Healthcare - Group Purchasing Organizations (GPO’s) =

Opportunity.

GPO Market• 2004:

– GPO’s account for 72% to 80% of every healthcare dollar spent. *

• 2004: – Top 7 GPO’s account for 85%

of US Hospital Market. *• 2009: *

– Projected GPO Market:• $287 Billion = Hospitals

alone.

• * Source: Knowledge Source “Group Purchasing Organization Market Overview – 2004”

85%

15%Non-GPOGPO

GPO Market• 2004:

– GPO’s account for 72% to 80% of every healthcare dollar spent. *

• 2004: – Top 7 GPO’s account for 85%

of US Hospital Market. *• 2009: *

– Projected GPO Market:• $287 Billion = Hospitals

alone.

• * Source: Knowledge Source “Group Purchasing Organization Market Overview – 2004”

85%

15%Non-GPOGPO

Revenue

GPO economic impact on Healthcare Market.

Reseller driven Market.

Margin

Revenue

GPO economic impact on Healthcare Market.

Reseller driven Market to decline over time to 15% of current.

Margin

15%

Time

Revenue

GPO economic impact on Healthcare Market.

Reseller driven Market to decline over time to 15% of current.

Developed GPO Market• Participation in Market• Channel Development• Drive Market Standards• Channel Management provided by

Partnered, not Commodity engagement.

Margin

GPO Market Potential

15%

GPO “Market”

• GPO’s negotiate Pricing, Terms, Conditions by leveraging buying power of members.– Commodity Buying Model Employed.– Unique Market Space

• No Volume commitments• “Play, no Play” consequences

– HP lost $75 Mil in desktops and printers for 2003 through one GPO.

• Vendor Exclusivity is not desired – Variety is.

Understanding GPO’s• GPO’s must:

– Meet demands of their member base.• Heterogeneity whenever possible.• Less 3 way contractual commitment whenever possible.

– Operate under Government Scrutiny.• Must be able to demonstrate

– Non-preference for Specific Members or Vendors.– Ethical operations (Safe Harbor)

• No kick-backs, undo influence, etc.– Evolve in order to stay competitive.

• Growth.• Value of GPO’s Contract negotiation to commoditize over time.• Member retention = Do more for incrementally less.

– New services, products offered to expand market.– Each new offering will be initially less costly. This will evolve into increases as

bundling occurs.

Typical Account Management Standards do not apply

• Volume, tiering, bundling and exclusive commitments do not and cannot apply.

• Product access is a limiting factor to vendor, not the GPO.

• Healthcare consumes:– Broadest offering at; – least cost; – “DeFacto” standards whenever possible.

“Partnership” = Account Control

• “Partner” with GPO to:– Provide broader solutions (Products, Services,

Standards) to the members as a perceived value add.– Evolve the GPO

• Embeds Clearcube as partner for success.– GPO becomes dependent.

• Changes engagement dynamics from “Commodity” to “Partnered.”

– Broaden product offering.– Create new products and markets.– Drive Market Standards to a competitive advantage

– Become “De-Facto” solutions Standard by effectively partnering whenever possible.

Tier IServers

Storage

Desktops / Notebooks

Tier II

Co-Solutions Development

Tier IIIPartnered Products / initiatives:

Capital Equipment Management

Clearcube “X” Service Provider

Co-drive Industry Standards

Profit Center - Service Agreements

Analysis & Time

Complexity

TBD

TBD

Partnership Universe = Account Management.

