EDI spots pricing anomalies in Ontario’s healthcare supply chain

As orders for medical equipment flow through Electronic Data Interchange (EDI) systems, giving a view of the purchasing patterns of hospitals across the country, it’s become apparent that different facilities are paying a wide range of prices for the same goods. Those disparities are especially noticeable in Ontario.

“We have identified hundreds of medical products in Ontario with significant price differentials,” says Dave Ralph, president and CEO of Commport Communications International, an e-commerce provider in Toronto. “Sometimes the difference is small, but the ordered quantities are large, or very large.”

Commport acquired its EDI business from Telus in 2012. It now serves over 700 hospitals in British Columbia, Manitoba, Ontario, New Brunswick and Newfoundland, with between 800 and 850 healthcare vendors as customers.

“In Ontario, as we grew the database, we recognized that these pricing irregularities were rampant. We don’t see problems to this extent in the other provinces where we operate.”

Back in November, 2020, Ontario announced that it was launching a new agency, Supply Ontario, to centralize government procurement. The idea was to enable a whole-of-government approach to purchasing goods and services. One specific goal was to save taxpayers money by “delivering the best value by sourcing high-quality goods at scale to serve the public interest in a financially responsible way.”

However, the process to bring about transformative change in the medical supply chain in Ontario has been slow.

“I thought with Supply Ontario we would see a single price for a product across the province, but that hasn’t happened,” says Ralph. “The potential savings are staggering. It would be possible to go to the Commport database, find the lowest price, and to tell vendors that we will buy province-wide at that price.”

Ralph has presented to the Deputy Minister of Health in the former Liberal government, and twice to the Ministry of Health in the present Conservative government. However, he has not presented to Supply Ontario.

When contacted by Canadian Healthcare Technology, Supply Ontario was unable to reference any specific initiatives to address price harmonization – or even to acknowledge pricing inconsistencies – other than to say it is “currently focused on building up its operational capacity to drive its mandate to leverage Ontario’s buying power.”

With EDI, it is possible to have a system in which pricing is consistent, even when there is diverse geography and differing volume requirements.

“In British Columbia, when a contract is signed with a vendor, there is one price for all hospitals and health authorities,” says Kanwar Hayer, provincial manager with the Health Services Authority of BC. “It is all done under one umbrella. It doesn’t matter if the hospital is in Kelowna or Vancouver – it’s the same price for the same item across the province.”

This is not the case in Ontario, where the system is more fragmented. For example, two purchasing organizations, Plexxus and Mohawk Medbuy Corporation (MMC), which collaborate for joint strategic sourcing initiatives, represent over 60 percent of healthcare spend in Ontario hospitals. Plexxus was unable to confirm that, based on its own data, pricing anomalies are a problem in Ontario.

However, using only the data available to Commport, it is possible to see many areas where significant savings could come into play.

“I can see where a vendor will sell a gown to one hospital for $14, and then to another for $8,” says Ralph. “This is repeated across the province, with almost every hospital paying a different price. And it is not all about geography or volume – sometimes a smaller rural hospital is getting a better price than a major hospital in a big city. We have some hospitals in Ontario that are only 25 miles apart, but with a big pricing differential.”

Though purchasing methods can differ depending on the type of product – basic PPE, for example, will not be bid on in the same way as a pacemaker – once a price is established, there is no reason it cannot be consistent.

“There is an opportunity to save hundreds of millions of dollars,” says Ralph. “Even if you used this data to set a baseline catalogue price, I estimate that you could immediately save $32 million.”

British Columbia is already a fine example where a single price model is succeeding.

“In BC, we consider ourselves to be a leader in terms of how we approach supply chain in Healthcare,” says Hayer of BC’s Health Services Authority. “Our executives have made presentations to many jurisdictions explaining how we approach purchasing, contracts, warehousing and logistics, and how it can scale.”

Given that Commport’s clients are the vendors themselves, it might seem odd that Ralph is eager to harmonize pricing. At the end of the day, it is the inefficiency and unfairness of the present situation that is forcing his hand.

“We would love more business from more hospitals, or the new Supply Ontario organization,” he says.

“However, with all the talk about costs and ways to save, it would be good for the government to actually do something.”

Tim Wilson is a Peterborough-based freelance writer and researcher.