Relational and coordination mechanisms influencing collaborative purchasing of expensive medicines between hospitals and health insurers: a case study in the Netherlands

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Relational and coordination mechanisms influencing collaborative

purchasing of expensive medicines between hospitals and health

insurers: a case study in the Netherlands

Master Thesis Supply Chain Management

Faculty of Economics and Business, University of Groningen

29 June 2018

Lilian Slagter S2226847

l.e.slagter@student.rug.nl

Supervisor

PhD Candidate, A.C. Noort

Co-assessors

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Abstract

The costs of expensive medicines are increasing year by year. The pharmaceutical industry asks high prices for their medicines and society struggles with the payment of this financial burden. Joint purchasing of these medicines could be used by hospitals and insurers to decrease the rising costs of those medicines. However, the relationship between hospitals and health insurers is characterized by clashing objectives and distrust. The purpose of this research is to explore how different mechanisms influence collaborative purchasing of expensive medicines within the hospital-insurer relationship. This research uses a qualitative single-case study whereby multiple semi-structured interviews are conducted. The results of this research show that both relational and coordination mechanisms can foster collaborative purchasing between hospitals and health insurers. Relational and coordination mechanisms even intensify each other, yet, in the studied case this has not yet led to a decrease in costs of medicines.

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Acknowledgements

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1. Introduction

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6 have been various attempts to improve the efficiency and effectiveness of hospital systems through both vertical or horizontal and direct or indirect collaborations (Rego et al., 2013). However, the full success of these collaborations has been hindered by difficulties in communication, leadership, conflicting interests or suspicion about the fair distributions of costs and benefits of the collaboration processes (More & McGrath, 2002; Bhakoo, Singh & Sohal, 2012). Therefore this research targets at trust and transparency, classified as relational mechanisms, and what their influence is on collaborative purchasing. Furthermore, coordination mechanisms can be seen as crucial to make joint purchasing a success. These coordination mechanisms include communication, performance measures, (un)fair distribution of savings, management commitment and project manager’s skills (Bentahar, 2018). Hence these relational and coordination mechanisms are central to this research. In this research the relational and coordination mechanisms are studied, to better understand the difficulties regarding CP between hospitals and health insurers. It is expected that the previously identified mechanisms related to CP do not fully explain how successful CP can be achieved in a healthcare setting and/or the fact that other mechanisms may have influence. Therefore the central aim of this research is to contribute to existing literature by answering the following research question:

How do relational and coordination mechanisms influence collaborative purchasing of expensive medicines between hospitals and insurers?

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2. Theoretical background

This section further explains the concepts of expensive medicines, collaborative purchasing and the different relational and coordination mechanisms influencing CP.

2.1 Expensive medicines

Within this research, expensive medicines refer to medicines provided by hospitals and thus not by pharmacies. The costs of these medicines vary from €1.000 to more than €100.000 per patient per year (NZa, 2017). Other costs associated with expensive medicines, such as laboratory provisions, hospital admissions and administration costs, are outside the scope of this research. Compared to total expenditures on specialist medical care, the expenditure on expensive medicines is substantial. Between 2012 and 2016, the share of expensive medicines rose from 7.2% to 8.4% (NZa, 2017). The increasing budget spent on expensive medicines has several reasons. To start with the introduction of new medicines: on one side extra medicines are added and on the other side medicines are replaced, but manufactures are asking a higher price for those new medicines than before (Nza, 2017). Second, after a successful trial period, the population whom are permitted to take certain expensive medicines is being enlarged. The group of patients taking certain expensive medicines is thus increasing over time (NZa, 2017). Lastly, with an increasing population, more people will be affected by certain diseases and thus more people will need a treatment involving expensive medicines (NZa, 2017).

2.2 Collaborative purchasing

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8 conflicts of interest between the various members (More and McGrath, 2002; Bhakoo, Singh & Sohal, 2012). The disadvantages and advantages of CP can be found in the table 2.1.

Table 2.1 Advantages and disadvantages of collaborative purchasing (Gobbi & Hsuan, 2010)

CP has been used thoroughly by hospitals which generally have similar requirements of the products needed (Gobbi & Hsuan, 2015). Joint purchasing groups consisting of hospitals were found successful in purchasing commodity and pharmaceutical items (Burns & Lee, 2008). Carrera et al. (2015) state that the hospitals in the Intrakoop initiative achieved an average saving of 31% for the purchase of pacemakers. Nonetheless, many public organizations have complications in sustaining intra- and interorganizational relationships in the form of joint purchasing (Schotanus et al., 2011).

