“Driving Down Construction and Operational Costs: How a GPO Does It”

Agenda Introduction / Who are the GPO’s GPO Structures GPO Contract Characteristics GPO Contracted Suppliers Doing More With Less Operations Support Capital Impact Capital Construction Project Opportunities Next Steps

Group Purchasing Organizations in the Marketplace A group purchasing organization (GPO) is an entity that helps healthcare providers-such as hospitals, nursing homes and home health agencies realize savings and efficiencies by aggregating purchasing volume and using that leverage to negotiate discounts with manufacturers, distributors and other vendors. These are the four leading GPO’s in the healthcare world. US Communities is out there in state and local government support. Many states have their own GPO’s to support state needs. The GSA is by far the largest GPO in America.

GPO Structures Can be privately held or a public company. Members of GPO’s typically have some ownership relationship with the GPO. There are “committed GPO’s”, where members must use the agreements. There are “Free Choice GPO”, where members have a choice on whether or not to use the GPO portfolios. Contract use compliance is the key. GPO contracts are available for use by the members and their affiliate members, which may not be owned by member. GPO’s support Healthcare (acute / non-acute), Colleges & Universities, K-12 and Business & Industry In the Healthcare Industry, every hospital has on average 2.3 GPO’s to pick from Three key words: Commitment, Compliance and Audit

Committee role – the voice of the member Provide aggregate/ contract level data Participate in value analysis discussions Develop and approve award criteria Act on committee awards within own organization Support award decision with all Members Member requirements Supplier long list Supplier short list Award decision Action Committees make KEY contracting decisions and are involved in every step Make group purchasing agreement award(s) that provide the best overall value and drive strategic initiatives on behalf of the alliance or, in rare cases, make no award Review, add to and approve the long list of qualified suppliers Review and approve the short list of qualified suppliers

GPO Contract Characteristics Commodities Capital Purchased Services Pricing structure will include tiered pricing, the more you buy, the deeper the discounts. Contracts also allow for local negotiation or competitive bidding. Allow for aggregation across multiple entities within a system. Contracted suppliers pay a % fee to GPO based upon sale to GPO members. Fee payment is meant to be for general, selling & administrative expenses (GS&A). The opportunity for the supplier is to save GS&A expenses when being a part of a GPO. Contracts are multiyear, typically three to five years. GPO’s share fee with member

GPO Contracted Suppliers Suppliers may sell direct to the members. Suppliers may sell to the members through authorized distributors or dealers. Third parties can buy off the contract on member’s behalf, so the member gets the benefit of sale recognition.

Doing More With Less

Healthcare Facilities Management Facilities related expenses makes up 5% of the total healthcare enterprise budget Every $ saved goes straight to the bottom line. $1 saved in facilities operations equates to the margin derived from $25-$40 in patient revenue. GPO’s can help with cost reductions in operations and capital construction projects

Water Treatment Uniforms, Mats, Microfiber Bulk Oxygen Floor Care Infection Control Housekeeping Products Paper & Janitorial Supply Distribution Paper Towels & Tissues Energy Services MSDS Management Can Liners Mobile Storage Services Emergency Response Services Laundry Products Waste Management Parking Management Lawn Care / Snow Removal Pest Elimination Moving Services

Capital Impact

Healthcare Construction Project Opportunities Medical Equipment IT & Telecom Furniture, Fixtures & Equipment (non-clinical) Consultant Fees & Contingency Project budget 60% Project budget 13% Project budget 10% Project budget 7% Project budget 10% Contract categories 17 Contract categories 118 Contract categories 9 Contract categories 9 Contract categories 1 National contracts 49 National contracts 379 National contracts 23 National contracts 38 National contracts 2

We bring contracts with over 400 suppliers of materials and equipment that goes into our members’ construction projects Now, Let’s look at the entire portfolio and see how you currently use Premier suppliers

Contract implementation – Industry relationships The construction industry is driven by relationships Incorporating GPO contracts involves creating awareness and building the process to implement contracts during a project This involves working with all parties during a project Understanding the relationships and industry model is imperative to the success of implementing agreements during your project

Construction contracts Healthcare Provider GPO PORTFOLIO Construction contracts architect/engineers & equipment planners Contracted national supplier General Contractor or Construction Manager Local distributor Local subcontractors Connecting the dots…

What is Your Goal? group purchasing organization (GPO) is an entity that helps healthcare providers-such as hospitals, nursing homes and home health agencies-realize savings and efficiencies by aggregating purchasing volume and using that leverage to negotiate discounts with manufacturers, distributors and other vendors.

How to Begin? Audit your present utilization of multiple categories in facilities, construction and EVS support services. Determine where you have standards based upon quality, service and price Determine where you do not have standards and establish your parameters for quality, service and price. Match your standards to the GPO portfolio offering and determine the best quality and the best service for the best price point through aggregation. It requires a commitment to change, diligence and discipline on the part of management, staff, consultants and the contractors

Jim Venker, AIA Senior Director, Facilities, Construction and Environmental Services 704-816-5375 jim_venker@premierinc.com