What if you could own companies you spend money on? What if you could save money on routine purchases by getting bulk rates? With those ideas, Christopher Metz and Stephen Somers founded Gastrologix, a Group Purchasing Organization (GPO). Gastrologix is the first GI-specific GPO that works with independent gastroenterologists. Today, they count 75 GI practices in their growing network.
In this interview, Chris and Steve tell us what exactly a GPO is and how Gastrologix spun out of the Digestive Health Network (DHN). According to Steve, they follow a “soup to nuts” approach that relieves independent practices from doing things on their own. Chris tells us about three specific support areas that Gastrologix provides to the physicians.
My company NextServices recently partnered with Gastrologix and other partners to help launch GastroInfuse, an infusion ancillary.
Watch this interview to understand on-the-ground insights from a GI-specific GPO.
◘ GastroInfuse – For practices who want to start infusion as an ancillary service
◘ “We offer a ‘soup to nuts’ type of approach that relieves the practice from developing the initiative on its own”
◘ “The lion’s share of the profit goes to the practice as opposed to the services management company”
◘ “We go beyond being just a GPO. We act as a business development organization on the behalf of practices”
◘ “We helped a practice save around $200,000 to $300,000 for the development of their endoscopy center”
The Transcribed Interview:
Praveen Suthrum: Chris Metz and Steve Somers from Gastrologix, I want to welcome you to our conversation. Thank you so much for joining me today.
Steve Somers: Nice to be here.
Chris Metz: Thank you, Praveen.
Praveen Suthrum: Yeah and you know, while we get started Chris and Steve can you tell us a little bit more about Gastrologix?
Chris Metz: Sure. Well Praveen, thanks for giving us an opportunity to talk about the Group Purchasing Organization world and how Gastrologix as a specialty GPO working with independent GI groups fits into that. So, Steve and I started Gastrologix a little over four years ago and we did that in conjunction with a couple of national GI organizations one being the DHPA – the Digestive Health Physicians Association as well as one that came along a few years later which is the DHN – the Digestive Health Network. And just a quick word on the difference between those two – the DHPA is a not-for-profit advocacy group made up of at this point, about 90 independent GI practices around the country and they started about seven years ago. A very successful organization… it does great work for independent GI groups and GI in general across the country and then around probably 2016 or so they decided to try to build on that success but in a more commercial way in creating the DHN – the Digestive Health Network. And that’s how Steve and I in conjunction with the DHN primarily created Gastrologix to support the growth of the DHN which is a more commercial or for-profit organization in that regard.
Praveen Suthrum: That is helpful. I just want to go a step further and understand what a GPO is exactly?
Steve Somers: Yeah. So, a Group Purchasing Organization is really at its core a cooperative effort on the part of its membership. So, really what we’re trying to do is align as much combined spend in one particular channel as possible amongst the independent gastro groups that do join the GPO so that we can afford access to preferred pricing and possibly improve terms when any one of these entities is going to be purchasing goods or services from a manufacturer or service provider. And really the GPO…its success is driven by its memberships’ compliance with the effort so the more people that are involved, the more people that utilize the platform, the more successful the group is going to be. The other thing that’s interesting about a Group Purchasing Organization is… it’s a vendor-funded model. So, the fees and the revenues that are generated to support the GPO are actually paid by the industry partners as opposed to by the membership. So, the industry is actually paying for access to the membership and that’s really how it works from a fundamental standpoint.
Praveen Suthrum: At this point of time how many members do you have and what kind of companies are you working with on the industry side?
Chris Metz: So, we’re probably around give or take 75 independent practices and growing. And we work with industry partners that cover literally the gamut of everything that a GI does whether it’s in their office or in any of their ancillaries. So, pharmaceutical companies – J&J, Merck, Pfizer, all the way through device companies – Microtech, distributors – Henry Shine just about anything that touches on an independent GI practice we develop contracts to provide benefits to the members of the GPO.
Praveen Suthrum: My company, NextServices recently partnered with Gastrologix and several others to launch this infusion offering. So, I want to talk a little bit about that and ask you what exactly that is about? And how does that benefit GI practices that want to start infusion as an ancillary?
Steve Somers: Yeah so, we recently started an initiative called GastroInfuse and that really was born out of a grown understanding that a lot of practices around the country either don’t support an infusion suite or in some instances don’t maximize that capability and it’s really for those practices that are implementing a well-developed infusion suite. It’s a very important ancillary. So, as we’ve gone out and touched on the GI market we determined that there are companies out there that do provide an infusion services management capability and can come to a practice that doesn’t currently offer infusion services and bring in really a turnkey solution. So, a ‘soup to nuts’ type of approach that really relieves the practice of developing the initiative on its own. So, what we’ve done is sort of taken all the individual pieces that make up an infusion suite, whether from inventory management, scheduling, to Revenue Cycle Management or procurement of the drugs to treat chronic disease. We have just partnered with individual companies in a very transparent way and on a management fee model basis where there’s complete transparency as it relates to the fees that are being paid by the practices so that ultimately as the initiative or the capability matures at the practice, the lion’s share of any profits or revenues is going to the practice as opposed to the services management company.
