Ascension Forges First-Ever Supply Chain Company to Reduce Costs

Rob Austin via Modern Healthcare

Ascension is partnering with a large Australia-based international hospital company to form what appears to be the first-ever global supply chain firm.

A major goal of the joint venture between Ascension and Sydney-based Ramsay Health Care, announced Tuesday, is to reduce costs at Ascension's 151 U.S. hospitals and hundreds of other not-for-profit facilities to the levels in lower-cost countries. 

The joint venture is part of Ascension's new strategic direction, announced in March, that includes downsizing hospital operations and expanding ancillary businesses such as group purchasing.

Until now, there have been no meaningful efforts to rationalize the healthcare supply chain internationally, even though that's been done in other industries. Much higher prices for drugs and other products in the U.S. are a major contributor to much higher healthcare spending here compared with other advanced countries.

Rob Austin, director of healthcare consulting at Navigant, said the deal could help reduce U.S. healthcare costs if it helps Ascension learn how much other countries pay for medical products, and it uses that knowledge to negotiate lower prices for U.S. providers.

"Especially with pharmaceutical drugs, if they could get the pricing, that would really make an impact on bending the cost curve," he said.

But Austin cautioned that it won't be easy for the new buying group to navigate the differing regulations in each country, particularly when it comes to drugs and medical devices.

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