The rising price of keeping your practice safe: Managing PPE cost increases

MGMA Stat - August 12, 2020

Budgeting

MGMA Staff Members

The Medical Group Management Association’s most recent MGMA Stat poll asked healthcare leaders about how the total cost of obtaining personal protective equipment (PPE) has changed this year. The majority (98%) responded “increased,” while only 1% said “stayed the same,” and 1% stated “decreased.”

The poll was conducted Aug. 11, 2020, with 855 applicable responses.

Data from nearly 300 practices facing increased costs found that the increases ranged from more than 100% increases in PPE costs to more modest growth in spending:
  • 15% reported cost increases of 101% or more.
  • 16% reported costs rising 41% to 50%.
  • 19% saw increased costs of 21% to 30%.
  • 13% saw increases of 11% to 20%.
Working toward accessibility, price transparency
In a recent MGMA Government Affairs webinar, the challenges of sourcing PPE for medical groups — especially smaller, independent physician practices — were detailed by three representatives from the volunteer-led Project N95:
  • Clare Pierce-Wrobel, senior director for the Health Care Transformation Task Force and adjunct faculty member at the George Washington University Milken School of Public Health
  • Marilyn Levi-Baumgarten, who previously was an executive at United Health Group 
  • Anne Miller, a strategist with more than 20 years of experience in development of novel medical devices, surgical products, diagnostic tools and innovations for an array of companies.

As Pierce-Wrobel noted, a major concern for Project N95 was the large number of unverified suppliers trying to fill the void amid a surging demand for PPE. Since then, smaller and independent practices — lacking the resources of larger health systems’ procurement arms — have struggled as suppliers demand minimum order volumes that far exceed a practice’s needs, in addition to broader concerns with product availability, low-quality products and fake PPE on the market. 

Some smaller groups report to MGMA that they face limited allotments from vendors based on pre-pandemic order volumes, when PPE need was much lower. Project N95’s solution has been “to accurately identify the supply that's out there, also to accurately identify demand,” Pierce-Wrobel said. 
Vetting suppliers: “It’s quality, not quantity” 
For Project N95, Miller focuses on vetting suppliers to ensure their products match the needs of buyers, especially in terms of quality. Miller’s team uses external databases to check potential suppliers to ensure there aren’t sanctions, fraudulent claims or criminal reports against them. 

“The main thing is we want to make sure we have a quality supplier and by checking the company, we're also checking the principles who are registered with that company,” Miller said. Project N95 then has teams that vet at a product level, specific to respirators, surgical masks, gloves, gown, bouffant caps, etc. 

The work involves translating FDA 510(k) and enforcement policies and federal emergency use authorizations into a “vetting playbook” for each product. For example: The gown team checks to ensure if the entire gown was tested for regulatory standards, rather than just the fabric or seams separately. “We're really going through … with a very fine-tooth comb to make sure that the products that are offered to the people who are seeking to buy them do meet the standards,” Miller said. “I tell the team all the time, ‘it’s quality, not quantity.’”
Quantifying demand and promoting transparency
In May, Project N95 implemented a marketplace that allows purchasers to note the type of PPE they need, the quantity desired and the timeframe they would need it, according to Levi-Baumgarten. That produces a request for quote (RFQ) to which suppliers have 48 hours to respond. Those RFQs are public on the Project N95 website (absent the purchaser’s name), and the organization has a reverse auction workflow in which suppliers bid on RFQs directly from customers. “That’s using transparency to drive down the price of PPE,” she added.

Tracking those transactions from end to end through the marketplace also allows Project N95 to evaluate the quality of the suppliers through direct customer referrals and responses, Pierce-Wrobel said. “In that way, we've been able to drive additional market stability.”

As the U.S. government’s response has shifted to focus on identifying domestic suppliers, there’s less competition for suppliers overseas, Pierce-Wrobel said. The Department of State has since referred some suppliers to Project N95 now that the federal government is working to guide U.S. manufacturers in converting domestic production capacity toward creating PPE.

As Pierce-Wrobel notes, the Project N95 marketplace of vetted buyers helps establish for those manufacturers the demand for these products. They then can feel comfortable in making the initial investments to transition their production capacities toward products that meet all the requirements for use by frontline healthcare workers.
Looking ahead: Higher demand persists
Global demand for PPE has ebbed recently, as other nations get a handle on containing the spread of coronavirus. “Unfortunately, we still need PPE,” Miller said, noting that gloves (including chemo-rated gloves) and chemo gowns are getting harder to obtain. The steady demand for these products is likely to continue through spring 2021, she added. 

Another way to think of the future market is not just in terms of PPE, Miller noted, but in terms of pandemic supplies. “We're not just looking at [PPE], but we also look at surface disinfectants, alcohol, hand sanitizer, IVDs, nasopharyngeal swabs, all of those kinds of items,” Miller said. “I think we're going to see pretty steady demand for them.”

As prices begin to stabilize for some products, she noted that item prices will still be elevated if raw material prices remain higher. For example, N95 respirators, pleated surgical masks, isolation gowns and other products use SMS (spunbond meltblown spunbond), a tri-laminate nonwoven fabric that has been in high demand. 

In addition to checking with Project N95 to try to find better pricing, Levi-Baumgarten suggested that practices can check with their specialty societies to see if they are already participating in a group purchasing compact to help secure needed supplies.
MGMA Stat
Would you like to join our polling panel to voice your opinion on important practice management topics? MGMA Stat is a national poll that addresses practice management issues, the impact of new legislation and related topics. Participation is open to all healthcare leaders. Results of other polls and information on how to participate in MGMA Stat are available at: mgma.com/stat.
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