2.3 Mechanisms influencing collaborative purchasing

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2.3.1 Relational mechanisms

Trust

According to Touboulic and Walker (2015) trust has been identified as a critical relational mechanism for collaboration. When organizations in a relationship have confidence in each other’s abilities and motivation and thus trust each other, they can work together (Sharma, Young & Wilkinson, 2015). Trust between various members within a purchasing group is vital to the success of CP. As mentioned earlier, the relation between hospital and insurer is characterized by clashing objectives and distrust (Hughes et al., 2013; Maarse, Jeurissen & Ruwaard, 2016). It is thus beneficial to better understand how this distrust has an effect on the collaboration between hospital and insurer.

Transparency

Transparency can be defined as the openness towards partners (Larsson et al., (1998) in Schnackenberg & Tomlinson (2016)). At the moment health insurers have limited insight and influence on providers’ medication prescriptions in terms of volumes, costs and appropriateness (Bijlsma, Meijer & Shestalova, 2008). At the same time uncertainty exists among the hospitals about the purchase policy of new expensive medicines. Further, the healthcare system is highly dependent on the role played by physicians, as they develop long-term relationships with suppliers and develop preferences on specific medicines, reflecting, for example, their education at specific medical schools (Rego et al., 2013). As a result, it is unclear for health insurers why certain medicines are used and others not. This could hinder an effective collaboration between hospital and insurer.

2.3.2 Coordination mechanisms

Communication

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10 cannot be at stake. Communication is key to CP and needs a closer look regarding the collaboration between hospital and health insurer.

Performance measures

By setting up performance measures, ambiguity with regard to objective information can be removed (Cousins, Lawson & Squire, 2008) while desirable behavior from different group members can be obtained (Sahin & Robinson, 2002). Next, performance measures can be seen as incentives to improve collaboration and dynamics between purchasing group members (Nollet, Beaulieu & Fabbe-Costes, 2017). Performance measures are also a way of reducing the different perceptions between stakeholders and can thus foster the success of CP (Tan, Handfield & Krause, 1998). Until 2012, the hospital-insurer negotiations in the Netherlands were primarily focused on price as the most important performance indicator (Schut & Varkevisser, 2017). Next to price, other performance measures can be used to measure the progress of CP between hospital and health insurer.

(Un)fair distribution of savings

According to Schotanus (2007) it is difficult to distribute the savings, as a result of CP, equally or in a fair manner between the various members. It is more likely that difficulties with regard to the distribution of savings arise when organizations have different sizes and characteristics (Johnson, 1999). A member of a purchasing group can experience injustice in the distributions of savings, this could lead to tensions and conflicts that affect the success of CP (Bentahar, 2018). In short, it is important that the agreements on the fair distribution of savings are convincing and clear to every member of the purchasing group (Schotanus, 2007).

Mangement commitment

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Project manager’s skills

Bentahar (2018) finds that CP requires a project manager with solid experience in the healthcare field and not just management skills, but leadership aptitudes. This is consistent with the fact that there is a significant correlation between project manager’s skills and a project’s success (Müller and Turner, 2007).

An overview of the operationalizations of the mechanisms is presented in table 2.2. Operationalization

Trust The level of belief that partner is willing to act according to promises and joint interests (Haugland & Grönhaug, 1995)

Transparency The level of openness towards partners (Larsson et al., 1998 in Schnackenberg & Tomlinson, 2016)

Communication The degree of timely sharing meaningful information between organizations (Anderson & Narus, 1990)

Performance measures The level of performance measures used

(Un)fair distribution of savings The level of distribution of the saving between parties. Understanding if relationship-specific investments are equally or unequally distributed (Touboulic & Walker, 2015)

Management commitment The degree of management commitment Project manager’s skills The level of skills a project manager possesses

Table 2.2 Operationalizations of the different mechanisms

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3. Methodology

3.1 Study context

The current organization of the Dutch health system has four major players. The care recipient (insured/patients), the care provider (medical professionals), the health insurers and the government (Ministry of Health) with a directing role. These players are depicted in figure 3.1 below. In this research the focus is on the healthcare purchasing market.

Figure 3.1 Organization of the Health System in the Netherlands (Wammes, Jeurissen & Westert, 2014)

The Dutch healthcare system was introduced in 2006 and is based on the concept where health insurers have to compete for their customers and healthcare providers need to compete for contracts with health insurers (Mikkers, 2016). Within this model of managed competition (figure 3.2), consumers can freely choose a health insurer whom they prefer most (Mikkers, 2016). The Dutch healthcare model aims at aligning the commercial interests of insurers with consumers’ health and financial wellbeing, in such way that health insurers can thrive by purchasing healthcare for consumers in the most economical way (Mikkers & Ryan, 2014).

