Healthcare Supply Chain Management: Medassets CEO John Bardis (Part 6)

SM: What is your revenue model like for your services group? Do you charge on a flat fee basis or do you have a success based fee model?

JB: It depends on what the client would like. We often take on risk in very large transactions. We call those transformationals. We are years ahead of where we expected to be with those types of contracts. They are multi-million dollar, per year, per site contracts. It is a very large opportunity.

SM: Where are the 350 people in your services group located?

JB: They are primarily located in New Jersey, however we are expanding our services units to Nashville and Dallas. We will eventually reach the west coast. We are getting tremendous traction in that business right now.

SM: That is a call center business. Why do you need it in different places?

JB: A portion of it is call center driven but there is also a portion which is technology and technology interface driven. Depending on where our larger clients are located there is a need to be able to directly interface with those clients from time to time. We make our services division more efficient by deploying our 36 different software tools which is something no other services group does. We use those tools in our services group and embed them inside the hospitals. They are critical to each other.

SM: What impact do you see coming from President Obama’s healthcare stimulus having on your business?

JB: I see the direction this administration’s policies are headed as a tremendous positive for the industry as well as our business. This administration is focused on transparency. That is exactly what we do.

SM: It is more than transparency. There is a huge inefficiency on the IT side. It is one of the industries that has not used technology as efficiently as it could. It seems like there are billions of dollars to be saved just by putting in the right IT infrastructure.

JB: There is truth to that although I would not say that is the foundational problem. The primary problem is that the government has been the centralized force in determining how payment occurs which has its origin in cost only. When you look at the structure of how the entire industry was established from a payment perspective it all started with a government that paid hospitals on a cost plus basis.

That changed in 1983 when diagnostic related groups went from cost plus to a cost adjustment on top of an existing cost system. There have been no incentives to drive efficiencies in clinical care. There were many incentives to drive efficiencies by product. I dare anybody to tell me what the major innovations have been in the deployment of human resources and clinical resource assets over the course of the last 30 years in hospitals. The reason that has not occurred is that they have been paid historically on past behaviors that were cost based.

The problem in and of itself is cost but you cannot attack cost until you allow the provider to actually be paid based on efficiency as opposed to what they spend. Right now there is no incentive within the system for providers to focus on reducing costs when in fact they are only paid based on activities of costs that they deliver.

We have been built for a time when the provider and those in health care would be able to drive markets, costs, and the utilization of resources based on the most efficient utilization of those resources to produce both the best outcome and the lowest cost.

This segment is part 6 in the series : Healthcare Supply Chain Management: Medassets CEO John Bardis
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