Healthcare Matters

Offering further evidence of the seriousness of its mission to build an integrated healthcare delivery system, Highmark, Pennsylvania’s largest health insurance company, launched a new supply chain management company, called ProtoCo. The company will operate under the direction of Bill O’Connor, who will report to John Paul, Highmark’s leader of provider services.

There’s a nice symmetry here. O’Connor was the former corporate director of supply chain for UPMC during John Paul’s tenure as one of UPMC’s most senior executive leaders. Most recently, O’Connor has been the CEO of OC Reilly, a small healthcare supply chain consultancy he formed back in 2006 with the support of the same John Paul. And not surprisingly, OC Reilly has been a recent contractor to WPAHS. Now, it’s the keystone among a few small companies that have been rolled up to create ProtoCo. O’Connor and Paul had a good working relationship at UPMC; they’ve continued that relationship through their OC Reilly affiliations; and they’re back together again, responsible for stitching together a fabric that can support a large delivery network. I wonder if the old adage, “be careful of what you wish for” is appropriate for these guys in this context.

Although Highmark continues to await regulatory approval of its deal to acquire West Penn Allegheny Health System (WPAHS) for $475 million, ProtoCo reflects the insurer’s confidence that it’s all but done. Indeed, it is refreshing to see some timely wisdom on display here. Highmark is building a supply chain management infrastructure before the fact. And while there is no such thing as “plug and play,” you can bet that O’Connor and company seek to build an environment that quickly benefits the acquired entities and offers at-large provider organizations who opt to join its full service GPO an enticing, albeit ala carte menu of benefits.

In addition to having WPAHS as its anchor with nearly $500 million in annual spend, it has signed St. Vincent Health Center in Erie, PA and United Health System (a five hospital system based in West Virginia). And with $500 million of its own money to spend on building its system through the acquisition of physician practices, outpatient centers and clearly, a supply chain management infrastructure, ProtoCo’s opportunity is the stuff of which case studies are made.

Good luck to ProtoCo. The ties that bind its executive leadership run deep and therefore, enhance this new venture’s chances for success.

—Tom Finn