joe walsh, avp procurement intermountain healthcare supply...
TRANSCRIPT
Intermountain Healthcare Supply Chain
Brent Johnson
March 11, 2014
Our Purchased Services JourneyIntermountain Healthcare
Joe Walsh, AVP Procurement
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Greenland Gold Rush
Changing Environment (ice retreat AND healthcare reform)
Economic Incentives (high value of gold AND cost pressures)
Willingness to Overcome Obstacles (harsh landscape AND more challenging categories)
Last Frontier?
Next Wild West?
Intermountain Overview
• Headquartered in Salt Lake City: 34,000+ employees
• Created in 1975 when LDS Church donated its 15 hospitals and a secular nonprofit system was created
• $4.5 billion in Net Patient Services Revenue / $5.5 billion in Assets
• AA+ Standard & Poor’s Aa1 Moody’s
• Founders charge: be a “model” health system
Hospitals• 23 hospitals
• 2,800 beds
• 37% of Utah hospitals, 43% of beds, 57% of discharges
Insurance (1983)
• SelectHealth
• 550,000+ members
• ~25% of market -BCBS is largest in Utah.
Providers (1994)
• Medical Group
• 185 clinics
• 1,200 employed physicians
• 4,000 affiliated physicians
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Integrated System: Other Entities
• Homecare
• Central Lab
• Genetics Institute
• Community Benefit Department
• Rehabilitation Services
• Senior Services
• InstaCare, KidsCare, WorkMed
• Life Flight Air Medical Transport and Rescue Service
• Pharmacy Services
• Psychiatric Resources
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State Rankings: Health Status vs. CostC
ost
Health StatusSource: americashealthranking.org and statehealthfacts.org
Wo
rst
Bes
t
BestWorst
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“If all doctors practiced to the standard of Intermountain Healthcare in Salt Lake City,
Medicare would cost 40% less.”
Intermountain’s Clinical Programs
1. Behavioral Health
2. Cardiovascular
3. Intensive Medicine
4. Oncology
5. Pediatric Specialties
6. Primary Care
7. Surgical Services
8. Women and Newborns
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Intermountain’s Clinical Services
1. Imaging
2. Pharmacy
3. Case Management
4. Patient Flow
5. Rehabilitation
6. Nursing
7. Continuum of Care
8. Laboratory
9. Respiratory Care
10. Pain Management
11. Patient and Provider Publications
12. Food and Nutrition
13. Patient Safety
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Critical Success Factors
• Supply chain became a strategic focus by senior
leadership
• $3M initial investment and 25 new talented FTEs –
investments continue
• Empowering supply chain culture
• Centralized buyers and reporting relationships of the
warehouse
• Added couriers, travel services, publishing and central
laundry
• Earned trust of stakeholders: leadership & clinicians
Implemented effective strategies
Deliver on commitments ($280MM in last 6 eyars)
Solution provider AND service provider
• “Skate to where the puck is going to be”
Notable Recognitions
Garter’s 4th Best Supply
Chain in Healthcare
2013 AHRMM Innovation
Award
ECRI Healthcare Supply
Chain Achievement
Award
IntelliCentric’s 5-Rings
Award
How?
Our Supply Chain is One of the Industry’s Best
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Purchased ServicesWhat is It?
Transcription
Diagnostic
Imaging
Support
Outsourced
Services
Consulting
Services
Contract
Labor
Temp Labor
Printing
Services
Auditing
Services
Travel
Services
Pharma
Services
Vehicle
Maintenance
SaaS
Solutions
Design
Services
General
Contractors
Architect
Services
GPO Services
Marketing
Services
Document
Mgmt
Services
Biomed
Services
Equipment
Maintenance
Furniture
Installation
Foodservice
Training &
Education
Building
Maintenance
Services
Grounds
Services
Investment
Services
Insurance
HR Benefits
Payroll
Services
Logistics
Services
Distribution
Services
Records
Storage
Telecom
Treasury
Services
Debt
Recovery
Clinical
Research
Services
Call Center
Services
Language
Services
IONM
How many
sacred cows
can you find?
Purchased ServicesHow is it Different than Anything Else?
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Source: Adapted from The Hackett Group
…and Exponentially More Challenging• Imprecise/changing requirements• Many acquisition channels• Non-commoditized• Demand driven (not supply driven)• Many decision variables• Few to no SMEs & disparate stakeholders• Sourcing never owns the category• High barriers to change• High emotions
Purchased ServicesWho are the Internal Stakeholders?
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Oh Yeah…Clinical Operations too
Stakeholders represent “demand”
Purchased Services represent the “supply”
Matching requires depth, breadth and expertise
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Purchased ServicesSo What?
On average, the healthcare industry
spends an estimated $100 billion per
year on healthcare purchased services,
exceeding supplies and physician
preference items (PPI).
