UBMD boosts its purchasing power

The top three expenditures by UBMD practices are clinical supplies, rent and office supplies. Of those three, clinical and office supplies—and their corresponding fees—cut into UBMD's profits by a whopping 44 percent.

After conducting a thorough cost-benefit analysis, UBMD has concluded that making group purchases through a centralized vendor network can reap savings of nearly 20 percent and save UBMD nearly a million dollars a year.

A year ago, UBMD officially joined the Western New York Purchasing Alliance (WNYPA), a group-purchasing consortium, for ordering all clinical and office supplies. After careful negotiations to maintain quality and improve prices, the preferred vendors for UBMD are now McKesson for the clinical side (surgical gloves, syringes, etc.) and Office Max for office needs (paper, files and printing).

This past spring, three UB School of Management students (see story on Page 1) spent three months helping UBMD compile a database of every syringe and paper clip ordered in 2008 by UBMD and four of the largest UBMD practice plans: Internal Medicine, Family Medicine, Orthopaedics and Ob-Gyn. They compared those costs to how those practices and others could save by purchasing together through WNYPA.

The resulting cost-benefit analysis demonstrated how better economies of scale are achieved through the consolidation of the practice plans, showing a savings of 17 percent for commonly purchased clinical supplies, and around 16 percent for popular office supplies. The 18 practice plans currently spend $6 million on clinical and $1.3 million on office supplies. "By negotiating for the best prices, we can offer practices real savings—like offering rebates and further savings from ordering the 'house' brand of surgical gloves or copier paper," says UBMD CFO, Michael J. Quinn.

Also, McKesson and Office Max reps have become more focused on delivering better customer service to UBMD, now one of their larger regional clients. Although essential clinical orders would continue on a daily schedule, by combining larger bulk orders UBMD has already begun streamlining deliveries through the two vendors and could save practice plans, if all 18 were to join the consortium, an estimated $1,197,450 a year.