Official order! National hospital, equipment & consumables procurement mode to change!

On June 25, the Liaoning Provincial Health Commission, the Development and Reform Commission, the Department of Finance, and the Department of Human Resources and Social Security jointly issued the Notice on printing and distributing the Pilot Work Plan for the construction of Compact urban Medical Groups in Liaoning Province, making it clear that the pilot construction of compact urban medical groups will be fully launched from the end of June 2023!

Not long ago (June 8), the National Health Commission, the National Development and Reform Commission, the Ministry of Finance, the Ministry of Human Resources and Social Security, the National Administration of Traditional Chinese Medicine, the National CDC six ministries jointly issued the “Tight City Medical Group Pilot City List”. It is clear that the construction of compact urban medical group has been piloted in 81 cities in 31 provinces across the country, and two cities in Liaoning Province are included in it.

The issuance of this document in Liaoning Province is also the first time a national level document has been implemented nationwide!
According to the national documents, the pilot construction of compact urban medical groups should be completed in the next three years, and the replicable experience should be promoted nationwide, which means that the next nationwide promotion will begin on a large scale.

So what is the compact city medical group, and why has a subversive impact on the procurement of hospital medical equipment, consumables and reagents?

The “compact urban medical group” belongs to a type of compact medical consortium. If the loose medical consortium is “making friends”, the tight medical consortium is more like “a family”.

In the documents issued by Liaoning Province, we can see that the “Compact urban medical Group” involves a wide number of hospitals and a large number of types: it includes both top three general hospitals and second-level specialized hospitals such as rehabilitation and obstetrics.

The explosion of compact urban medical groups involving numerous hospitals will enable a major shift in the current management of medical institutions:

Great changes! Opening  up the era of “Separation of procurement and  use of medical equipment “

The pilot may be able to further break the boundaries of large hospitals, and the hospital market of consumable and equipment will be greatly changed.

This point has landed in the compact city medical group’s birthplace – “Luohu”, “Luohu model” has fully opened up the era of “Separation of procurement and  use of medical equipment “

Luohu District has integrated all the five public hospitals and 23 community health centers into an integrated hospital group and established Luohu Hospital Group, the sole legal person.

In 2019, Shenzhen News Network released a message, publicly stating that Luohu District Government Material Supply Center and Luohu Hospital Group and other three medical institutions formally signed a memorandum of understanding on medical equipment procurement reform, marking that the pattern of  “Separation of procurement and  use of medical equipment “ in Luohu District has been fully formed.

Luohu District, with the government material supply center, implements the mechanism of “Big purchasing agent”, and then realizes the work pattern of “separation of purchasing (purchaser) and using (user)”, so as to achieve the reform goal of “cutting off the interest chain and optimizing the supply chain”.

After the reform, the centralized procurement of medical equipment in the whole region is compressed from the previous 3 months to 35-40 days; The procurement cycle of medical equipment purchased by agents is compressed from 1 month to 15-20 days.

Health care funds payment reform enters the deep water zone! Consumable procurement needs to change

The industry generally believes that the core of a tightly knit urban medical group is the health care funds payment reform: taking a tightly knit medical union as a unit, implementing total packaged payments for health care funds on a per capita basis, and establishing a mechanism for retaining the balance and sharing a reasonable amount of overspending.

This has also become the key to the country’s comprehensive promotion of the construction of compact urban medical groups!

According to the requirements of the Notice of the National Healthcare Security Administration on Issuing the Three-year Action Plan for the Reform of DRG/DIP Payment Methods:

The pace of the country’s comprehensive promotion of the DRG/DIP payment method reform and the promotion of the compact urban medical group pilot is almost identical.

As a tight-knit organization with highly unified personal, financial, physical and management, the promotion of DRG/DIP payment reform will undoubtedly greatly simplify the operational process and difficulty implemented within the group, and the promotion of medical healthcare payment reform has entered the “fast lane”.

Although the reform of the payment method will not interfere with the price of consumables on the surface, it will change the cost control logic of hospitals from the source: medical institutions may strictly control the use of consumables due to cost considerations.

Especially for some specialized hospitals, the proportion of consumables is very large. After the implementation of the new payment system, hospitals will be forced to carry out fine management of procurement, use, storage and other links, and promote the rational use of consumables, so that consumables will not become a stumbling block to costs.

Therefore, the transformation of hospital business model will be bound to have a huge impact on the marketing model of hospital consumables.

For distributors, while medical health care forces hospitals to reduce costs, it will promote hospitals to conduct a new round of strict screening of distributors, and whether they can provide cost-effective products to “save money” for hospitals will be an important criterion for hospitals to choose distributors.

Non clinically necessary, usable, and non-essential consumables with low cost-effectiveness compared to competitors will become the first consumables that hospitals will “abandon”.

China is encouraging China end uses for more domestic products in latest years. Thus, more and more overseas manufacturers are planning localization in China. BradyKnows localization team has extensive experiences in facility establishment, audit, supplier evaluation, manufacturing, registration, and marketing in China. Pls feel free to let us know any questions on China entry via info@bradyknowsmedical.com

Source：Medical Device Distributors Alliance

Translated & edited ： Bradyknows