Here's how it works. There are three important prices for capital medical equipment: the list price, which basically nobody ever pays; the contract price negotiated by a group purchasing organization, generally the starting point for most hospital dealmakers; and the known cheapest price recorded from an actual transaction. This last one is what OpenMarkets bases its deals on.


For instance, on a recent event for the Resuscitaire, Draeger’s infant warmer, the list price for the equipment was $19,990. The average GPO contract price was $15,213. But the lowest known price was $12,990. In its event, OpenMarkets was able to get a deal for $9,983.

HOW THEY MAKE MONEY

The group itself makes money two ways: first, there's a yearly subscription fee, which varies depending on the hospital's bed size, from about $2,500 to $4,500. But as Michalek explains, this is only a hook. "It gets them in the club," he says. "It gets them engaged and gets them invested, encouraging our clients to communicate their capital needs to us.”

But the company plans to get the main source of its revenue by taking a cut of the savings on the things users buy. Michalek says they take 25 percent of the difference between the product's best known price (the benchmark) and the price they negotiate with their deals.

The idea is to incentivize the company to get good deals -- the more its customers save, the more the company makes.

MARKET FOCUS

OpenMarkets focuses on what its executives see as an untapped market -- equipment that costs less than $200,000. For more expensive stuff, usually over $500,000, some institutions, such as health systems with multiple hospitals, will run their own aggregate buys.

"A successful event for us can generate 100 TV sales, saving 45 percent," Derrick says. "Granted it might not be as sexy as a deal for 100 CT units, but it still creates value for our clients."

And although GPOs do often have their own group buying events, they're usually created with the suppliers, and not as a result of GPO member demands, Michalek says, so he thinks more providers will participate with his program.

That said, OpenMarkets is careful not to try to position itself as a competitor to GPOs. The company says while it currently has no formal arrangements yet, it could help friendly GPOs with revenue-capturing programs: that is, reporting back deals to GPOs so they can be sure to get their administration fee from vendors, an important source of revenue for the organizations. Also, OpenMarkets' staff point out they share a common lineage with GPOs: Alan Weinstein, the founder of the GPO Premier, sits on OpenMarkets' board, as does John Strong, the former president of Consorta.

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