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13 This research is motivated by a current pilot “Jointly Purchasing Expensive Medicines” between the Dutch Hospital Association (NVZ), the Netherlands Federation of University Medical Centers (NFU) and Zorgverzekeraars Nederland (ZN). Within this pilot all eight academic hospitals, 40+ nonacademic hospitals and all ten health insurers in the Netherlands including newcomer IptiQ are participating (Benraad, 2017). The estimated market share of this group is above 85% (of the Dutch healthcare market). All involving parties are combining forces to purchase expensive medicines for a more reasonable price.

3.2 Case selection

The main purpose of this research is to obtain a better understanding of the mechanisms that influence collaborative purchasing expensive medicines regarding the hospital-insurer relationship. Theory on these mechanisms influencing CP already exists, but has not been looked into within the specific healthcare context. Therefore, this research aims at expanding theory (Voss, Johnsson & Godsell, 2016). To conduct this research, a single case study is chosen as it is helpful for answering “how” questions (Eisenhardt, 1989; Yin, 2002). Additionality, the pilot “Jointly Purchasing Expensive Medicines” exploits the opportunity to explore relational and coordination mechanisms under unique circumstances (Yin, 2002). Further, a case study allows the phenomenon to be studied in its natural setting and lends itself as an exploratory lens for answering questions where the phenomenon is not fully understood (Karlsson, 2016, p.167). In this research we do not fully understand yet how different mechanisms are influencing the CP of expensive medicines between hospitals and insurers. Next, a case study method is a way of discovering unexpected emerging mechanisms (Eisenhardt, 1989) and helps to better understand the complexity of the circumstances (Yin, 2002), which makes it useful for expanding theory into a different context. A single case study is found especially useful when it is essential to explore the situation as it is (Karlsson, 2016). The unit of analysis sets the boundaries for the case regarding the generalizability of the results (Yin, 2002), which is the relation between hospital and health insurer.

3.3 Data collection

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14 researcher. All interviewees have been contacted by phone, e-mail ore LinkedIn to set up a face-to-face appointment. In total ten face-to-face-to-face-to-face interviews have been conducted with four representatives of a hospital and six representatives from a health insurer whom had a great extent of knowledge about jointly purchasing medicines and the current relation between hospital and insurer. The interviews took approximately 45-60 minutes each and were held in the native tongue of the interviewees, which is Dutch for all interviewees and the interviewers as well. The interviews were held from the 18th_{of April until the 28}th_{of May 2018. The interviews were recorded with permission} of the interviewee (appendix A), transcribed and subsequently sent to the interviewees for verification. The interviews are conducted by the researcher and a fellow colleague, in such way that one asks the questions and the other makes notes and complements if necessary. The secondary source of data are publicly accessible documents related to the (collaborative) purchasing of expensive medicines and first results of the pilot “Jointly Purchasing Expensive Medicines”. Triangulation is achieved by interviewing multiple individuals per case and combining additional documents with the interviews (Eisenhardt, 1989).

Positions of interviewee(s) Duration interview (min)

Documents used Pages

Insurer view

- Account manager

- Healthcare policy coordinator - Purchaser specialized care - Program manager

- Intelligence analyst

- Senior manager of healthcare purchasing 45 55 58 59 50 40

- Website content of all organizations

- Social annual report 2017 - Social and Financial Annual Report 2017 - Annual report 2017 113 114 123 Hospital view - Hospital pharmacist

- Manager procurement & logistics - Hospital pharmacist

- Manager specialized care

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49 55 54

- SiRM rapport “versterken inkoop geneesmiddelen” (2016)

- Website content of all organizations

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Table 3.1 Overview of sources from which data is gathered

3.4 Data analysis

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15 step was to assign a code to all statements. This was done through deductive coding. Nonetheless, inductive coding was also used to give space to emerging mechanisms influencing CP. Based on these codes and emerging codes, a coding tree has been developed in Microsoft Excel 2016. The coding process was iterative. The data of the case was set up in displays to systematically present the information. There has been looked at patterns and interactions that explain how relational and coordination mechanisms influence CP. This ensured that valid conclusions are made (Karlsson, 2016). The secondary data is not coded, but is used to provide additional insights.

3.5 Safeguard measures

Within this chapter multiple approaches are mentioned to ensure the reliability and validity of this research. A clarifying overview of them is provided in table 3.3.

Test Measures

Reliability Use of an interview protocol

Same interviewers

Construct validity Operationalization of research constructs Internal validity Multiple sources of evidence used (triangulation);

Interview transcripts checked by the interviewees; Matching patterns

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4. Results

This chapter outlines the findings of this research. First the pilot “Jointly Purchasing Expensive Medicines” is further explained, which helps in understanding how the collaborative purchasing between different parties is organized. Next both relational and coordination mechanisms influencing the CP between hospital and insurer are discussed. At last, the emerging patterns are presented.

