hospitals-usa supplychainmanagement

8/7/2019 Hospitals-USA SupplyChainManagement

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Supply

Utilization

Beyond Purchasing/ Supply Chain Management

Jim Oliver President& CEO, Yankee Alliance, Inc.

NCHN Annual MeetingTuesday April 21, 2009



Supply

What gives me the right to talk about this subject?

Yankee Alliance employee for 20 years – Dir. MM to CEO

Dir. MM at Miriam Hospital, Providence, RI

Dir. MM at University Hospital (now Boston Medical Center), Boston, Ma.

What is Yankee Alliance?

Yankee Alliance, Inc.501(c)(3)

YA SupplyChain

Cooperative501E

YankeeAlliance, LLC

• 47 Acute Care• 6 Long Term Acute Care• 42 Surgery/Ambulatory Sites• 1,141 Senior Living Sites

• 2,116 Home Care Sites• 1,253 Physician Practices• 3 Laboratory Sites• 124 Institutional Sites• 60 Imaging Sites• 138 Outpatient Services Sites

$1.4 Billion in Contract Volume



Supply

Utilization

Key Findings

- Access to Capital is Constrained- Margins are weakening

- Hospitals are cutting spending

Key Action Steps

- Create a “Sense of Urgency”, Understanding and Leadership- Be a low cost provider - Preserve Cash

HFMA 2009 study- The Financial Health of US Hospitals and Healthcare Systems



Supply

Utilization

Staffing

Inventory & Logistics

45% of Hospitals budget is Supply Chain Cost AHRMM/ HFMA

ProductPrice15%



Moving to ………. > 50%

Consumable Products Expense Increasing 64% Faster

Than

•Salary Expense•Benefits Expense•Total Operating ExpenseThe Advisory Board



Supply Chain Management

Evaluate& Select

Contract

Order

Pick Receive& Pay

Inventory& Store

Pick

Deliver,Use &

Charge

Dispose or Reprocess

Ship

What is the Hospital Supply Chain?

In your facility is one person responsible for these activities?

NO

G P O o r L o c a l

E D I / F a x

/ P h o n e ,

P u r c h a s i n g

o r C l i n i c i a n

O f f i c i a l o

r

E x p e n s e d

C l i n i c i a n s ?



Supply

Utilization

Supply Chain Management – Is new to Healthcare

Purchasing Directors Material Managers

Ford Motor Company – Group VP Global Purchasing

Walmart – Executive VP Logistics and Supply Chain

Covidian – SR VP Global Supply Chain

2-3 levels away from the CEO



Supply

Utilization

Health Leaders 2009 CEO Survey

1.Quality/ Patient Safety2.Construction/ Capital Improvement

3.New Clinical Products/Services

14 priorities

Cost Reduction #14

Top 3 Drivers of Healthcare Costs:

1. Government Laws and Mandates2. Medical Devices3. Clinical Technology

11 Drivers

Pharmaceuticals #9

Top 3 Priorities for the next 3 Years:



Supply

Utilization

Projected Supply Chain Trends for the US Health Care Sector-2009WP Carey School of Business, Arizona State University

1. Continued Growth in Overall Supply Chain Costs

2. Increasing focus on Supply Costs by Providers

3. Competition around services will increase between organizationssuch as GPO’s and Distributors

4. Supply Chain Metrics will be refined

5. Price Transparency will Increase

6. Role conversion will continue within the supply chain department inorganizations from transactional to strategic

7. Executive Suite focus and involvement

8. Exposure of ethical dilemmas will provide opportunities for change



A commitment to make Supply Chain Management as strategically important as Patient Safety

or Quality is required for Hospitalsand Health Systems to be successful.

Who is going to Lead this Change?

“ The Supply Chain Officer”



Supply Chain Officer -2012?