Source: MD Buyline
Purchased services spend is a worthy
target representing, on average, 25%-
40% of the typical hospital’s budget.
Source: The Advisory Board
Supplies19%
Pharma9%
Direct Labor29%Bundled
Service Contracts
5%
Purchased Services
24%
Self Perf Services
14%
Total Hospital Budget
Purchased ServicesSo What?
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Complex services categories have historically been difficult for procurement
to penetrate
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Purchased ServicesSo What?
Current
Situation
Cost Reduction
Initiative
Revenue
Initiative
Revenue
Cost
Net Results
$4,500,000,000
$4,275,000,000 95%
$225,000,000 5%
$4,500,000,000
$625,000,000 14%
$3,875,000,000 86%
Reduce costs structure
by 9 pointsTo generate incremental $400M in NOI:
$12,500,000,000
$625,000,000 5%
$9,500,000,000 95%
Increase revenue 177%, which
is 20X the cost reduction!
- OR -
Change Drivers Imperatives
Purchased ServicesWhy Now?
“When the rate of change inside an organization is less than the
rate of change outside, the end is in sight.” Jack Welch , former CEO, GE
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Purchased ServicesNow What?
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Executive Support
Talent & Structure
Process
Governance
Metrics
Time & Maturity
Infl
uen
ce,
Sco
pe
& V
alu
e
Our Journey to Purchasing Services Proficiency
Case Study
Our Purchased Services Spend Profile
Leverage
• $27M Marketing Services
• $23M Temp Staffing
• $3.5M Supply Chain Services
• $3.3M Distribution Services*
• $3.3M Facility Services
Strategic
• $94M Financial Services
• $20M Clinical Services
• $6.7M HR Services
• $6M Outsourcing Services
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Doesn’t Include:Energy Services
Construction ServicesConsulting Services
Travel ServicesMany Others!
Total Addressable Spend: $300-350MM
Case Study
Our Key Strategies
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• Executive Support Gained CFO support within first month in role
“5% letter” helped gain foothold
• Education and Competency Development Set Expectations with Policies, Procedures and
Road Shows
SOPs and too many procurement education efforts to list
• Analysis Planning Established Taxonomy to Classify Expenditures
Ongoing Spend Analysis
Gained Access to Departmental Budgets
• Engagement Models for Stakeholders & Suppliers New structure and new processes
• Job Aids & Contract Templates MSAs
SOWs
Local/Low Complexity Agreements
• Broad Range of Category-SpecificStrategies
• Leverage GPO Where Appropriate Coverage for “supply-driven” services
Exclusive relationships
Case Study
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Talent & StructureStakeholder Engagement, Sourcing, Purchasing and SRM are All Integrated Case Study
31 Team members
Organized around spend types
Diversity of experience (Supply Chain, Nurse, Doctor, IT etc.)
Majority are masters prepared
Equipment and
Maintenance
Software and Services
Products
Specialists Pool
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Mission: Provide high quality, stakeholder-integrated and integrated spend management services
Talent & StructureSpecialization Has Driven Efficiencies and Effectiveness Case Study
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• Software/IT Sourcing Manage $125M
Support IT, financial, clinical software
• Services Manage $240M*
Support all but marketing and legal services
Jeff Hall: Masters degree, CPSM certified, 25 years supply chain
Scott Palfreyman: Masters degree, CPSM Certified, 12 years IT sourcing
Justin Horsley: Masters degree, CPSM, 9 years Services
Matt Clark: Masters degree, CPSM, 12 years IT
Talent & StructureSoftware & Services Team Case Study
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• Manage $700M; 16 Categories & 196 Sub-categories
• Support clinical programs sourcing and contracting Clinical commodities
Implants
Pharmacy
• Support non-clinical product sourcing Food
Linen
EVS
Trent Gee: Masters degree, CPSM, Clinical sourcing
Jeromie Atkinson: Masters degree, CPSM, pharmacy sourcing
Vince Oda: RN, Masters degree, CPSM, implants
Brent Strong: Masters degree, CPSM
Rob Kurtz: Masters degree, CPSM
Hyde Frederickson: Masters degree, CPSM
Talent & StructureProducts Team Case Study
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• Manage $185M annual capital plan Plan, bundle and bid
• Support capital equipment evaluations and roadmap
• Construction and facilities sourcing
• Asset lifecycle management
• Equipment planning
• Value Optimization Team
• Reprocessing Program
• Custom Packs Program
Scott Schofield: Masters degree, CPSM certified, Finance and sourcing background Julia Gasperini: MD, podiatrist runs our reprocessing and custom pack initiatives
Mark Christensen: Masters degree, CPSM, imaging sourcing
Trent West: CPSM, 20+ years clinical engineering, bundled bids, equipment evaluations
Talent & StructureEquipment & Maintenance Team Case Study
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• Service Request: An initiative for internal stakeholder that is low $$ and low complexity
• Also work with Strategic Sourcing and Solutions team to manage the contract churn
• Helps us develop bench for future sourcing manager roles
• Kellen Switzer, Scott McAlister, Brady Roghaar, Janet Livingston, Royce Bitter, Steve Isakson, Jan Boyer
• Troy Larsgard, Travis Christensen, Riley King, Cole Smith
Talent & StructureSourcing Specialist Team Case Study
SER
VIC
ES
PR
OD
UC
TSStrategic Sourcing ProcessProducts and Services have Little in Common
Attributes• Tangible
• Recurring
• Historical purchases
• Inventory considerations
• Logistics considerations
• Robust decision rights
Sourcing Approach• Source to attribute
• Source to specification
• Value analysis
• Value engineering
• Leverage competition (generally)
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Attributes• Intangible – service, people, expertise!