4.1 Pilot “Jointly Purchasing Expensive Medicines”

As mentioned in the previous chapter, a pilot “Jointly Purchasing Expensive Medicines” started in the beginning of 2018. In this pilot all insurers, all academic hospitals and 40+ nonacademic hospitals of the Netherlands are participating. It is the first time in history in the Netherlands that such a large group of involving parties committed themselves to a pilot of CP. The structure of this pilot is depicted in table 4.1.

Group Function Actors involved Additional information

Steering committee

Determines policy

Two directors of respectively NVZ, NFU and ZN Representatives of NFU and NVZ

Program managers NFU, ZN and NVZ Secretary Joint working group Translates policy to actions

Program managers NFU, ZN and NVZ Policy advisor ZN (secretary)

Two hospital pharmacists NFU and ZN Specialized care purchasers ZN

Purchaser expensive medicines NVZ and NFU Hospital pharmacists

Clean team Directs the purchasing and translates the contract to individual participants

Hospital pharmacist (NFU) from joint working group

Hospital pharmacist (NVZ) from joint working group

Data analyst

Coordinator from iZAAZ

All actors have a pledge of secrecy1

Accountant checks afterwards for the purpose of objective reporting to health insurers and other participants Purchasing team Conducts negotiations and concludes contract

Coordinator from iZAAZ

Purchaser from an academic hospital due procurement obligations

Medical specialist of the relevant area of interest Hospital pharmacists from participating hospitals (both NVZ and NFU)

All actors have a pledge of secrecy

Table 4.1 Formation of pilot "Jointly Purchasing Expensive Medicines" based on Benraad (2017)

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17 The affiliated hospitals joined forces with the health insurers and started an official tendering procedure, targeting one out of three medicines from three different pharmaceutical companies. These three medicines are interchangeable. The goal of the pilot is to force the pharmaceutical companies to lower their prices of the medicines. If a pharmaceutical company is unwilling to lower the price, an alternative medicine is chosen by the purchasing group. The pilot targets expensive medicines that can be labeled as oligopolistic. This means that there is more than one medicine available on the market but yet the number of available medicines is limited and there are barriers to new providers such as a patented medicine. One has to keep in mind that the joint purchasing of oligopolistic medicines can only be successful if the occupational group that uses this medicine timely formulates their medical policy and when the medical specialist in the hospital who prescribes the medicines to the patient, is supporting this policy. Multiple interviewees have indicated this as a condition for successful collaborative purchasing of expensive medicines. “Within this pilot, that is a

very clear example, I think that an occupational group has to say that these medicines are interchangeable; they are actually doing the same. That is a condition for such an agreement. If an occupational group does not do that or does not want to do that, it not possible to even start this [pilot].” (Health insurer 1)

Respondents indicated that the power of the pharmaceutical industry is gigantic and as a result it is extremely hard to “even organize a piss-up in a brewery” (Health insurer 2) for both hospitals and health insurers. The profit of the pharmaceutical industry in the Netherlands is practically 0.01% of their total profit, which is considerably low for pharmaceutical companies (although it is about millions or even billions). The pharmaceutical companies play upon hospitals and health insurers and still ask extremely high prices for their medicines. The power of both hospitals and health insurers too small to demand real low prices for expensive medicines. Accordingly the involving parties are disappointed with the obtained discount this year.

Hospitals and health insurers are aware that they have to cooperate to decrease the rising costs of expensive medicines, therefore they are mutually dependent. Furthermore, the system is set up in a way that both hospital and health insurer have to come to an agreement and sign a contract. When a hospital has no contract with a health insurer, the hospital has a financial crisis and is unable to treat patients. On the other hand, when a health insurer has no contract with the hospital, the insured patients cannot visit that hospital in particular. Some describe it as a marriage of convenience (Hospital

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18 The CP between hospitals and health insurers is more and more developed. The pilot has potential, but at the same time difficulties are experienced. Therefore this research takes a closer look at different relational and coordination mechanisms to better understand CP with regard to the hospital-insurer relationship. By understanding these different mechanisms, it can be better understood and explained whether CP is successful or not.

4.2 Relational mechanisms

Trust

Trust is perceived as a critical component of a successful relationship between hospital and health insurer. It was frequently discussed as essential to the openness of sharing information. Some interviewees stated that the relationship between hospital and insurer is characterized by trust, but others marked this relationship by distrust: “the relationship between hospital and insurer is not a trust

based relationship.” (Hospital 2). Different opinions exist whether trust existed right from the beginning

of the pilot or it had to be earned over time. Some opine that trust increased to some extent as the collaboration process between hospital and insurer showed progression. “Because we have been

talking for one year now, we get more feeling for each other; what is happening at the other side and we really needed that year to come to speaking terms, to understand each other and really talk witch each other and to gain trust.” (Hospital 1). Although different signals about the level of trust are

perceived, trust plays an important role and the pilot can take part to enlarge the level of trust between the hospitals and health insurers.