Patient Management

GPO Contract Attributes

• No Volume commitment.• “Admin Fee” = 2-3%• Weekly reporting• Audit Rights

– Company to Company– Dept of Health + Human Services = flows

down to all services subcontracting• Family level discounting

$0$2$4$6$8

$10$12$14$16$18

Billions

2001Vol

2002Vol

2003Vol

AmeriNet

Broadlane

Consorta

HealthTrust GroupPurchasingJoint PurchasingCorporationMedAssets HSCA

Novation/VHA

Premier

Note Growth rates

Contract Values per GPO

2004 Broadlane Opportunity• 5500 accounts:

– 3800 are comprised from 10 major members• Kaiser, Tenet Healthcare, Christus health, Continuum, Kindred

Healthcare, Health Alliance Greater Cincinnati, Us Oncology, Community Health Systems, Alliance Imaging, NCS

– 21,000 locations– 500 Major Hospitals

• $15 Mil = Servers• $50 Mil = Desktop/Notebook• $25 Mil = Printer• $Emerging / Evolving Markets ($100 Mil + adder)

Account Structure• 1383 non-affiliated account locations

– Pending SMB/Commercial/Enterprise assignment analysis

• 22 Enterprise accounts comprised of 3583 locations.

Broadlane serves providers on a national scale … anchored by core customers

• Committed customers with comprehensive agreements ranging from 5 to 10 years

• Purchase volume flowing through Broadlane contracts is projected to reach $5.4b in 2003

Continuum Health Partners

1. Type: Not-for-profit IDN2. Location: New York City3. Number of acute hospitals: 74. Number of beds: 3,9015. Annual supply spend: $300 million6. Dedicated Broadlane employees: 37

1. Risk-based, full outsource agreement with compensation based on achieved savings

2. Broadlane is involved in 100 percent of all contracting efforts; provides custom contracting solutions; contract management system and e-procurement; and operational consulting services

Customer Characteristics Broadlane Services

5 years

1. Implement imaginative solutions to deliver savings outside of contracting, such as capital asset management and AP management

2. Engage physicians and other clinicians to drive and support product selection and standardization

Customer Challenge

1. To date: $38 million of recurring savings

Savings Achieved

5 years 5 years

The Health Alliance of Greater Cincinnati

1. Type: Not-for-profit IDN2. Location: Cincinnati, Ohio3. Number of acute hospitals: 64. Number of beds: 2,2565. Annual supply spend: $207 million6. Dedicated Broadlane employees: 28

1. Risk-based, full outsource agreement with compensation based on achieved savings

2. Broadlane is involved in 100 percent of all contracting efforts; provides custom contracting solutions; and e-procurement

Customer Characteristics Broadlane Services

1. To date: More than $7 million of recurring savings

Savings Achieved1. Deliver contract savings by

leveraging national customer base2. Incorporate clinical participation in

product decisions3. Provide business and clinical

expertise

Customer Challenge

CHRISTUS Health

1. Type: Not-for-profit / faith-based IDN2. Location: Operates in 6 states3. Number of acute hospitals: 404. Number of beds: 7,6325. Annual supply spend: $387 million6. Dedicated Broadlane employees: 15

1. Risk-based, full outsource agreement with compensation based on achieved savings

2. Broadlane is involved in 100 percent of all contracting efforts; provides custom contracting and self-contracting support; contract management system; temporary labor solutions; and directs and manages clinical and non-clinical resource groups

Customer Characteristics Broadlane Services

5 years 5 years

5 years

1. Enable centralized and focused approach to supply chain management

2. Coordinate internal groups responsible for contracting, implementation and utilization initiatives

Customer Challenge

1. Early phases of customer engagement

Savings Achieved

Kaiser Permanente

1. Type: Not-for-profit IDN2. Location: Operates in 9 states3. Number of acute hospitals: 294. Number of medical offices: 4235. Number of beds: 7,3266. Annual supply spend: $5.2 billion7. Dedicated Broadlane employees: 25

1. Risk-based, full outsource agreement with compensation based on achieved savings

2. Broadlane is involved in 100 percent of contracting efforts; provides custom contracting solutions; and manages physician committees for both medical and non-medical groups