Responsible for the hospitals entire supply chain

Report to the: CEO/COO/CFO

Will have budget responsibility for all hospital supply cost

All hospital managers will be responsible to the Supply Chain

Officer with regard to their specific department

Manage all hospital value analysis activities

Will develop and manage all hospital supply chain metrics



Purchasing

Manage all aspects of the hospitals contracting functionsto include:

Budgeting

Contract Administration

Purchasing



Purchasing

•Manage the Item Master file

•Manage the Centralized Contract file•Act as the signatory of all contracts•Manage all GPO relationships•Manage the Capital Acquisition Process•Implement & Manage the processes and

Procedures for all buying operationscentralized & decentralized



Supplier Relations

•Manage all policies and procedures related tosupplier access to the institutions generaloffice space, clinical and patient care areas

•Act as the principal liaison with all hospital suppliers•Manage a centralized vendor registration system

and monitor compliance with that system byall departments

•Develop and distribute a hospital wide vendor relations policy

•Monitor staff compliance with the hospitals codeof conduct related to vendor interactions



Inventory Management

•Develop, present and manage the physicalinventory policies and procedures for theentire hospital

•Develop, implement and manage directly or throughdepartmental relationships processesnecessary to insure the smooth, efficient flow

of materials through the hospital•Develop inventory benchmarks for all asset locations

official or unofficial



Inventory Management

•Manage the processes necessary to controlall consignment programs in the institution

•Insure the hospital has an emergency plan inplace for supply management in the caseof an emergency or disaster



Distribution

•Develop, implement and manage the systemsrequired to efficiently and effectivelydeliver all supplies to all areas of the hospital

•Manage all electronic distribution systems requiredto deliver supplies(Pyxis, Omnicell, Robots)•Manage the receiving systems in place for all areas

of the hospital to insure appropriate controlsare in place

•Manage the facilities courier systems•Insure the proper systems and controls are in place

regarding inbound and outbound freightservices and expenses



Central Supply

Report to Surgical Services?



Education

•Develop & Implement programs necessary toeducate all staff regarding the hospitalssupply chain

•Identify & develop key personnel that can be trainedto assume responsibility for aspects of themanagement of the hospitals supply chain



Supply Chain Information Technology

•Manage the day to day functions of the hospitalsMMIS

•Centralize the hospitals item database to includeall items purchased by the hospital

•Manage all aspects of the hospitals electronicordering systems

•Liaison with Accounts Payable to insure the 3way match process is functioning effectively

•Incorporate GS1 standards: Including GLN-Global Locator Number and GTIN- GlobalTrade Identification Numbers



Supply Metrics/Benchmarking

•Develop supply benchmarks and metrics for each department of the hospital

•Implement systems to report on a consistentbasis these benchmarks to Departmentmanagers, Sr. Management & the Board

•Champion the utilization of the benchmarks

•Manage the systems required to insure accurateand timely reporting of the benchmarks