Transparency

Generally hospitals are negotiating with the pharmaceutical industry about the prices of medicines including expensive medicines. Hospitals often receive discounts from the pharmaceutical companies on these expensive medicines. Health insurers are aware of these discounts, but are not informed about the exact discounts hospitals receive. Health insurers reimburse the expensive medicines for a higher price than the hospitals actually spend on these medicines. This means that hospitals make profit on these expensive medicines and this profit is a so-called margin. Health insurers are not by definition against these margins, but would like to have an insight on the discounts. When these margins are too high, this financial capital should flow back to the health insurer whereby it benefits the premium payer. “I think that we should go to a more transparent system about what are actually

the costs of a medicines and what are the benefits? Especially with the prices they ask for nowadays. I do not think it is justifiable to keep it a secret.”(Health insurer 2). Hospitals on the other hand, are not

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19 that if they are open about the discounts given by the pharmaceutical companies, there is no incentive anymore for the pharmaceutical company to even give a discount because their prices are widely known and the pharmaceutical company loses their bargaining power and will not give any discounts anymore. Insurers are aware of this and counter the argument by saying they could assure confidentially.

One participating hospital already shares the discounts of the expensive medicines on a cluster or even a product level with health insurers. In return the hospital is fully compensated on the costs made on expensive medicines (via post-calculation). This situation is quite remarkable because it is uncommon for hospitals to give such openness. The particular hospital is convinced that the margins should not be used to close gaps in budget, because then the hospital’s financial situation depends on the discounts given by the pharmaceutical industry. The respondent recognizes the need to go to a more transparent system where the hospitals run no risks in their budget anymore and therefore is willing to share such information with the health insurers. “That is a durable agreement for me. Which I am

satisfied with.”(Hospital 3).

Transparency contributes to a better collaboration between hospital and insurer, in such way that the health insurers in particular are better served to have more insight in the prices paid for expensive medicines.

Next to trust and transparency, another mechanisms is found and is categorized as a relational mechanism: the history of the relationship.

History of the relationship

It is found that in the past the relationship between hospital and insurer was unpleasant. “I have to say

that years ago, I despised health insurers, standard.” (Hospital 4). This influences the collaboration

between both parties nowadays. “It took a long time to put all the wood behind one arrow” (Hospital

2). Further, there has been an attempt for joint purchasing expensive medicines a few years ago which

completely failed. As a result most hospitals were hesitant at first to join the pilot because they were afraid that failure would happen again. Since this pilot has approached CP from another direction, by involving the occupational group whom use the targeted medicines, eventually most Dutch hospitals agreed upon participating within this pilot.

4.3 Coordination mechanisms

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20 Hospitals and health insurers yearly negotiate about the reimbursement prices of expensive medicines. These conversations can be harsh and some experience them as very unpleasant. The availability of data has established that the dialogue between both parties nowadays is more focused on the content instead of solely on the prices. Within the pilot “Jointly Purchasing Expensive medicines” the joint working group (see table 4.1) gathers every month to discuss the progress. In general these meetings help to understand each other better. However, the communication between involving parties can use some improvements. Currently it is not always clear who you have to approach for certain information. Next, reports within the joint working group are not always shared within the desired time frame. It even happened that press releases were made about the pilot without informing the involving parties (yet). The representatives of both hospitals and health insurers who are not directly involved within this pilot (they do not belong to one of the groups as mentioned in table 4.1) suggest some improvements as well. Nowadays they barely have a clue what is going on with this pilot. One respondent within the pilot admitted that he pilot has fallen short with the communication to the ‘outside world’ due capacity problems. “Communication is one of those things

you put aside, because that is less important between quotation marks.”(Hospital 2).

Performance management

The agreement that hospitals and health insurers have made with the pharmaceutical company that offered the best deal is as follows. The deal includes that at least 75% of the new patients is using the targeted medicines, thus not every patient has to use that chosen medicines according the agreement. Every three months health insurers receive data about how many patients are using the targeted medicines. If this percentage is less than 75%, it will be discussed with the hospitals why this percentage is below the agreed number. Hence health insurers can monitor and control the deal with the pharmaceutical industry. It is unclear whether or not the pilot uses other performance measures than the number of patients which uses the targeted medicines. Hence, it is hard to self-evaluate and identify shortcomings. It can be concluded that the used performance measure can tell if the agreements with the pharmaceutical are met, but it cannot reveal much about the performance of the joint purchasing between hospital and health insurer.