• Recurring AND Project Based
• History often doesn’t matter
• Relationship considerations
• Service level considerations
• Fractured/local decision makers
Sourcing Approach• Source solutions to problem statements
• Source to business requirements
• Source subject matter expertise
• Balance service and cost
• Use appropriate structure: fixed price, contingency, rate card
• Clear scope and SOW
• Evaluate relationship fit
Case Study
Program Management ProcessThe “Real Work” Begins Once Deal is Signed
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Source: Hackett Group
Case Study
GovernanceDecision Rights via 3-Tier Model
Responsible for executing sourcing projects.
Approve most sourcing decisions
Leadership
Sets priority for sourcing projects throughout company.
Escalation level for complex decisions.
Procurement Steering
Committee
Category Council 1
Work Team 1A Work Team 1B
Category Council 2
Work Team 2A
GOVERNANCE
Implemented Procurement Steering Committee
• Consists of Executive Leadership across the system
• Approve Sourcing Calendar
• Oversee Category Councils that Make Sourcing Decisions
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Case Study
GovernancePrioritization Model
• Model to prioritize and balance sourcing requests
• Utilize algorithm to score every potential sourcing initiative. Highest scored items are worked on first.
GOVERNANCE
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Case Study
GOVERNANCE
GovernanceCategory Councils Make Decisions
Category Councils
Aligned by expense category
Responsible for the following decisions and activities:
Supplier Selection Formulary Management Product Standardization Supply Utilization Supplier Collaboration
Note: These teams are high level and will often empower workgroups to make recommendations.
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Case Study
Metrics
• Use process-based metrics only where applicable “How” the supplier does its processes
Traditional SLAs
Assumes that you know exactly what processes are needed to achieve the outcomes (uncommon)
• Use outcome-based metrics where possible “What” outcomes are expected from services
Fully leverages suppliers for their expertise
Lean on industry benchmarks to set expectations
Tradeoff between cost and service is not linear
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Case Study
Recent Successes
• Revenue Cycle
Transcription services (medical group, hospitals)
Collections
Coding services
• IT
Data center outsourcing
Staffing/Staff augmentation
Software implementation
Consulting services
SaaS solutions
• Nursing
Translation services
Nursing flex services
IOMN services
Lithotripsy services
• Finance
Banking services, Treasury services
E-payables
• HR
Temp labor
Background checks
Executive recruiting
Leadership development services
• Facilities
Energy Management
Pest control services
Janitorial services
Elevator service
HVAC services
Print services
Mailing services
Linen services
Case Study
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Joe WalshAVP, ProcurementIntermountain [email protected]
Let’s Stay Connected!
LinkedIn: http://www.linkedin.com/in/joewalsh/
Mazree: www.mazree.com
Key Success Factors
• Spend more time on stakeholder involvement with a focus on change management –Include key stakeholders in the decision process, have visible high-level support, educate
through training –Communicate objectives, requirements, and progress regularly
• Involve the suppliers early –Maintain perception of a competent and fair process with high-level, strategic relationship
suppliers –Hold pre-RFP meetings to ensure all supplier activities are incorporated in the bid and to
allow other users to become familiar with available capabilities
• Allocate additional time for a thorough, TCO analysis; review results (not calculations) with suppliers where prudent
• Focus on Risks less common in traditional sourcing (e.g., supply continuity, disaster recovery)
• Designate a final decision body; empower with the authority to enforce the decision
• Expect a higher percentage of savings from process and demand management • Implement a supplier performance tracking program to sustain savings• Being proactive in the initial stages will avoid significant barriers to success.
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Key Success Factors
• Collaborate and partner –always give credit to the business
• Pick your battles wisely –pick the right champion• Better, faster, cheaper (in that order) wins over
stakeholders• Learn the commodities –always bring something to
the table• Sole source relationships should be viewed with
additional rigor• Nail your Category Profile, Develop an effective
Supplier Relationship Model and Collaborate with all of the Stakeholders throughout the process…
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