others can replicate those successes. We have proven that working together, with established measures, data transparency and best practice sharing, accelerates improvement to degrees not seen in single-system efforts. And we understand the interactions and interdependencies between quality outcomes, patient safety, supply chain, and overall costs. We have the data to drive efficient and effective value analysis to support comparative effectiveness.

And unlike many others, we don’t regard regional or local buying groups to be an either-or proposition. We support members’ ability to do local negotiations when it makes sense, using our contracts as benchmarks and leverage points they can use to secure the best possible deals.

Overall, to remain competitive, we need to be delivering the most value possible to our members. Premier has the total value package targeted to deliver significant savings through a combination of quality and financial improvement supported by a core team of resources, market-leading technology, and opportunities for participation in industry-leading collaboratives.

3. The most elemental interaction between Premier and pharma manufacturers is price negotiations. How does this negotiation proceed? What do you wish pharma companies brought to the table that is not present today?

Premier’s portfolio coverage includes commodity medical/surgical items, physician preference items, lab products, capital equipment, pharmacy, food and construction. Premier has more than 1,300 contracts, and provides flexibility for local negotiations. Given our portfolio breadth, we anticipate a smooth conversion when a healthcare organization becomes a member. In fact, there is typically more than 80% exact match rate between the Premier portfolio and an organization’s current purchases, meaning that a large majority of “conversions” are simply transactions and not a product change.

We divide our pharmaceutical contracts into two categories (branded products and generic products). The negotiation process and relationships with brand and generic manufacturers differ especially now with the critical generic injectable drug shortage problem our country is experiencing. Branded product contracts usually are “performance agreements,” and have tiered pricing based on market share.

Thus, we try to work with the manufacturer prior to the finalization of the contract to ensure the tiers meet the needs of our membership, and are attainable. Generic products are, for the most part, commodities, and in this area, we are trying to focus on supplier attributes (ability to control raw material supply, breadth of portfolio, market competitive pricing, relationships with wholesalers, product quality, outstanding FDA issues, ability to supply the market, etc.).

4. Premier has made an apparent big push into evidence-based medicine, and using member-generated data to create recommended therapeutic pathways. How is this evaluation performed, and what results are you seeing from it? Do manufactures have a part to play in this analysis?

We evaluate how providers are delivering care, and through collaboration in sharing data and knowledge, we can identify where the gaps are and how to fill them. Premier collaboratives like QUEST® establish the measures and outcomes changes that improve performance in hospital-acquired conditions, readmissions and infections, and in developing the operational and cost efficiencies needed to weather market basket cuts and productivity adjustments. QUEST® is setting new national standards for top performance in evidence-based care, mortality, cost savings, harm prevention and patient satisfaction. In just three years’ time, participants have saved nearly 25,000 lives and more than $4.5 billion in costs.

Today, we’re also partnering with our members in an evidence-based, enterprise value-analysis effort to make significant improvements in value-analysis activities, in terms of process improvements and knowledge sharing in support of reducing redundant activities (i.e., waste).

This ensures that truly valuable supplies and services are identified and used: clinical supply chain education; utilization enhancement with tools, data sets and behavioral changes to reduce resources consumed in providing services; and organizational clinical contracting and/or contracting strategies specifically regarding major physician preference items. It also includes determining the appropriate supplier and most effective sourcing method for acquisition of all medical and non-medical supplies, equipment, and services.

For example, Presbyterian Healthcare Services has saved more than $43 million over three years by clinically integrating their supply chain and accessing Premier’s integrated cost and quality improvement applications to identify outliers, opportunities for improvement, and high-volume diagnoses for each of its business lines. In analyzing their data, Presbyterian benchmarked their costs to top performers nationwide, and found a number of opportunities in the high-volume cardiac surgery APR DRGs*. They even learned that they were using an expensive anticoagulant for nearly 60% of its cardiac valve patients, compared to less than 1% of similar patients in its peer group. This one drug added about $11,500 per patient, but it wasn’t adding any clinical benefit. Today, use of the drug is in line with Premier’s top-performing hospitals, and contributes nearly $2 million a year to the health system’s bottom line without affecting clinical outcomes.