(Un)fair distribution of savings

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21 concession is not by everyone perceived as fair and they would like to see that a part of the purchasing savings flow back to the hospitals as well. “It should be attractive for everyone to participate” (Health

insurer 3). It can be concluded that the distribution of savings is not perceived as fair by all respondents,

but at the same time it is a challenge to come up with a new calculation model.

Management commitment

Both boards of health insurers and participating hospitals are supporting the pilot “Jointly Purchasing Expensive Medicines”. They see the need that at least something needs to happen to decrease the rising costs of expensive medicines. However, the boards do not interfere with the pilot and occasionally receive an update about the progress. Some respondents admit that if the pilot does not reach the predetermined goals, their board will ultimately pull the plug. It can be stated that there is practically no management commitment.

Project manager’s skills

The pilot is led by three program managers (table 4.1). Each represents an involving party: the academic hospitals, the non-academic hospitals and the health insurers. All managers have experience within the field of purchasing of expensive medicines. The different professional backgrounds were recognized as beneficial because it resulted in more opportunities to understand each other’s points of view. However, some respondents have admitted that they feel their side not represented (enough) within the pilot. This impacts the collaboration between hospital and health insurers negatively.

4.4 Interaction between relational and coordination mechanisms

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5. Discussion

5.1 Discussion of findings

The goal of this research is to find out how relational and coordination mechanisms influence CP of expensive medicines between hospitals and health insurers. The results of this research confirm that both relational and coordination mechanisms have an influence on the joint purchasing of expensive medicines between hospital and health insurer. There is a strong cohesion between relational and coordination mechanisms and both are essential in fostering CP between hospital and health insurer. The results show that more trust leads to a better relationship between hospitals and insurers and that leads to better CP. Trust has, as expected, a positive impact on CP. However, not all empirical studies found this as well (Muhwezi, 2010; Shotanus et al., 2010). The results suggest that joint purchasing groups should focus on developing trust between all involved parties and members should mind their own credibility and their benefaction to other members. Next, the results show transparency helps to enhance trust as well: when more openness is created towards each other, the more trust arises between involved parties. This relation has been found earlier by Akkermans et al., (2004) but than in the context of a high-tech electronics industry.

The history of the relationship between two or more organizations has not been mentioned earlier as a mechanism influencing CP. However, abundant literature on collaboration in supply chains reveals that “the history of interaction between partners is likely to influence present conditions and future exchange.” (Touboulic & Walker, 2015, p.184). The history of the relationship troubles CP between hospitals and health insurers, because they have a long mutual history.

The lack of proper management skills of the project managers leads to a lower level of trust whereby respondents feel that their side (e.g. the view of the hospital or the view of the health insurer) is not represented. This hampers the level of trust within the pilot. Although only recently the link has been made between manager’s skills on the impact on the success of CP, the results of this research can confirm this. Management commitment is not a necessity for fostering CP, which is not in line with the findings of Bentahar (2018). However, management can provide resources, such as capacity and budget, which gives a boost to CP.

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24 communication misses. An earlier study confirmed that performance measures are seen as an important incentive for members to communicate objective information (Nollet, Beaulieau and Fabbe-Costes, 2016).

5.2 Managerial implications

This research underlines the importance of the relational and coordination mechanisms for the success of collaborative purchasing. Professionals may use the research not only to obtain a better understanding of the relationship between hospitals and health insurers when collaborative purchasing expensive medicines, but also to strengthen the management of them. From a managerial perspective, key findings of this study can be outlined as follows:

▪ The perceptions and expectations within a purchasing group are not static but evolve over time. The level of trust increased over time and members and/or managers can enhance this development by supporting relational and coordination mechanisms.

▪ Communication plays a crucial role in the success of a purchasing group. Members involved need to be informed on time with the expected information.

▪ Performance measures should be used to obtain an objective account of the progress of CP. ▪ Fair agreements have to be made for the distribution of savings.

Mutuality of expectations, the complementarity of needs and better quality of communication will result in successful CP and gratification within the joint working group. This will, however, require more commitment not only by members but also by the boards of the different hospitals and health insurers. Management of the involving parties have to be aware of this and should purposely allocate resources such as capacity and budget, to boost CP.

5.3 Limitations and future research

A few critical comments to this research may be raised. First, this research used a single case design aiming for analytical rather than statistical generalizability (Yin, 2013). The purchasing group can be regarded as a rather unique first endeavor for the collaborative purchase of oligopolistic medicines. However, not all involved participants within this pilot have been interviewed. This qualitative data would have provided more additional insights.

