Summary of Key Points
This article compares the reliance of American medical groups (such as Kaiser) on market-based GPOs (Group Purchasing Organizations) with the government-led model of the Shanghai Shenkang Hospital Development Center in China, highlighting two approaches to improving cross-institutional data benchmarking and operational efficiency in the healthcare industry. In the United States, GPOs have evolved from simply facilitating bulk purchasing to providing services that include data analysis, benchmarking, and performance improvement. In contrast, Shanghai China has embedded cross-hospital management capabilities within its government governance system. Both approaches aim to solve similar issues (increasing efficiency and reducing costs), but their organizational structures and institutional contexts are fundamentally different.
I. What American GPOs Offer: More Than Just “Cheap Goods”
Many people assume that GPOs merely help hospitals negotiate lower prices through bulk purchases. However, this is not the whole story. Take Vizient, a leading American GPO, as an example. It provides hospitals with four layers of services:
1. Bulk Negotiation: By consolidating the purchasing volumes of multiple hospitals, GPOs can secure better prices (although this is not the primary focus).
2. Data Sharing: GPOs collect operational and purchasing data from various hospitals (e.g., the prices and usage amounts of the same medical supplies).
3. Peer Benchmarking: They provide hospitals with insights into how they perform relative to others (for example, the cost of specific surgical supplies and the amount used by other doctors).
4. Performance Improvement: GPOs not only help in obtaining cheaper supplies but also offer guidance on what to purchase, in what quantities, and how to use them efficiently (e.g., recommending more cost-effective alternatives and standardizing procedures).
For instance, the Ohio State University Hospital discovered significant differences in the costs of medical supplies used by different doctors during the same procedure through Vizient’s data analysis. After making adjustments, the hospital saved $900,000—this was achieved through cross-hospital data comparison rather than simply negotiating lower prices.
II. Why Can’t Hospitals Do This on Their Own?
Large hospitals like Kaiser, which have supply chain teams of 2,100 people, still rely on GPOs for several reasons:
1. Insufficient Sample Size: The data from a single hospital is limited; GPOs connect hundreds of hospitals, providing a larger and more comprehensive sample.
2. Lack of External References: Internal teams can only compare current performance to previous years but not to industry standards (similar to students knowing only their own grades without understanding the class ranking).
3. High Costs: Establishing an in-house team capable of conducting in-depth benchmarking analysis is much more expensive than outsourcing to a GPO.
4. Greater Acceptance of External Recommendations: External advice is often more readily accepted by hospitals than internal suggestions.
III. China’s “Shenkang Model”: A Government-Led Cross-Hospital Management Platform
The Shanghai Shenkang Hospital Development Center acts as the “manager” for over 30 hospitals in Shanghai. Its approach is similar to that of American GPOs but with significant differences:
- Data Aggregation: It collects financial and budgetary data from its affiliated hospitals on a monthly basis for economic analysis.
- Performance Evaluation: It conducts comprehensive performance assessments for hospital directors and party secretaries.
- Cost Accounting: It calculates costs at the department, medical procedure, and even disease level (e.g., the cost of an appendectomy).
- Monitoring: An information technology platform was established in 2013 to monitor healthcare quality, expenses, and efficiency in real time.
Shenkang is a government-led entity that has integrated cross-hospital management capabilities into its system rather than outsourcing them to the market.
IV. Core Differences Between Chinese and American Models
While the approaches differ (the U.S. relies on market-based external organizations, and China on government-led internal governance), the goals are the same: to make hospitals more efficient and cost-effective.
However, the article raises questions about the extent of Shanghai Shenkang’s capabilities. Although it has achieved success in financial, cost, and performance management, it is unclear whether it has delved into the details of the supply chain. For example, there is no publicly available information on the differences in purchasing prices for the same medical supplies across hospitals, or whether the usage amounts and purchase volumes are well-matched. These are key areas of expertise for American GPOs.
The article also prompts reflection on what kind of external support hospitals will truly need as they develop their own data capabilities: more in-depth industry data or external forces that can drive change. This may be an issue that both the U.S. and Chinese healthcare industries will face in the future.
Conclusion
This article challenges the notion that American practices can be directly applied in China, emphasizing that there is no one-size-fits-all solution to improving healthcare efficiency. The U.S. relies on the market, while China relies on government intervention. The key is to find a approach that fits the specific institutional context. Yet, the underlying principles remain the same: data and benchmarking are always crucial for enhancing efficiency.