Highmark Inc., the state?s largest health insurance company, has started a supply chain management company under the leadership of a former UPMC executive that the insurer says will help hospitals reduce costs.
ProtoCo Supply Chain Partners is the latest addition to Highmark?s emerging integrated health care delivery system. The new system, to be anchored by the five-hospital West Penn Allegheny Health System, is being established by the health insurer to compete with Western Pennsylvania?s dominant hospital system, UPMC.
?Containing the cost of health care is critical for our customers,? said Bill O?Connor, who is running ProtoCo and reports to John Paul, Highmark?s executive in charge of the integrated system.
O?Connor, CEO of health care consulting company OC Reilly Inc., is a Highmark contractor. From 1984 to 2005, O?Connor was corporate director of supply chain management for UPMC. Paul was a senior vice president at UPMC until 2003.
ProtoCo Supply Chain Partners will manage the supply chain and handle purchasing for West Penn Allegheny, which Highmark is trying to buy for $475 million. The acquisition awaits approval from the state Insurance Department.
ProtoCo, which has 50 employees in Pittsburgh and expects to add 30 by the end of the year, hopes to save West Penn Allegheny $100 million over the next five years. West Penn Allegheny spends about $480 million a year buying supplies for its hospitals, the company said.
St. Vincent Health Center in Erie and the five-hospital West Virginia United Health System have signed up to have ProtoCo manage their supply needs. And the company is in discussions with other hospitals.
In addition to the West Penn Allegheny acquisition, Highmark has said it will spend $500 million on its integrated delivery system to acquire private physician practices, build outpatient centers across the region and provide other services.
Highmark and UPMC on Wednesday announced a deal that will allow Highmark members to retain in-network access at UPMC facilities through the end of 2014. The two organizations? previous reimbursement contracts had been set to expire on June 30, 2013.
Article source: http://www.chicagotribune.com/business/sns-mct-highmark-starts-supply-chain-management-firm-20120505,0,3785874.story
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