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May 8, 2018

Ascension's latest big move: A first-of-its-kind partnership to create a global health care supply chain

Daily Briefing

    Ascension last week announced a new partnership with Australia-based Ramsay Health Care to form a new global supply chain firm that aims to reduce hospital prices for medical products and improve care quality.

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    Details of the partnership

    The new venture will be owned equally by Ascension—the largest private Catholic health system in the United States, with 151 hospitals—and Ramsay, an international hospital company that owns 230 hospitals and outpatient surgery centers in six countries and is the largest private hospital operator in both Australia and France.

    Ramsay reported revenue of about $6.5 billion U.S. dollars in 2017, with a net profit of $451.5 million. Ascension reported $552.7 million in income from operations on revenue of $22.6 billion in 2017, a 27% drop from its $753.2 million in operating income on revenue of $21.9 billion in 2016.

    According to Modern Healthcare, the new deal is part of the major restructuring Ascension announced in March. Through the deal, Ascension could benefit from Ramsay's experience meeting the needs of patients across many countries, while Ramsay could benefit from Ascension's group buying division's operating model, which focuses on ways to streamline to the purchasing process. 

    Ascension CEO Anthony Tersigni said he wants the new business deal to extend Ascension's business both in the United States and abroad, and hopes to gain new insights into clinical research from other countries. In addition, Ascension will be able to use the new venture to find new sources for medical and surgical products, such as gowns and mattresses, across the globe. According to Modern Healthcare, the venture could eventually extend to pharmaceuticals and medical devices, though experts say that any effort to do so would likely face tough regulatory challenges.

    Ramsay CEO Craig McNally said the new global supply chain also will enable the companies "to share learnings, best practices and industry knowledge to seek improved quality and outcomes whilst also reducing costs," he said.

    Potential impact of the venture

    The new venture marks a first, Modern Healthcare reports, as the health supply chain has not been internationalized in the manner that is common in other industries.

    John Doyle, EVP of Ascension and president and CEO of Ascension Holdings International, said he believes that, over the next few years, Ascension and Ramsay "will create opportunities to both improve financial and operating performance within our respective organizations," and also provide "an alternative supply chain source for independent providers" across the globe.

    He added that this venture is "designed by providers, for providers, with the belief that we can bring greater efficiency, discipline, and innovation to the system, and form more productive relationships with the vendor community, so that all can benefit by making health care more affordable."

    Rob Austin, director of health care consulting at Navigant, said that the partnership could help reduce health care costs in the United States if Ascension can learn how much other countries are paying for medical products and subsequently negotiate lower prices for U.S. providers. "Especially with pharmaceutical drugs, if they could get the pricing, that would really make an impact on bending the cost curve," he said. He added that this could lead to "price transparency around the globe," and could "call suppliers on the carpet for pricing much more aggressively in the U.S. than in other places" (Meyer, Modern Healthcare, 5/1; Ascension release, 5/2).

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