supply chain transformation - becker's asc reviewrecognized leader in healthcare supply chain...

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Supply chain transformation:Setting the stage to improve your bottom line

Heather O’Sullivan Steve Thompson

VP, Clinical Operations VP, Supply Chain Innovation

Cardinal Health™ Inventory Management Solutions

October 1, 2015

© 2015 Cardinal Health. All Rights Reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are


Welcome

2

• Healthcare trends impacting the supply chain

• Why traditional approaches to the supply chain are

no longer working

• Alternative ways to manage inventory and clinical

efficiency



About Cardinal Health

Recognized leader in healthcare supply chain transformation

• Ranked #1 by Gartner 2011-2013 for transforming the

healthcare value chain to meet new challenges around costs,

revenue and outcomes

Unparalleled understanding of healthcare value chain

• Nearly 100 years of experience serving hospitals

• 40+ years of leading supply chain solutions

3



Shift from pay for volume to pay for value

4

Source: CMS.gov

20% 15% 10%

60% 55%40%

20% 30% 50%

2014 2016 2018

Alternate Payment Models (e.g.,bundled payments, ACOs)

Fee-for Service (FFS) Linked toQuality or Value

Traditional FFS Payment

Health and Human services has set explicit goals for alternative

payment models and value based payments



Impact on providers

5

What does value-based care mean to

providers?

• Pressure to reduce spending while improving

quality of outcomes

• Financial risk and costs shifting from payor to

provider

• Pressure for providers to demonstrate

differentiated outcomes

• Increase in the need for better care

coordination and patient care

Source: Deloitte Center for Health Solutions. “The road to value-based care.” 2015





A changing landscape

Affordable Care Act (ACA)

Regulatory requirements

• Unique Device Identification (UDI)

• Joint Commission audits

Census and demographics

• 10,000 people turning 65 every day

• 10M Americans over 80

• 20 percent population >65 by 2030

Pressure to reduce costs

• Reimbursements are declining

• Products are being commoditized

Source: The Centers for Disease Control and Prevention (CDC), The State of Aging and Health in America, 2013

55 percent

labor

35 percent

materials

10 percent

other

Expenses

6



Immense waste in the supply chain

Does not include

indirect costs of:

• Excess time spent by

nurses searching for

inventory

• Time spent (or patient

risk) during product

recalls

• Risk of non-compliance

to regulations set by

Joint Commission

10%-30%1

Waste in PPI supply chain

$5,000,000,0002

Estimated loss per year

Mil

lio

ns

1- Modern Healthcare “Losing preferential treatment” (February 2013)

2- PNC Healthcare; GHX quantitative research study (August 2011)

• Source also applies to chart

7

© 2015 Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO

CARE are trademarks or registered trademarks of Cardinal Health.

Managing costs within the supply chain

8

Rising product costsManual/multiple

inventory systems

Barriers to data sharing

Nature

of product stocking



How do things work in retail?

Manufacturer Distributor Distributor Supermarket Consumer

9



…and for a hip prosthesis in the OR

Manufacturer Hospital Patient

? ? ?

10

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRw&url=http://www.direct-healthcare.com/hip_replacement.htm&ei=9UKUVdmbB4XAsAWZwYPICQ&bvm=bv.96952980,d.b2w&psig=AFQjCNF3M4fAVJNhJwpfh71SO_eqcToYXQ&ust=1435866224191858

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRw&url=http://www.direct-healthcare.com/hip_replacement.htm&ei=9UKUVdmbB4XAsAWZwYPICQ&bvm=bv.96952980,d.b2w&psig=AFQjCNF3M4fAVJNhJwpfh71SO_eqcToYXQ&ust=1435866224191858



10 barriers to effectively managing inventory

Difficulty with charge/cost

capture

Physician preferences

Diversity of procedures

and service lines

Expiration/Obsolescence

Limited data

Consignment

D Duplications

Lack of automated inventory

systems

Multiple supply categories

Consignment

1

2

3

4

510

9

8

7

6

11

Source: Gagliardi, A., Supply Chain Management Inventory Control: The Basics, ASCs Conference, 2010



What are the priorities?

12

Supply ChainEliminating

product waste

Charge/cost capture

Optimized par levels

Having the right

product when

needed

Documenting

implants

Regulatory

compliance

Visibility to

product

Patient care

DirectorBusiness

Manager

Clinician



From 12 steps to two

Number of steps within the workflow:

*Process is repeated for each additional item opened during a case

13

Current manual state:

Number of steps*

With automated

inventory management:

Number of steps*



Where to begin

• Recognize there is a problem

• Agree on the vision

• Build alignment with key stakeholders

• Assess the current state

• Understand automation options and

impact on key areas including point of

use

14



Inventory management best practices

15

Best practice Reason

Using an RFID-enabled

system

• Real-time visibility, accurate tracking and intuitive

• Unique Device Identification

Using 2-bin Kanban

methodology

• Used for commodity products

Point-of-care charge/cost

capture

• Eliminate manual processes

• Improve compliance and accuracy

Interface with systems • Integrate inventory management into data analysis system

No cycle counting • High compliance — because it’s a reliable, trusted process

• Clinicians not involved in PAR level reconciliation

Strong analytics platform • More predictable ordering patterns and ability to use data to

optimize purchasing



An ideal inventory management solution

Integrated

advanced

analytics

Lowproduct cost

Highproduct cost

High-cost

physician

preference items

and implantables

RFID-enabled

Smart Cabinets

Surgical packs and

other mid- to

high-cost supplies

RFID-enabled

Smart Wand

Low-cost supplies

like gauze

and bandages

2-Bin Kanban

Low-cost supplies

that require

each-level tracking

Barcode



Cost per case



Cardinal Health™ Inventory Management

Solutions for the OR

18

1. Receive producta. Add RFID-tag

b. Scan

2. Store inventory a. Central supply

b. Core

3. Pick for procedure

4. Use and documenta. Scan for charge capture and/or tracking

b. Return unused items

5. Manage inventory a. Advanced analytics

b. Smart order

c. Enterprise visibility

d. Expiration management

© 2015, Cardinal Health. All Rights Reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are


Q&AHeather O’Sullivan Steve Thompson

VP, Clinical Operations VP, Supply Chain Innovation

www.cardinalhealth.com/cims

[email protected]

614.553.5322

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