4. Doctor Smith just returned from the Annual Physician’s Orthopedic Conference, where she saw a new hip joint replacement demonstrated. She decides she wants to start using the replacement joint at Arnold Palmer Hospital. What process will Dr. Smith have to go through at the hospital to introduce this new product into the supply chain for future surgical use? Arnold Palmer Hospital, one of the nation’s top hospitals dedicated to serving women and children, is a large business with more than 2,000 employees working in a 431-bed facility totaling 676,000 square feet in Orlando, Florida. Like many other hospitals, and other companies, Arnold Palmer Hospital had been a long-time member of a large buying group, one servicing 900 members. But the group did have a few limitations. For example, it might change suppliers for a particular product every year

(based on a new lower-cost bidder) or stock only a product that was not familiar to the physicians at Arnold Palmer Hospital.

The buying group was also not able to negotiate contracts with local manufacturers to secure the best pricing.

So in 2003, Arnold Palmer Hospital, together with seven other partner hospitals in central Florida, formed its own much smaller, but still powerful (with $200 million in annual purchases)

Healthcare Purchasing Alliance (HPA) corporation. The new alliance saved the HPA members $7 million in its first year with two main changes. First, it was structured and staffed to ensure that the bulk of the savings associated with its contracting efforts went to its eight members. Second, it struck even better deals with vendors by guaranteeing a committed volume and signing not 1-year deals but 3- to 5-year contracts. “Even with a new internal cost of

$400,000 to run HPA, the savings and ability to contract for what our member hospitals really want makes the deal a winner,” says George DeLong, head of HPA