SSM Health and MD BuylineAchieving Sustainable Savings in Purchased Services through Best

Practices

Presenters

David RodriguezSVP Marketing

• 15 years of experience in healthcare product marketing for revenue cycle, supply chain and payer solutions

• Previous positions held at Trizetto, Interpoint, Concuity and The Advisory Board

Cris O’NealSystem Contract Manager – Purchased Services

SSM Health Care Corporation

• Manager of SSM System-wide Purchased Services • Appointed member -Premier National Purchased Services Strategic Planning

Committee• Active Member of CCG Purchased Services Committee • Active Member of AHRMM Education Committee

Agenda

• Introductions to MD Buyline and SSM Health Systems

• Overview of Purchased Services

• SSM – Transcription and Laundry Services

• Purchased Services Best Practices

• SSM – Transcription and Laundry Services Results

• Q&A

SSM Health - The FactsMission-Through our exceptional health care services, we reveal the healing presence of God.

• 1st Health-care Organization to receive Malcolm Baldridge Quality Award

• 19 Hospitals in 4 States• 30,000 Employees• 3,900 Licensed Beds

Annual Spend on Purchased Services• $300 million • 20% of system’s annual

expenditures

MD Buyline – The Facts

Industry-Leading and Proprietary Data

• 500,000+ unique products and services tracked

• 100+ clinical specialty areas covered

• 60,000+ quotes, contract reviews, and analyses annually

• 30+ years of historical data

Clinical and Financial Research

• 600 years of collective experience, averaging over 20 years of experience each

• Broad collective expertise across a range of specialties

• Over 3,700 research reports and surveys published annually

Technology Solutions

• Capital: Proprietary product configurator analyzes thousands of possible configurations

• Consumables: Item-level benchmarking and sophisticated analysis capabilities

• Purchased Services: Sophisticated data and service contract analysis

Our Research: How to Outperform the Market• Challenge: Growing non-labor costs, increased risk, compliance

mandatesThe CAGR for all healthcare expenditures is projected to grow at 6% annually from 2013 to 2022, according to a 2014 HSCA report.

• Process: Identifying opportunities: 3 keys – cost, risk, processUnderstand your spend (AP review). Evaluate the ROI. Align stakeholders to ensure utilization. Manage the contract. Reduce your exposure.

• Savings: Equipping hospitals with actionable data and researchVendors on GPO contracts are offered at a discount, but healthcare providers achieve greater savings when applying industry-leading benchmarks and

research.

medical devices15% healthcare IT14% purchased services30% medical/surgical11%

% S

AV

ING

S

GPO

10% Medical Capital

15% PPI/Consumables

30% Purchased

Services

Status Quo Savings

Our Research: How to Outperform the Market• Execution: Managing contracts, risk and performance

Centralize contracts and establish a formalized contracting process with transparency and accountability. Leverage healthcare subject-matter experts.

• Alignment: Bridging the clinical, savings and contracting gap between stakeholdersComing together like never before, clinicians, physicians, department heads, supply chain, vendors, finance, compliance, audit and legal teams will be able to collaborate and use data to improve decision making and reduce risk for their health system and patients.

financial

accountability

contract

repository

manage

risk

financial

accountability

25%

20%

15%

10%

5%

0%

Save more every month5% sustainable improvement to operating margins

10% to 30%average savings in a purchased services

category

savings before after

experience the direct impact

purchased services savings fallstraight to the bottom line.

before after

20%

15%

4%

9%

PURCHASED SERVICES OPERATING MARGIN

Hospitals implementing Purchased Services’ best practices

spend 25% less on purchased services.

Hospitals with a defined Purchased Services Program quickly realize a

5% sustainable improvement in their operating margins.

Poll Question #1

Q. Do you have clinical outsourced services that have not been re-evaluated or re-contracted in 3 or more years?

A. Yes

B. No

C. Unsure

SSM Purchased Services

Transcription and Laundry Services – Strategic Services that needed a facelift

HOW TO FIND THE RIGHT FOCUS

Immediate, high-impact savings

• Look at top 10

• Then top 50

Best Practice

1. Set our goals2. Formulate the plan3. Implement

Price is only one factor

• Strategic Services• Regional Providers• Optimize Technology • Regulatory Compliance

Implications• Risk

Transcription – Current State

MModal

• Is the incumbent the best choice?

• How is the current pricing?

• What do the clinicians think of the vendor?

• How do we build a solid contract?

Laundry Services – Current State

Seven Vendors

• What are existing obligations (e.g. Expire dates, Termination clauses)?

• What is the current linen/laundry model?

– On-Premise Laundry– Customer Owned Goods– Rental Service – Cooperative– Other – Vocational Services

• What is price Unit Of Measure (UOM)

– Clean or Dirty – Poundage or piece rates

• What does regional stakeholders think of incumbent vendor?

• Do we source for system agreement or leverage locally?