Supply Expense as a Percent of Operating Expense

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

M31 M29 M44 M34 M22 M88 L83 M61 L35 S57 M82 L81 S26 L78 L46 M59 M89 S72 M81 M27 S55 M37 M39

Hospital

S u p p

l y E x p e n s e

%

A v e r a g e

19%



Supply Expense Per Adj. Discharge

0

1000

2000

3000

4000

5000

6000

M31 M22 M29 M39 M44 L35 L78 S57 M61 L81 S26 M82 L83 M59 M88 S72 M27 L46 M34 M81 S55 M89 M37

Hospitals

E x p e n s e

P e r

A d j D i s c h a r g

A v e r a g e

$ 1,429



Supply Expense Per Surgical Procedure

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

M 2 2

L 7 8 M 3

1 M 2

7 M 5

9 L 8

1 L 3

5 M 4

4 M 8

8 M 2

9 S 5

7 M 3

4 M 8

9 S 7

2 L 8

3 S 2

6 M 3

7 M 6

1 M 8

2 L 4

6 S 5

5 M 8

1 M 3

9

Hospital

C o s t / P r o c e d u r

Supply Cost Per Procedure

Avg

Median

$ 481

$ 631



Laboratory Suppply Expense Per Billable Test

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

M 2 9

M 8 8

M 8 1

M 6 1

M 3 9

S 2 6

M 8 2

M 8 9

M 2 7

L 8 3

L 4 6

S 7 2

M 3 4

M 5 9

M 4 4

L 3 5

M 3 1

L 7 8

L 8 1

M 3 7

S 5 5

S 5 7

M 2 2

Hospital

E x p e n s e Expense

Avg

Median

$ 2.68

$ 2.76



Diagnostic Radiology Cost Per Procedure

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

M31 L81 M88 M81 M59 M82 L46 M44 M34 M37 M29 L83 M89 S55 M22 S57 M27 L78 S72 M39 L35 S26 M61

ExpenseAvg

Median

$ 8.26

$ 10.05



Linen Expense Per Clean Pound

0.000

0.100

0.200

0.300

0.400

0.500

0.600

0.700

0.800

0.900

1.000

L 7 8

M 8 2

M 2 7

M 3 4

L 8 1

M 3 1 S 5

5 S 2

6 L 4

6 M 2

9 M 3

9 L 3

5 M 5

9 M 6

1 M 4

4 M 3

7 M 8

1 S 7 2

M 8 8

M 8 9

L 8 3

S 5 7

M 2 2

Hospital

Expense

Avg

Median$ 0.466

$ 0.453



Dietary Supply Expense Per Adjusted Patient Day

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

M22 M31 L78 M89 S72 M81 S57 M39 M61 M27 M29 L83 S55 M44 M82 M34 L35 M88 M59 M37 L81 L46 S26

Hospital

E x p e n s e Expense

Average

Median

$ 9.56

$ 9.74



Maintenance Expense Per Patient Day

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

L 3 5

M 8 2

M 8 1

M 3 1

M 6 1

M 3 7

M 8 8

M 3 4

M 8 9

M 3 9

S 5 5

M 2 7

L 4 6

S 7 2

M 4 4

L 8 3

L 8 1

L 7 8

M 2 9

S 5 7

M 5 9

M 2 2

S 2 6

Hospital

E x p e n s e

P e r D

A v e r a g

$ 10.63



Supply Analytics

Proactively cleansing supply purchase andusage data and utilizing that data to managesupply cost.



CommodityContracts

PhysicianPreferenceStrategy:

Benchmarking

Product

Standardization

ClinicalProduct

Utilization

Business Intelligence: Data requirements

Strategic Supply Chain:Driving savings with data analytics

S

trategicSupplyChain



What you “see” may not bewhat you want or get

What you “see” may not bewhat you want or get

Multiple Manufacturer NamesMultiple Manufacturer Names

What is it? What is it?

Difficulty in ordering Difficulty in ordering

Order 50 receive 500or

Order 20 cases, receive 20 boxes

Order 50 receive 500

or Order 20 cases, receive 20 boxes

Multiple Product NumbersMultiple Product Numbers

Inconsistent Item DescriptionsInconsistent Item Descriptions

Packaging IssuesPackaging Issues

Old product dataOld product data Attempting to order obsolete products

Attempting to order obsolete products

SUPPLY iSUPPLY i



SUPPLYview:SUPPLYview:Areas of FocusAreas of Focus



• Opportunities: Generally deal with improving price points via contract price tiers. – Contract available to sign,

– Enhanced price tier is available

• Degree of difficulty : Fairly easy (with good data)• Validate data• Sign contracts• Yankee Alliance staff does research and analysis

• Savings opportunities identified to date:

10 hospitals = $2,254,625



Teleflex endosavings



Line itemdetail



• Opportunities : Are you using different manufacturers in Interventional Radiologyvs. Operating Room?

– Can you standardize to one vendor to maximize your contract tier position?

– Would conversion to a new contract offer savings?

• Degree of difficulty : Moderate to Difficult• Requires really good data• Value analysis process required• Often clinical preference


10 Hospitals: $2,656,505



Peripheral & Biliary Stents1/1/2009-1/31/2010

• Abbott PP-CA-137 No Aggregation

• Boston Scientific PP-CA-138 No Aggregation• EV3 PP-CA-139 Tier 4

h l l



Peripheral & Biliary Stents1/1/2009-1/31/2010

SUPPLY view ® ev3 peripheral and biliary stent conversion :Manufacturer CurrentTotal Spend EV3 TotalConversion

Spend

EV3 $ Savings EV3 %Savings

EV3 $101,356.50 $76,050.00 $25,306.50 24.97%

Abbott $338,155.00 $228,850.00 $109,305.00 32.32%

BostonScientific

$435,921.10 $302,250.00 $133,671.10 30.66%

Cook $6,710.00 $4,250.00 $2,460.00 36.66%

Bard $263,269.00 $186,350.00 $76,919.00 29.22% J&J $761,184.45 $482,250.00 $278,934.45 36.64%

Medtronic $19,060.00 $11,150.00 $7,910.00 41.50%

Grand Total $1,925,656.05

$1,291,150.00 $634,506.05 32.95%



• Opportunities : There is a significant spendfor products that are not on any Premier, Yankeeor hospital contract

• Yankee can provide price benchmarks• Can hospital negotiate contract for these items?• Can hospital convert to a contracted product to save?

