New England Society for Healthcare Materials Management

Ken Peterson,

Vice President

System Logistics Management

Aurora Health Care

April 16, 2004

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Committed to Finding a Better Way

Making Health Care a Competitive Advantage for Wisconsin Companies and Citizens

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Using Web Based Technology& the Internet as a Driver

AgendaAurora at a Glance

Focus on Operating Margin

Materials Goals to Support Aurora Strategy

Aurora’s Use of the Web & Internet

Improvements & Successes

Lessons Learned4

Aurora Health Care

Largest community owned, not for profit, integrated network in Wisconsin

Largest private employer in State of Wisconsin: Employees: 27,162

Hospitals: 13 Acute Care and 1 Psych hospital

Clinics: 113 Retail Pharmacies: 143

Revenue: $2.4 billion Supply Expense: $571MM

Total Certified Beds: 2,598 Adult Inpatient Days: 430,973

at a glance

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The Three Part CommitmentTo the People of Eastern Wisconsin

• Whatever the national benchmarks are for price increases for 2003 through 2005, Aurora Health Care will be below

• Aurora Health Care will initiate actions to moderate total community health costs while demonstrating improved community health

• Aurora Health Care will be accountable to the community and transparent in its success in meeting its commitments

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Moderate Total Community Health Costs

Maintain Growth to meet needs of Community

Replace Aging Capital

Support New Technology (Speed/Cost of Change from an IS as well as from a Clinical stand point)

Focus on Improving Operating Margin

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Increase/Enhance Customer Service(s)

1. Web Based Requisitioning ToolImprove Productivity

1. Transmitting Transactions via Internet

2. Automating the Capital Process

Effectively make use of Web-enabled technology and the Internet

Reduce Costs/Improve Productivity

1. Contract Management Program (Premier’s e-Sourcing Program)

• See and Identify Opportunities to Reduce Costs

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Increase/Enhance Customer Service(s)

Automated Single User Interface for procurement Vs use of multiple (proprietary) platforms

(Aurora’s tool is IREQ -Intranet Requisitioning)(Global Healthcare Exchange (GHX)’s tool is “Catalyst” )

Centralized all transactions through MMIS

• Means to support Outlying Users• From 200 Users to 2700 Users (Began Implementation 2001)

Lock Down/Approval features to assist departments’ control costs

Web Based Technology & the Internet

1. Web Based Requisitioning Tool

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Web Based Technology & the Internet

1. Processing Transactions via the Internet: Aurora: Using XML (Extensible Markup Language) to process the 3 major ordering sets over the Internet via GHX to suppliers or direct to Cardinal Health --- (PO (850), Confirmation (855), Invoice (810) (Began Implementation Oct 2001)

Improve Productivity

Consolidates transactions through single intermediary vs. using numerous EDI systems

Facilitates accurate transmission of electronic purchase transactions by comparing data (catalog format: description, units of measure) that provider transmits with supplier data and flags discrepancies) (GHX “Content Intelligence)

GHX… more than an Internet Intermediary!

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Web Based Capital Approval Tool (completed and fully deployed)

• Increase the processing speed for submission/approval• Improve accuracy of data & capturing full project costs• Track processing times and data for bundling

Web Based Capital Request Tool (under development -- estimated completion Fall 2004)

Quote/RFP Tool (GHX) (working development with GHX)

Web Based Transactions via Internet (GHX) (working development with GHX & shopping for supplier to pilot program)

Web Based Technology & the Internet

2. Automating the Capital Process

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Authorization For Expenditure Request

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Web Based Technology & the Internet Reduce Costs & Improve Productivity

1. Contract Management Program (Premier’s e-Sourcing Program)

Initiate Rapid Contract Implementation and Establish Accurate Pricing• Act as central repository for all contracts• Ensure accurate and timely contract pricing from day 1 • Contract/Pricing Activation on line with Suppliers & Distributors (Active)

Facilitates Accurate Data Transmission • Transmission of accurate nomenclature and pricing from Premier Contract File to users’ MMIS via GHX (Under Development)

• Pricing Confirmation via GHX during confirmation and invoicing (Under Development)

Reduce Healthcare Costs by Increasing Visibility/Availability of Data• Enabling higher levels of contract compliance: Analytics: Contract Utilization- By Supplier, by Contract, by Product, by facility, by department… (Under Development)

Verify Purchase/Contract Volumes: Rebate Calculator (Under Development)

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3. Automation Requires/Be Prepared for Process Change:

• Change for Customers

• Change for your Staff & other Departments

• Change for Suppliers

Lessons Learned

1. Establish a Vision:

• Why/what benefit am I trying to accomplish• Involve your IS Dept Early• Involve users as part of development process

2. Establish Current State Basis for Benchmark/Metrics Early

• Capability to prove value of Systems and Processes

• Credit for increases in productivity

4. Be Prepared to Commit Your Time and Resources

• Hold your staff, suppliers & intermediary accountable to meet agreed upon expectations

• Participate in User Groups

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Improvements/SuccessesPurchasing Transactions via Web Based Technology & Internet

1. Intra/Internet Requisitioning Tool (IREQ): Productivity Gains From Manual to Web Based: (Estimated)

• From 200 to 2700 users connected to MMIS• Buyers: 17 Min per PO processed = 54,085 hr/yr equates to 26 FTE’s Savings• Users: 19 Min per Req processed = 66,262 hr/yr equates to 31.8 FTE’s Savings

From FY 2000 to FY 2003 Expanded Central Purchasing Function with minimal staff increase FY 2000- 3 Hospitals FY 2003- 14 Hospitals FY 2000- 0 Clinics FY 2003- 42 Clinics

2. Productivity gains for Users and Staff increase as Aurora uses more Web Technology & continues to connect with more suppliers via GHX Connected with 25 Suppliers on 850/855’s through GHX or direct with Distributor-Cardinal Health & Live with 3 Suppliers on 810’s and growing: (Volume = 43,750 PO’s/yr = $50MM/yr) Reduction of pricing errors (Reduced 50% of open invoices w/Cardinal Health from $1.7M in Mar 02 to $26K today -- Continuous Pricing Verification)

3. Productivity gains with Automated Capital Request Process Decrease processing (approval/coordination/negotiations/order from 11 weeks to 7

weeks)

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Improve Order EfficiencyPurchasing Staffing Levels

95,320

287,376

131,494

381,295

195,235

547,646

208,058

564,792

232,962

625,778

2000 2001 2002 2003 2004 Projected

Total PO's

Total Lines

11 Buyers27.5 Staff

13 Buyers27.5 Staff

14 Buyers29.5 Staff

16 Buyers28 Staff

16 Buyers29 Staff

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Cost to Implement Aurora’s Web-Based Requisitioning Tool

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Hardware $ 60,000

Software $147,000

Consulting $400,000

Staff Time $ 30,000

1 FTE Full-Time Trainer

Note: The hardware and software were purchased for this project but were then the foundation for all Web-based projects that followed.

Questions??

Web Based Technology & the Internet

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