Roland Berger study on developments in the cost of materials and the importance of purchasing associations for hospitals

Roland Berger study on developments in the cost of materials and the importance of purchasing associations for hospitals: billions of euros could be saved

• Spending in the health sector is rising continuously: it totaled EUR 279 billion in Germany in 2010
• Inpatient hospital care alone accounted for EUR 66.7 billion of this figure
• 80% of hospitals already use purchasing associations
• In 2010, hospitals saved EUR 4 billion in material costs compared to similar European markets by using purchasing associations and other initiatives

Expenditure on health in Germany is rising steadily – up from EUR 212 billion in 2000 to around EUR 279 billion in 2010. Inpatient care in hospitals accounts for a large proportion of these costs. Cost-saving models for hospitals, such as purchasing associations, are becoming increasingly important against this background. In Germany, 80% of hospitals handle their purchasing via such collaborations, on average buying half of their procurement volume in this way. In 2010, this enabled German hospitals to save some EUR 4 billion in material costs compared to other European markets. This is a key finding of a study by Roland Berger Strategy Consultants called "Material costs and the importance of purchasing companies in the hospital environment," for which the researchers conducted interviews with representatives of hospitals, the healthcare industry and purchasing organizations.

"Demographic trends, growing health awareness, general price rises and expensive innovations are continuously pushing up costs in the health sector," says Roland Schwientek, Partner of Roland Berger Strategy Consultants and the study's author. Compared to EUR 212 billion in 2000, spending in Germany rose to an estimated EUR 279 billion by 2010. Inpatient hospital care alone accounted for a significant proportion of this figure: EUR 66.7 billion. Against this backdrop, 80% of hospitals are already organized into purchasing associations. They generate synergies, especially in material costs, which account for 38.7% of spending. A total of EUR 4 billion in material costs was saved in this way in 2010.

Big potential savings from purchasing associations

"Purchasing associations bundle the product needs of healthcare enterprises, enabling them to negotiate lower prices from producers," says Roland Berger expert Schwientek. "This can result in savings of 15 to 20% compared to hospitals in the Netherlands or Switzerland." Savings of up to 80% are even possible in certain product categories. According to the study, it would makes sense for purchasing associations to handle around EUR 31.3 billion of the inpatient and partially inpatient clinics' material costs, which total EUR 34.8 billion. EUR 12 billion, or 39% of material costs, is currently covered by purchasing associations. On average, purchasing associations handle about half of German hospitals' current purchasing volume. This means that the German market is already highly developed compared to other European countries. The USA is the world's most mature market for purchasing associations, covering around 80% of the total procurement volume.

Purchasing associations are expanding their fields of business

Four types of purchasing associations can be distinguished based on their degree of organization: loose purchasing associations (with a total purchasing volume of about EUR 3 billion), non-binding and binding purchasing companies (about EUR 5 billion) and hospital groups jointly coordinating their purchasing (about EUR 4 billion). In the past, purchasing associations have limited themselves to bundling procurement to achieve price cuts on material costs. The authors of the Roland Berger study expect them to cover the full range of products in the future; they can also be expected to take on additional services such as IT, product-range streamlining, process consulting and logistics services. Many hospitals are already planning to gradually expand the volumes handled by purchasing associations. "There is still growth potential, both for purchasing associations and for possible savings in the hospital environment that currently remain hidden," says Schwientek.