• Degree of Difficulty : Difficult• Suppliers do not want to contract for

these items• Value analysis process will be required

to convert to another product

• Will require really good data


10 Hospitals: $6,089,797

Non-contract: Top 45



Non contract: Top 45



M93

L32

M87

M37

L46

L78

M34

L83

1 Product8 Hospitals8 Different Price Points!! =

PRICELESS!!

$205

$276

$279

$185-

$206

$230



• Opportunities : Utilization benchmarking studieshave demonstrated significant savings

• Studies focus on clinical utilization rather thanprice points

• Degree of Difficulty : Difficult• Requires change in behavior • Value analysis process will be required

to present clinical utilization best practices• Will require really good data


10 Hospitals: $8,234,633



Bone Cement v.2Product Utilization

BenchmarkingComparing: Total spend per Joint Procedures

Findings:

Total category spend: $ 1,055,931Potential savings opportunity: $ 169,807



History• 1958: First use bone cement (Femur) Germany• 1960's: Illegal trade of bone cement in America• 1969: FDA approved bone cement

• 1969: Antibiotic Loaded Bone Cement (ALBC) developed• 2003: FDA approved commercial prepared ALBC



Summary• Limit use of antibiotic bone cement:

– Second stage revision – High-risk patients primary

• Antibiotic coverage should treat specific pathogen



FDA Approval• May 2003, the FDA approved low-dose commercial pre-

mixed antibiotic-loaded cement (ALBC) for use in thesecond stage of a two-stage total joint revision followingremoval of the original prosthesis and elimination of active periprosthetic infection

• Not approved for prophylaxis of primary or revision

• Should not be used and is not indicated for the treatmentof established infection.

http://www.fda.gov/default.htm

http://www.hhs.gov/



High RiskClinical evidence supports low-dose ALBC for prophylaxis in revisions and high-risk primary joints

• Increased contamination• Operative time > 150 min• Prior joint infection

• Insulin-dependent diabetes mellitus• Immune suppression (organ transplant)• Steroid-dependent patients (asthma, Rheumatoid

arthritis)



RevisionRemove old implants and replace with new components

Revision rate 10% (primarily hips)• Infection < 2%

• Loosening prosthesis 73%• Bone fractures during or after surgery• Dislocation• One leg shorter than the other • Bone loss in the joint

Symptoms: – increase in pain – change in the position – decrease function: limp stiffness, instability or dislocation

http://images.search.yahoo.com/search/images/view?back=http://images.search.yahoo.com/search/images?p=hip+revision&toggle=1&cop=mss&ei=UTF-8&ni=20&fr=yfp-t-471&b=141&w=184&h=300&imgurl=www.maitrise-orthop.com/corpusmaitri/orthopaedic/mo71_wagner/fig23a.jpeg&rurl=http://www.maitrise-orthop.com/corpusmaitri/orthopaedic/mo71_wagner/wagner_us.shtml&size=4.4kB&name=fig23a.jpeg&p=hip+revision&type=jpeg&no=154&tt=398&oid=5680ea7512ff23ee&ei=UTF-8



Disadvantages of ALBC1. Potential for allergic reactions2. Antibiotic-resistant organisms: long-term exposure to low doses antibiotic

releasing bone

Study of infected hips found in previous arthroplasties

with gentamicin cement, 88% of bugs were resistant, while 16% of bugs wereresistant in arthroplasties with plain cement.

Journal of Bone & Joint Surgery Dec 2001



Current as of: 3/9/09 Data Date Range: 10/1/07 ~ 9/30/08Proprietary and Confidential. © Copyright 2007. Yankee Alliance, Inc. All rights reserved.

Antibiotic Bone Cement Spend Benchmark v.2 Total Spend/Joint Revision Procedures

> 60%

Antibiotic BoneCement



Value Analysis

•Develop, Implement a hospital wide value analysisprogram for all supplies

•Start with Nursing, Operating Room, Cardiology•Develop and manage the agendas, data analytics,

product trials, and implementation of new

products into the hospital



Thank You

Good Luck implementing Supply ChainManagement in your Hospital!

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