Tag Archives: supply chain

Intalere Member Best Practice Spotlight-Parkview Health-Supply Chain Takes on Construction RFP and Bid Management

ISSUE

A major lesson learned from Parkview Health System’s rapid growth expansion over the past several years was that there were gaps in transparency of construction bids, contractual requirements and invoice review with which Supply Chain could have assisted.

SOLUTION

Teams were assembled to conduct a gap analysis and develop process improvements for construction acquisition and contracting. Internal auditing uncovered critical gaps in processes when it came to choosing contractors and evaluating invoices. This audit led to the development of a Construction Concept to Implementation Flow Chart that helped the team understand the current process in detail. Supply Chain inserted steps and processes into the flow chart based on current policy and the gaps identified by the teams involved in the review.

OUTCOME

The process changes implemented will result in cost savings (as identified in the audit) as well as a perception of transparency in the bid processes. Contractual improvements will result in more clarity in billing of when and how much should be paid. Success is measured by adherence to the newly prescribed processes including a formal vendor certification process, identifying standard contract templates and addendums, recording events that identify errors in invoicing, and savings that occur due to the reductions.

ABOUT PARKVIEW HEALTH

Parkview Health is a not-for-profit, community-based health system serving a northeast Indiana and northwest Ohio population of more than 820,000. With more than 10,000 employees, it’s the region’s largest employer. Its mission is to improve patient health and inspire patients to take steps to improve their own well-being. Parkview Health has been serving these communities since its early beginnings as Fort Wayne City Hospital in 1878.

Check out the Parkview Health page in the 2017 Intalere Best Practices Compendium.

Intalere Member Best Practice Spotlight – Virginia Mason Medical Center – Virginia Mason Memorial Supply Chain Integration

ISSUE

With Supply Chain expenses for medical supplies, devices and implants hovering around 10% of an organization’s total net revenue, this is an area where economies of scale, negotiating power and collaboration come together to make healthcare more sustainable and cost effective. The Virginia Mason Health System is committed to taking advantage of these opportunities through a team-centered approach which results in better financial results and improved, focused patient care.

SOLUTION

A team consisting of Virginia Mason Supply Chain leadership, Intalere and Health Resource Services (HRS) representatives instituted weekly meetings that focused on sharing best practices, analyzing standardization opportunities, identifying technology solutions and developing joint project plans. Intalere Savings Roadmaps identified savings opportunities available by simply taking advantage of existing Intalere and HRS regional agreements without any conversion, known as Quick Wins, or by aggregating volume and tier optimization. These Quick Wins accounted for approximately $532,723 in aggregated savings in 2016 and was accomplished without having to convert any suppliers.

OUTCOME

Virginia Mason Health System was able to prioritize and implement more than 60 contracts and tier adjustments. Total savings for phase one of the project topped $1.2 million for the health system. In later phases, the health system will work with Intalere and HRS in the areas of physician preference items, purchased services and other non-labor spend.

ABOUT VIRGINIA MASON MEMORIAL

Established in 1920, Virginia Mason Health System is a non-profit organization offering a system of integrated health services. A multispecialty group practice of more than 460 employed physicians, it offers both primary and specialty care as well as an acute care hospital, licensed for 336 beds.

Check out the project video and view the Virginia Mason page in the 2017 Intalere Best Practices Compendium. Read the full success story.

The Importance of Price Transparency

Jim WebbShon Wettstein

By Jim Webb, Executive Vice President, Business Development at BroadJump, and Shon Wettstein, Vice President, Product Management, Intalere

Among the most critical struggles hospital supply chain executives face today is not truly knowing fair market prices for the goods they are purchasing on an everyday basis. This is due to a pervasive lack of information – or a lack of cost transparency – about the fair market value of medical and surgical supplies. What can they do to ensure consistent logical pricing structures and the implementation of best practices that will help achieve savings goals?

  • Empower supply chain leadership to negotiate based on current market share and spend with incumbent suppliers.
  • Have the CFO and CEO, if necessary, actively participate in key supplier negotiations and provide additional pressure when suppliers aren’t cooperative.
  • Ensure pricing is addressed in contracts.
  • Avoid signing supplier pricing confidentiality clauses.

