Premier joins 34 health systems in DeRoyal partnership for expanded domestic isolation gown production
Thirty-four member health systems are taking part including AdventHealth, Atrium Health and Baptist Health.
Healthcare company Premier has joined 34 member health systems in partnering with global medical manufacturer DeRoyal Industries, creating a joint venture focused on domestic production of isolation gowns.
The joint venture will produce isolation gowns in an existing facility just outside Knoxville, Tennessee. Raw materials will primarily be sourced from U.S.-based manufacturers, with backup capacity from Mexico and South America.
In the collaboration, the gowns are designed to specifications considering the hospital systems' care delivery requirements, while also allowing for automated production that can scale over time. To support the venture long-term, health system coinvestors also signed multiyear commitments to purchase a portion of the isolation gowns used each year from the joint venture.
WHAT'S THE IMPACT?
Medical products critical to the daily operations of health systems are overwhelmingly sourced overseas, with about 80% of personal protective equipment coming from Southeast Asia. The risks of this overreliance came into sharp focus as COVID-19 swept across the globe, and many nations closed borders and prevented U.S. access to supplies, triggering shortages of PPE needed to protect healthcare workers and patients.
On top of that, sourcing from overseas makes replenishment difficult, since it can take 90-120 days for foreign products to reach American shores, depending on the country of origin, the weather, the mode of transportation and the customs processes. As a result, around 74% of U.S. hospitals reported they were unable to source adequate quantities of isolation gowns in the month of April, a problem that has continued as the coronavirus continues to spread.
The arrangement with DeRoyal is part of Premier's strategy to create more resiliency in the supply chain, the company said on Monday. To that end, Premier, which specializes in group purchasing, analytics and consulting, has worked with members to pursue targeted investment opportunities in supply categories that lack adequate competition, geographic diversity or stable sources of contingency supply.
The first such investment was in Prestige Ameritech, among the nation's few domestic producers of face masks and other PPE. As a result of the joint investment and a long-term commitment to purchase products from Prestige Ameritech, the company is now making 3.5 million additional N95 masks per month for U.S. healthcare providers. Moving forward, Premier plans to address critical supply needs through similar partnerships with members in other product categories, including gloves and disinfecting wipes.
Premier members participating in the initial investment include, among others: AdventHealth (Altamonte Springs, Florida); Atrium Health (Charlotte, North Carolina); Baptist Health (Louisville, Kentucky); Beebe Healthcare (Lewes, Delaware); CHAMPS GPO (Cleveland); Chesapeake Regional Healthcare (Chesapeake, Virginia); Med Center Health (Bowling Green, Kentucky); Community Medical Centers (Fresno, California); East Alabama Medical Center (Opelika, Alabama); First Health of the Carolinas (Pinehurst, North Carolina); Health Enterprise Cooperative (Cedar Rapids, Iowa); Henry Ford Health System (Detroit, Michigan); Hospital for Special Surgery (New York); McLaren Health Care (Grand Blanc, Michigan); Methodist Health System (Dallas); Mon Health System (Morgantown, West Virginia); Monument Health (Rapid City, South Dakota); Norton Healthcare (Louisville, Kentucky); OSF HealthCare (Peoria, Illinois); Riverside Health System (Newport News, Virginia); SBH Health System (New York); St. Elizabeth Healthcare (Edgewood, Kentucky); St. Luke's University Health Network (Bethlehem, Pennsylvania); the University of Tennessee Medical Center (Knoxville, Tennessee); Texas Health Resources (Arlington, Texas); and the University of Virginia Medical Center (Charlottesville, Virginia).
Revenues from the investment in the joint venture are not expected to materially impact Premier's FY 2021 results. Gowns produced by the new joint venture are expected to be available in mid-2021.
THE LARGER TREND
Personal protective equipment in healthcare has been in high demand due to the COVID-19 pandemic, and this demand is reflected in its market outlook. The PPE industry is likely to generate close to triple its 2019 revenue by 2027, with a June report from Allied Market Research estimating that the PPE market will reach $33.4 billion globally by 2027, up from just $12.9 billion in 2019, at a compound annual growth rate (CAGR) of 12.4%.
In September, the California state legislature passed the nation's first law requiring healthcare facilities – including hospitals, medical groups, skilled nursing facilities and dialysis clinics – to maintain a 45-day supply of personal protective equipment at pandemic levels to be prepared for future healthcare emergencies. The law also sets the stage for the state to create a 90-day supply of PPE for healthcare and other essential workers.
While the law was spurred by the COVID-19 pandemic, it's meant to ensure that healthcare in the state doesn't buckle under the weight of any future pandemics or public health crises.
ON THE RECORD
"Together with our members, Premier has created a proven, replicable coinvestment model for generating new sources of supply," said Premier President Michael J. Alkire. "We rely on a data-driven approach to build more supply chain resiliency, prioritizing investments that will quickly satisfy the greatest needs, at scale. In following this approach, we are protecting providers from shortages, injecting more competition into the market and expanding the GPO portfolio with new domestic and geographically diverse options."
"Domestic manufacturers face tremendous handicaps against foreign competitors, many of whom draw from among the cheapest labor and supply markets on the planet," said Brian DeBusk, DeRoyal CEO. "One way we can restore diverse, on-shore and near-shore manufacturing is by investing in automation combined with assurances of long-term purchasing volume at globally competitive prices.
"With this added certainty, we are now able to move into an entirely new product category, create new American jobs and offer a domestic option for providers where one didn't exist previously. Our intent is to leverage automation to remain price competitive for the long term."
Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com