Purchased Services Categories Addressed

Transcription

• Identified as Top Spend

• Negotiated on System level

• Challenges beyond price

• New Technology

• Clinical Improvements

Annual Spend

$3.8M

Laundry Services

• Identified as Top Spend

• Identified as Strategic Importance

• Negotiated on local level

• Challenges beyond price

• Regulatory Compliance

• Existing Relationships

Annual Spend

$7.2M

LeveragedExisting

Relationships

Best Practice Approach

• Analyze spend

• Rank the opportunities

• Analyze T&C

• Service performance

• Utilization

• Identify stakeholders

• Perform interviews

• Gather requirements

• Many points of data

• Scenario driven pricing

• Service-based pricing

• Engage incumbents

• Bid the service

• Pick the vendor

• Define the contract terms

• Monitor the spend

• Monitor the service

• Monitor the users

• Monitor the quality

Opportunity Identification

Analyze the data

Research CategoryPricing

BenchmarksBid the Service

Implement and Manage the Contract

The Opportunity AssessmentBuilt a database with our contracts, AP and PCard data, centralizing our purchased services.

Categorized the data, then prioritize projects based on our initiatives and our identified opportunities.

Gathering Requirements

Understanding the Needs

1. Meet with key stakeholders

2. Utilize MD Buyline’s resources to identify action items for service category

3. Review payment history

4. Agree upon goals andexpectations

Transcription

• Physicians

• Health Information Management (HIM)

• CIO/IHT

• Supply chain

• Quality

• Legal

Laundry

• Environmental Services

• Operations

• Supply chain

• Accounts Payable

• Quality

• Legal

Dialysis

C-SUITE

CONSULTANT DIALYSIS PROVIDER

• Relationship with the dialysis provider since 2001

• Contracted: hemodialysis, CAPD, CRRT and apheresis

• Parallon initially involved to negotiate contract

• Could not achieve maximum savings

SUPPLY CHAIN

$$

MEMBER FACILITY

• Benchmarked the contract • Identified $132K annual savings

• Empowered the supply chain to achieve greater savings with MD Buyline’s recommendation

• Believed in MD Buyline’s recommendation

• Contracting achieved $142K savings annually

• $10k over MDB• Achieved

$71Ksavings over the contract term

Contracting Matters

Dialysis

• Service

• Legal

• Risk

• Liability

The best performing hospitals achieve 30% additional savings through better data research and contracting$$$$

$$$• Better terms

• Better price

• Better service

Ambulance Services

• Legal requirements

• Service requirements

• Regulations

• Risk

• Liability

Poll Question #2

Q. Do you have local or regional outsourced services that have not been re-evaluated or re-contracted in 3 or more years due to local or regional regulatory issues?

A. Yes

B. No

C. Unsure

Duration of Projects

5months

5 -12months

Opportunity Identification

Analyze the data

Research CategoryPricing

BenchmarksBid the Service

Implement and Manage the Contract

Opportunity Identification

Analyze the data

Research CategoryPricing

BenchmarksBid the Service

Implement and Manage the Contract

Transcription – ResultsContracting and Pricing Improvements for

added contract valueSSM now saves $1.3M annually

Course of Action

• Negotiated new rates: too high for hospital volume

• Terms and conditions were not industry best practice. Evergreen Clause and annual CPI

• Standardized Turnaround times to improve efficiency.

• Explore Regional flexibility - Outsource Transcription

Resolution

• Achieved 35% cost reduction

• Improved contract language for turnaround times

• Waived Charges (Hardware and Maintenance)

• Tiered pricing new Fluency Direct technology

• Eliminated Annual CPI for years 1-3 of 5 year agreement ($123K cost avoidance)

• Achieved additional $1.2M – Separate Outsource Initiatives.

RESULTS

35% reduction in previous contract

rates

Improved escalation clauses

Option to renegotiate deal at years 4 and 5

of the contract.

Added Fluency DirectTechnology to

improve efficiencies and drive further

savings

$1,356,264/YEAR COST REDUCTION

Laundry Services – ResultsContracting and Pricing Improvements for added contract value

SSM now saves $1.1M annually

Course of Action

• Negotiated benchmarked rates. (STL/JC)

• Renegotiated billing method : soiled wet linen to clean dry (WI)

• Regionalize 9 separate contracts with 4 vendors to 1 vendor.(WI)

• Source for new Laundry supplier due to incumbent sale of market and Assess CBA of COG vs. Rental. (SOIL)

• Renegotiate T & Cs – Strong language, penalties, rates too high, auto increases and change per piece UOM. (MV)

Resolution

• Achieved reduced rates. $291K

• Achieved savings of $240K

• Achieved Aggregate contract savings of $322K

• Reduced Vendor Pool from 4 to 1. Awarded new Supplier and transitioned from COG model to Rental model. Achieved $170K savings.

• Achieved new contract terms and changed per piece UOM to clean poundage. $110K

RESULTS

Achieved 16%Annual Cost Reduction

Contract terms improvements

ImprovedCompetitive rates

per pound

Added SLAs for quality

$1,132,341 AnnualCost Reduction

Questions and Answers