ASCEND collaborative participants are also achieving rapid improvements in supply chain through collaboration on common initiatives, sharing best practices, and a market-leading committed portfolio based on aggregated volume of nearly $7 billion. But, they are exploring the delivery of high-value care beyond specially negotiated pricing. They benchmark against each other, as well as share with each other, what was required to achieve top performance, centered around value analysis—clinically, financially and operationally.

Additionally, Premier’s QUEST® Comparative Effectiveness & Innovation Program (QCEIP) generates objective results to inform providers and patients about safe, cost-effective treatments for certain clinical conditions. Suppliers volunteer to participate in the program, which evaluates products and clinical interventions in real-world settings at Premier alliance hospitals. It also helps the healthcare community better understand patient outcomes associated with the use of certain products.

Similar to QCEIP, new programs called Premier’s Performance Improvement Research Collaboratives (PIRCs) also bring together manufacturers and systems of care to evaluate which clinical practices result in better outcomes while lowering costs. The providers and Premier are working together with progressive manufacturers dedicated to improving quality and reducing costs across a wide range of critical disease states. The focus of the collaboratives is to help providers better understand; monitor; and deliver high-quality, patient-centered care.

5. Premier also provides supply-chain consulting services to member hospitals. Given that most shipments come from wholesalers, how are Premier’s supply chain recommendations put into practice, and what role do wholesalers have in creating those efficiencies?

Premier receives daily invoice-level data from pharmacy wholesalers. These data are married with Premier contract information, and through an interactive reporting toolkit, the member can perform detailed analysis of their pharmacy spend. Such analysis can include price verification for base- and tier-priced products, contract conversion opportunities, market basket analysis, and other types of reports designed to provide contract and savings opportunities. Reports are available for health systems, individual members, or for custom-defined specific groupings. Ad hoc reporting is also available to the member from within Premier’s pharmacy SpendAdvisor application.

6. Premier has also been front and center in the discussion over drug shortages. At this time, is there a “light at the end of the tunnel” about this problem; if not, what needs to happen to alleviate the situation?

The recently passed Prescription Drug User Fee Act does contain a number of provisions that we support and believe will improve the shortage situation. A record number of drug shortages has had an adverse effect on public health and safety, and is a contributing factor to rising healthcare costs. Given the severity of the issue, early notification of anticipated shortages is essential, and will give (FDA) important new powers to identify alternative sources of supplies.

Premier also strongly supports the provision that empowers health systems to mitigate the impact of drug shortages by allowing them to repackage shortage drugs into smaller doses and redistribute those drugs to affiliate hospitals within their own system. Providing health systems a mechanism to quickly reallocate drugs across their hospitals to meet their patients’ needs is a common sense approach.

7. What are your goals in moving healthcare reform, and the performance of GPOs like Premier, and the provider facilities that are your members, forward?

They are out there making changes now, testing and scaling new ways to deliver better care at a better price.

We don’t have 15 years for good ideas to take root. We need to build on this approach to cut the learning curve down, develop the evidence, and get people working on their own solutions faster. And, once we have a good idea, we have to make it spread across the alliance, and across America.

In many respects, scale is the missing piece in healthcare. We have pockets of excellence all across our healthcare system. But we need the ability to pull those great ideas, and spread them to others so that we have system-wide excellence.

Almost every organization struggles with this concept. And it’s understandable because healthcare is so fragmented and localized. Yet it›s so key to what we need. The government recognizes this, which is why CMS’s Innovation Center has an entire division dedicated to what it calls “knowledge diffusion.” To me, this is exciting, because scale is at the heart of Premier.

*All Patient Refined-Diagnosis Related Groups (APR-DRGs) are part of the coding system by which healthcare providers categorize patients by the type and severity of their condition, as well as demographic factors.

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