Cleveland Clinic’s newest joint venture targets hospital supply chain for cost savings

hospital money

As hospitals feel the squeeze to cut costs, they have many places to look. Some are evaluating how things are done in the operating room. Others are mining data for clues as to what causes extended hospital stays, high costs or undesired outcomes.

The Cleveland Clinic, for one, is evaluating how and from where it gets its supplies. To make that process less costly and more clinically integrated, the Cleveland Clinic has formed a joint venture that it says “will transform traditional group purchasing approach into a strategic sourcing model.”

The Clinic spends about $1.6 billion a year on supplies and services, according to Modern Healthcare, and used to contract with Premier healthcare alliance on some of those supplies. Now, it’s shifting how it handles the purchase of pricey physician preference items and other supplies to an LLC formed with VHA, a Texas-based network of national not-for-profit health organizations.


“It will leverage Cleveland Clinic’s strategic approach of physician integration, clinical excellence and proven clinical sourcing with VHA’s best-in-class analytics, unique ability to foster strong member networks and market-leading contracting expertise through its contracting company, Novation, to create an innovative offering for value-based sourcing,” the Clinic said in a statement.

The joint venture also aims to lower supply costs, reduce operating expenses, enhance product standardization, improve visibility into supply chain costs and allow for more integration with physicians, the Clinic said.

This isn’t the first time a health system has formed a joint venture in an attempt to reduce costs associated with physician preference items. Last year, West Coast health system Dignity Health paired up with UnitedHealthcare and other unnamed systems to form a GPO.

Bill Donato, the director of supply chain management at the Clinic, told Modern Healthcare that the venture eventually plans to bring in other organizations like Clinic affiliates and VHA members.

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