Integrated Delivery Networks and Standardization

Over the past few months, MedSpan Research has conducted multiple studies with various hospital personnel.  Across the different types of research, a key theme emerged:  the number of integrated delivery networks (IDNs) and hospital systems are increasing, impacting the purchasing process and standardization decisions.  In this post, we’ll provide a brief background of IDNs and explain how they are changing the hospital purchasing process.

Background of IDNs:

An IDN is a coordinated health care system including hospitals, physician groups, and other types of associations, such as behavioral health facilities, ambulatory surgery centers.  These settings work together to deliver a continuum of care to their community.  Hospital systems, on the other hand, only include hospitals in their network.

IDNs are not new to the healthcare environment (the concept was developed in the 1980s*), but they are growing in number.  From 2010-2012, there were 25 percent more health systems than during 2007–2009; during the first quarter of 2014, the number of mergers (of hospitals into systems)  was 10 percent higher than during the same period in 2013.**

Impact on Purchasing Process

IDNs and hospital systems typically make decisions at the corporate level that are then passed down to other facilities in their network.  Throughout MedSpan Research’s multiple studies in this area, we found that the vast majority of IDNs and hospital systems have made an effort to standardize the manufacturers available throughout their network.  This allows them to commit to purchasing a larger volume of product, thus giving IDNs and hospital systems more influence in their price negotiations.

Furthermore, this standardization offers a number of other benefits, including: increased consistency throughout the hospital system, ease of supply chain logistics due to fewer manufacturers to deal with, simplified training throughout the system, and reduced number of SKUs.

The opportunity to standardize a manufacturer throughout different units is often viewed as a key factor in the purchasing process due to benefits cited above.  The decision of which manufacturers to standardize with tends to occur at the corporate level, and the decision is then passed down to the individual hospitals in the network.  This is commonly mentioned as a key reason for a hospital to discontinue purchasing from a manufacturer.  In addition, acceptance throughout the system is also a key factor in decisions on whether or not to adopt a new product.

Because of the emphasis of standardization throughout IDNs, manufacturers of hospital-based products may have to alter their sales strategy.  If your products are used within the hospital, you may want to explore the purchasing process at IDNs and how standardization may impact use or adoption of your product throughout the system.

*http://www.healthcareitnews.com/directory/integrated-delivery-network-idn

**http://www.aaos.org/news/aaosnow/apr15/advocacy6.asp

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