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25 time. Participant observations could surely improve the quality of findings as it allows the systematic observation of participants’ behavior within relationships during meetings, for instance (Yin, 2002). Another limitation of this research concerns the scope, which does not cover other costs associated with expensive medicines, such as laboratory provisions, hospital admissions and administration costs. It would be interesting to investigate if those costs can be decreased if hospitals and health insurers expand CP.

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6. Conclusion

It can be concluded that both relational and coordination mechanisms have an influence on the collaborative purchasing of expensive medicines between hospitals and health insurers. These relational and coordination mechanisms intensify each other and are essential for successful CP. The history of the relationship gives an indication for the level of trust between both parties before CP. When distrust dominates the relationship, coordination mechanisms can slowly turn distrust into trust. At the same time, relational mechanisms can improve the coordination mechanisms. For instance, more transparency leads to more fair perceived agreements.

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Appendices

Appendix A. Consent form

CONSENT FORM

Researcher’s name: Lilian Slagter and Jurgen van Katwijk Title: BSc Contact details of researcher:

Lilian Slagter Kleine Beer 44 9742 RJ Groningen 0611269907

l.e.slagter@student.rug.nl

Jurgen van Katwijk Jadestraat 79-1 9743 HB Groningen 0615634229

j.d.van.katwijk@student.rug.nl

Faculty/School/Department: University of Groningen, Faculty of Economics and Business, Department of Operations

Title of Study: Joint purchasing for expensive medicines To be completed by: The interviewee

Background of study:

This study aims to understand the purchaser-provider relationships and the hospitals perspective in joint purchasing of expensive medicines. By conducting a multiple case study, we aim to understand how purchaser-provider relationships develop and to get a better understanding of the mechanisms influencing collaborative purchasing between hospital and insurer.

During this study, qualitative data will be gathered by conducting semi-structured interviews and collecting documentation. The study will be conducted in the Netherlands. Interviewees will be asked to participate in an interview which will take 1 – 1.5 hours. During the interview the participant will be asked questions about expensive medicines, the relationship between insurers and hospitals and the current pilot. If agreed by the interviewee, the interview will be audio recorded. After the interview, the researcher will write a transcript which will be sent to the interviewee for possible revisions.

The transcripts of the interviews will be stored on the server of the University of Groningen. Data from the interviews will be anonymously published, in such way that the published information cannot be traced back to the interviewee.

Consent statement:

Participation to this research is voluntary, and you can refuse to participate or withdraw your participation at any point in time without consequences. Your responses will remain fully anonymous and cannot be traced back to you. The results of this study are intended to be published. With questions about this research you can contact the responsible researcher.

I hereby certify that I have read and understood the above; that I am at least 18 years old; and that I voluntarily agree to participate in this research.

□ I agree □ I disagree

Name in Block Letters ______________________________________________________

Signed_____________________________________ Date __________________

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Appendix B. Interview protocol

Details to provide before the start of the interview to the interviewee (4 min)

• Introduction of ourselves (name & education). Since it is hard to find interviewees, we pool interviews. The interview consists of X parts, concerning both questions about Lilian’s thesis and questions about Jurgen’s thesis. On forehand we will explain which part we are

discussing.

• The main goal of our research is to better understand how the hospital-insurer relationship develops when jointly purchasing expensive medicines. Hereby the focus of Lilian’s research is how different mechanisms influence this relationship and Jurgen’s research is focusing on the role of power within this relationship. The first questions are asked to acquire a better understanding of you, your function and your organization. The aim of the second part is to gain understanding of which mechanisms are relevant considering the hospital-insurer relationship when jointly purchasing expensive medicines and how these mechanisms influence the relationship. The final part is used to gain understanding of the role of power on the need for trust and contracts and how they influence the hospital-insurer relationship. • The interview will take 60 minutes. Due to time limitations it may happen that you are

interrupted and more specific questions are asked about particular subjects, since all subjects must be addressed.

• After the interview, there is room for questions and feedback that you may have. If you like to withdraw from this interview at any time, please let us know. You do not have to provide a reason for this.

Part 1

All that is discussed during this interview, will be treated as confidential. If some of your quotes are used in the research, this will happen anonymously.

1. Could you tell us something about yourselves and your function? a. Name interviewee

b. Position

c. Work experience in current position d. Name company

General information insurer-hospital relationship that is investigated. Please choose one relationship you have with an insurer or hospital

• Insurer: • Hospital:

• When was first contract closed: • Size of the contract:

• Role interviewee in closing the contract with this insurer/hospital: • Role interviewee in managing the contract with this insurer/hospital: Part 2

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33 b. Treated fairly

c. Same interests

d. Factors influencing the length of the collaboration e. Costs versus quality

2. Are you collaboratively purchasing medicines with other hospitals? And is there involvement of the insurer?

a. Can you describe the process of jointly purchasing expensive medicines? 3. Which actors are involved in this process?

a. Is top management involved?

b. Do you experience support of the top management? Yes/No - can you give an example? c. Who is in charge/leading?

d. Can you describe this person to me? Is he experienced?