Customer Characteristics Broadlane Services

5 years 5 years5 years 10 years

1. Provide customer-driven contracting process and leverage clinical input

2. Deliver compliance and utilization strategies

3. Streamline business processes and reduce contracting timeline

Customer Challenge

1. To date: $83.9 million

Savings Achieved

Tenet Healthcare

1. Type: For-profit IDN2. Location: Operates in 16 states3. Number of acute hospitals: 1144. Number of beds: 27,8825. Annual supply spend: $1.9 billion6. Dedicated Broadlane employees: 5

1. Risk-based, full outsource agreement with compensation based on achieved savings

2. Broadlane is involved in 100 percent of all contracting efforts; provides custom contracting solutions; contract management system; nurse staffing and other consulting services

3. Controllable expense diagnostic to identify additional cost reduction opportunities

Customer Characteristics Broadlane Services

5 years 5 years 10 years5 years 10 years

1. Drive cost savings in supplies and other controllable expenses, such as contract labor and purchased services

Customer Challenge

1. To date: $121 million

Savings Achieved

Direct

Broadlane outsourced procurement / Account management = leveraged 110 Broadlane people

Sales Touch Points

Other Major Broadlane Accounts by # of locations

• Advocate Health - 201• Alliance Imaging – 182• Brim Healthcare – 47• IHC – 34• Catholic Health Services – 14• Christus Health – 153• Community Health Systems – 106• Continuum – 57• Kindred Healthcare (Long Term Care) – 368• Omnicare (Long Term Care) – 194• Health Alliance Greater Cincinatti – 114• Universal Health Services – 100• US Oncology (Ambulatory Care) – 477

Identified Opportunities• Consultant - $40 Mil MOU for Storage.• $2.3 Bil / 3 yr. “Health Connect” project @

Kaiser.– Taken away from IBM Global Services– 5d0,000 desktops off the table – went to Dell– Servers and Storage = target

• Tenet– Blade Server

• Continuum– $2.7 Mil in Desktop refresh (4000 units)

Opportunities derived from Synergy

• Business derived from:– Multiple account, level and time management

• “X” ways– Steering Committee + Member + Influencer (Consultant, Other

provider, Developing Project• e.g. Broadlane + Continuum + CGE&Y + Patient Bed or

RFID, etc. • “Y” time

– Leverage future projects for imminent opportunities– Summary:

• “Z” Synergy equation– Opportunities (present and future) in relation to present and

future projects in relation to Influencers + Members + Broadlane.

Account Success = 4 levels External + 3 levels Internal

Work with Field

Regional Sales Managers

Work with Channel

Sales

Specialists

Work across business functions

Sales

Marketing

Product Dev

Operations

Premier Revenue per quarter (Direct + Indirect)

00.5

11.5

22.5

33.5

44.5

5

PreMerg -

02

Q4 03 1Q 04 2Q 04

Revenue(Millions)

Account coverage dispersal +

Economy + reduced focus

Account coverage re-focused, new support.

Relative Revenue per Engagement Strategy for One GPO (Broadlane)

050

100150200250300350400

$Millions

Commodity Partnered Finance -4% on

$1BillionEngagement Strategy

LeasingCo-Dev'dSolutionsServicesProducts

GPO Strengths• DeFacto PC Blade Standard (Healthcare Herd

Behavior)• Healthcare likes to consume perceived leader.• Leader defined by provider able to provide the most with less

effort at a competitive price that industry talks about.– Recognized work in Healthcare Industry. – Drives Standards through proactive partnering and bundled

problem solving. • GPO’s most efficient means to deliver

– Economies of Scale:• Sales, Ops, Marketing, Account Management

– Opportunity Cost – Play or no Play = 15% vs. driving and creating market.

GPO Opportunity

– Partnered development opportunities with emerging technology. (Dell does not invent)• RFID / “X”SP / Asset Management / Patient

Management– ARM for GPO to members

• Technical / Non-technical– Momentum to satisfy Healthcare “Herd”

behavior.

Partner Community

             

 

> BEA» Cisco System, Inc.» Intel» Microsoft» Nortel Networks» Oracle» SAP» Sun Microsystems