Praveen Suthrum: In your own business model Steve, just to clarify how does Gastrologix make its fees or money in this mix?
Steve Somers: So, Gastrologix… really its role is for the procurement of the therapies. So, as Chris made mention of… we’re contracted with all the major pharmaceutical manufacturers for the provision of those drugs in the infusion suite and that’s really a big source of administrative fees for the GPO. So, that’s really the role that we would play.
Chris Metz: We do in our opinion two additional initiatives that really bring benefit to the practices. And so, think of it as a three-legged stool. The first leg of the stool is how we are a traditional GPO. We’re formed as a GPO, we have to follow the regulations of GPOs and so on. So, we aggregate the spend, we bring beneficial contracts to the practices for virtually everything that they deal with on a daily basis. But we go beyond that and really act as a business development organization on their behalf and do that in two ways. The second leg of the stool is how we address the ancillary market on behalf of the GIs.
So, traditional ancillaries such as – infusion, pathology laboratories, and so on. We support those for practices that don’t either have those ancillaries or aren’t maximizing those ancillaries. And then the third leg of our stool is we create companies that the physicians can have ownership in. And so, that asset creation opportunity is something that in the long term is going to prove very beneficial to the practices. Examples of those opportunities are… we created about a year and a half ago – a captive insurance company that’s owned by the GI physicians for the provision of medical professional liability. And now, we’re in the process of expanding a second company which is based around data aggregation where we can pull the data out of individual practices and be EMR agnostic and pool that data for the benefit of those groups moving forward with the industry.
Praveen Suthrum: And in terms of whether it be a strategic benefit or financial benefit are you able to share any numbers? Like where a certain practice or at least representative numbers where a certain practice… for them it was costing X amount and then after using the GPO that number changed?
Steve Somers: A practice in the membership was building out a new endoscopy center and had gotten pretty far down the road in terms of the development of that project and we were sort of introduced late to the nurse manager who was really in charge of that effort. However not too late so we were able to introduce her to a number of companies on our platform that were in a position to provide alternatives both in terms of pricing as well as the type of equipment and supplies that they were going to be purchasing. And she had already developed the cost analysis based on her original foray into determining what the cost was of the build-out was. And then, by comparison, we really to do a pretty comprehensive comparison and it ended up saving the practice somewhere between $200,000 to $300,000 in the development of that industry center. So, that was a big win. We just developed a contract with a laboratory supply management company for a practices’ path lab. We recently did a comprehensive comparison there… their savings across the board was between 15 to 25% on what they had previously been spending and that really is not uncommon when we make a comparison with what we’re able to do relative to what practices have been able to do on their own and that’s the goal of the cooperative effort in a GPO.
Praveen Suthrum: What does the future look like at this point of time? I’d like you to reflect both from an industry standpoint but also specifically for Gastrologix.
Chris Metz: Well I think we’re a young organization and we’ve built out the offering to be comprehensive. Our market share is still relatively low within the independent GI community on a national basis. Obviously, not every existing member right now utilizes all of our programs. So, we have the ability I think to grow with the membership we presently have as well as adding new members in the relatively near future and on an ongoing basis.
Praveen Suthrum: And you know the whole consolidation which is happening in the industry, how does that play out in the GPO model? Does that help or come in the way?
Steve Somers: Yeah well from our perspective, we don’t believe that the change in an ownership structure in the market should impact our ability at all. Even the largest private equity platforms… it’s unlikely that they’re going to be as large as the physician membership that we already have and the key differentiator there… is that we are a GPO as I referenced earlier is a vendor-funded model so that the buying organization or consortium or cooperative its efforts are funded by industry and that’s simply not the case outside of a GPO structure.
Chris Metz: We’re private equity agnostic there’s no reason why a private equity-backed practice or platform wouldn’t work with us. We’re only additive in that regard. If they’re able to drive in some ways a better deal for themselves then they can take advantage of that, if we happen to have better relationships or better contracts, better terms there’s no downside to those organizations working with us in that regard.
Praveen Suthrum: This was great Steve and Chris. Was there anything else that you wish to share that we didn’t cover?
Steve Somers: I think we did a good job covering it.
Chris Metz: We appreciate the opportunity Praveen.
Praveen Suthrum: Yeah. This was fun and thank you so much for sharing your views and sharing more about Gastrologix.
Steve Somers: Thank you.
Chris Metz: Thank you.
By Praveen Suthrum, President & Co-Founder, NextServices.