4. Can you describe how you are communicating with the other actors involved in jointly purchasing expensive medicines?

a. Do all actors have the same interests?

b. Do all actors have an equally distributed amount of power?

5. In your opinion, are costs saved when jointly purchasing expensive medicines?

a. Assuming, when collaborative purchasing expensive medicines, costs are saved; how are these savings distributed?

6. Have you come across any difficulties or barriers regarding jointly purchasing expensive medicines?

a. Are there possible disadvantages of jointly purchasing expensive medicines? b. What impact did those difficulties have?

c. How could/did you overcome these difficulties?

d. To what extent do you depend on each other or are you able to influence each other? Part 3

1. How would you describe your collaboration with the hospital/insurer? a. What kind of information do you share and on which level?

1. Volume, medicines prices, goals, plans

2. How do you share information? regular meetings, email, phone, other 3. How often do you share information?

b. What kind of joint activities do you have with X?

c. Did you make any investments for the collaboration with x?

2. How do you control what is agreed upon in the contract with the hospital/insurer? a. Which control measure is the most relevant?

b. How strict are the measures?

c. How often do you control the actions of the hospital/insurer (and how)? 3. How detailed are the agreements in the contract with the hospital/insurer? a. Why are certain formal agreements made and what are they about?

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Appendix C. Coding tree

Quotes 1st order codes 2nd order codes

I think that [trust] is very important trust is very important the importance of trust

Trust

I think the basis is sufficient, there is trust and we have to build on that and prevent that the trust is not violated.

trust not violated the protection of trust

It is not a relationship based on a high level of trust relationship not based

on trust

low level of trust

Trust plays in every interaction an enormous role and the level of trust between health insurers and hospitals is just terrible.

level of trust is just terrible

very low level of trust

Transparency is a problem within those parties [hospitals and health insurers] transparency is a problem difficulties of transparency Transparency

It is not transparent what is going on with those discounts. Not transparent difficulties of transparency

If you are able to make it fully transparent to show to a health insurer where you loose and where you win, than you have made a big step ahead.

to make it fully transparent

Goals of transparency

I am not by definition against margins, but I would like to know where are those margins for, where are they used for, which budgets gaps are you closing with those margins.

Insights in the use of margins

Goal of transparency

Communication is one of those things you let go, because that is less important between quotation marks

paying less attention to communication

Difficulties of communication

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We have to better communicate to the others what we are doing, what the results are, that is correct. We are dealing with that now.

To make communication better

Goals of communication

Hospitals should be better informed, but health insurers as well because I do not hear everything as well.

Better inform parties Goals of communication

The fact that I am not informed about targeting other medicines and when press releases will be made, shows something about the internal organization.

Not being informed Effect of the lack of communication

Yes, they are supporting it [the pilot] full support of

management

level of management commitment

Management commitment

Fully, as in you have to something within this market, if we do nothing we definitely have a problem

to do something effect of top management

Our board is supporting this, they say that is important enough to participate within this pilot

Important enough to participate

They are fully supporting this. full support of

management

What happens to that purchasing advantage that we have achieved last year; that actually went to the health insurers

purchasing advantage to health insurers

purchasing

advantage to health insurers

(Un)fair distribution of savings

Our idea is that a bit should go to the hospitals, but they should not make monster profits on expensive medicines, but a bit is okay because then you maintain the system and ensure that there is a stimulus for hospitals to purchase their medicines with a good price.

A bit for hospitals to maintain the system

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It should, in fact, go back to BV Nederland, that is what matters and that is the most important. It does not matter where it goes from there, it should flow back to the hospital or health insurers: to the health care in particular.

Distributions flow back to healthcare

healthcare should benefit from distribution of savings

The process is not being managed, the content is not managed, and yes you can admit that the it should be professionalized.

process and content not being managed

Lack of managing skills

manager's skills

The influence of doctors is very important and a precondition for success. They form a key position in this process.

Influence of doctors and key position

influence of occupational group

Power of occupational group

But if the occupational groups have a different opinion, you can want something but nothing will happen

Different opinion of occupational group

influence of occupational group

Years ago, I have to admit, I hated the health insurers, standard.

Hating health insurers Feeling towards health insurers

History of relationship

There is a lot of power at the side of the pharmaceutical industry

a lot of power of the pharmaceutical industry

Power of pharmaceutical industry

Relational and coordination mechanisms influencing collaborative purchasing of expensive medicines between hospitals and health insurers: a case study in the Netherlands