GE wins Kaiser contract; HMO weighs PACS bids

August 25, 1993

GE Medical Systems has won a five-year preferred-vendor contractto supply MRI and x-ray equipment to HMO giant Kaiser FoundationHospitals. GE bested competitor Philips Medical Systems in winningthe contract. Philips had been Kaiser's preferred vendor for

GE Medical Systems has won a five-year preferred-vendor contractto supply MRI and x-ray equipment to HMO giant Kaiser FoundationHospitals. GE bested competitor Philips Medical Systems in winningthe contract. Philips had been Kaiser's preferred vendor for thepast seven years (SCAN 3/24/93).

The Kaiser deal, which begins in September, covers all MRI,CT and general x-ray equipment installed in the HMO's hospitalsthroughout the country. Kaiser, of Oakland, CA, operates 29 hospitalsand has annual revenues of $9.8 billion.

The preferred-vendor contract could be especially lucrativeas Kaiser is in the midst of a $7.5 billion hospital constructionand renovation project in its northern California region, accordingto Gailord Gordon, Kaiser's general manager for biomedical engineering.

"It's really an enormous package," he said.

Gordon declined to place a dollar value on the size of thecontract but did state that Philips installed 74 medical imagingrooms last year and several hundred over the life of the contract,primarily in x-ray. The Philips contract did not include MRI,which Kaiser has purchased mostly from GE for several years.

Kaiser was pleased with the quality of Philips' equipment andthe level of service it received from the vendor, Gordon said.GE submitted a bid low enough to prompt the HMO to switch companies,however.

"We had a very successful seven years with Philips,"Gordon said. "There was a significant enough difference (betweenbids) that we left a long-term and successful provider."

Contracts like Kaiser's preferred-vendor agreement are alreadypopular among health-care providers coping with the onset of managedcare. They are likely to become even more common as large purchasersbundle equipment acquisitions and smaller buyers band togetherinto purchasing cooperatives.

"With the consolidation of health care, we are going tosee more of these types of contracts," Gordon said.

THE PREFERRED-VENDOR CONTRACT WITH GE is not the only large imagingequipment deal under consideration by Kaiser. The HMO has plansto build a beta site for a fully digital hospital and is consideringbids from Philips and Loral Aerospace (SCAN 1/27/93).

Kaiser is bullish on picture archiving and communications systems,hoping that PACS can achieve for Kaiser its initial promise ofsaving money by eliminating film and associated costs. A Kaiserstudy found that a beta site should achieve a return on investmentafter 5.4 years.

If the beta site proves successful, Kaiser will implement PACSat other hospitals in the system.

Loral could have an inside track in the competition, thanksto a helping hand from the Clinton administration.

As a defense contractor, Loral is eligible for federal grantsunder a defense technology conversion program established earlierthis year. The program, called the Technology Reinvestment Project,earmarks a total of $500 million in matching funds for companiesconverting defense technologies to commercial uses. Loral hasapplied for several grants related to its work in PACS, accordingto Wayne Sebera, director of medical programs.

One of those grants could be for the Kaiser PACS project. WhileGordon declined to name names, he did state that one of the twocompanies vying for the PACS contract has applied for the federalgrants.

Kaiser hopes to hear in September about the status of the grant,according to Gordon.

"We think we have a good shot at this," Gordon said.

BRIEFLY NOTED:

  • Bristol-Myers Squibb landed a supply agreement with oneof the largest purchasers of MRI contrast media in the country.BMS and hospital group purchasing alliance American HealthcareSystems announced this month the signing of a five-year deal thatshould boost the alliance's purchases of BMS products. The dealincludes Squibb Diagnostics' MRI contrast agent ProHance.

American Healthcare Systems, of San Diego, CA, conducts deviceand pharmaceutical purchasing for some 1000 nonprofit hospitalsand nursing homes. The alliance purchases between 15% to 17% ofall MRI contrast used in U.S. hospitals, according to AHS spokespersonJack A. Bernard. Squibb's share of that usage could increase,Bernard said.

"We anticipate that under this agreement we will use avastly increased volume of Bristol-Myers Squibb products and services,"Bernard said.

American Healthcare will continue to purchase Sterling-Winthrop'sOmniscan contrast agent, Bernard said.