These best practices are most successfully accomplished when supported by strong analytics and technology resources, including technology that is incorporated into everyday practice.

Luckily, disruptive solutions are entering the market to assist in a more strategic contracting process. The best solutions are proving to be efficient, transparent, tactical and easy to use.

Read our full article on the importance of price transparency and check out this success story on how Intalere OptiPrice Advantage, powered by BroadJump, helped a member save nearly $300,000 in three months.

What’s Your Level of Supply Chain Maturity?

Pilla, Lori business shot

by Lori Pilla, Vice President, Custom Contracting and Supply Chain Consulting Solutions, Intalere

The maturity of your supply chain depends on many factors, including size of the organization, class of trade and available resources. The capabilities your organization possesses in terms of tactics, operations and strategy can offer a glimpse into where you are in terms of the maturity of your supply chain. Let’s take a look at the four stages of supply chain maturity to see where you might fall.

Stage 1: Ad-Hoc

At this stage, the focus is on today and fighting whatever fires may come up on a daily basis. There are limited controls and few metrics, with maybe something like comparison to prior year being the major benchmark. This stage is also typified by few formal policies and processes that have evolved to their current state without formal design. There is also limited data availability and limited functional coordination.

Stage 2: Controlled Enterprise

The focus in Stage 2 is on control and budgeting – basically the proverbial mantra of “making the numbers.” There is usually a formalized organizational structure and position descriptions as well. In terms of metrics, this stage utilizes more robust measures with comparison to budgets, industry and competitive analysis, and stronger product knowledge. Stage 2 also has productivity measures and substantial functional coordination, but is also marked by organizational silos.

Stage 3: Integrated Supply Chain

Stage 3 focuses on internal integration and a commitment to customer service that drives the organization. There is an emphasis on cross-functional coordination. Incentives are widely used and continuous improvement process is firmly entrenched in the culture. In terms of data, this stage features integrated databases and processes, benchmarking and targeting, and an overall goal to aspire to “world class” supply chain effectiveness. There is extensive functional coordination, i.e. “integrated logistics.”

Stage 4: Advanced Supply Chain

Finally, in the Stage 4, the functional organization gives way to process organization, which seeks out innovative approaches (best practices) for developing sourcing strategies and uses them to shape processes. The vision is on integration with the supplier and customers, and the use of advanced integration technologies. The advanced supply chain organization influences strategies and objectives of suppliers and customers to be more aligned with their own.

Whatever your size and aspirational level of supply chain maturity, there are things, that with a strategy and supportive organization and culture, you can do to improve your supply chain organization. Based on a foundation of performance management and technology, working to improve your processes in terms of inventory management, contract utilization, customer service and transactional procurement, are goals worth working towards.

Learn more about Intalere’s transformational supply chain solutions.

Healthcare Economics – Healthcare Can’t Survive or Thrive Without Supply Chain

A Guest Blog Post by Joe Walsh, VP of Supply Chain and Chief Purchasing Officer, Intermountain Healthcare

A consistent theme throughout Intalere’s blog posts and really in every communication they have with employees, members and suppliers, is the absolute vital role that supply chain plays in building a sustainable financial model for healthcare going forward. This week, I thought it would be beneficial to walk through a simple table to illustrate the point.

Let’s take a look at a healthcare provider with theoretical revenue of $500 million and a cost structure of approximately 95%, providing a $25 million profit, or 5% margin. This represents a somewhat typical structure for healthcare providers today.

The organization’s board decides that they would like to increase profitability by $25 million.  We will review two possible initiatives by which they could possibly accomplish this goal.  The second initiative would focus on cost management, shown in the middle column.  Focusing on reducing costs and/or improving quality within the organization by 5%, and moving towards a 90-10 cost to margin structure, they could realize the additional $25 million in profit gain.  Alternatively, the company could focus on growing its revenues as illustrated in the scenario highlighted in the third column. Based on the current cost structure (95% cost to 5% margin), the organization would have to double revenue, to $1 billion, in order to realize the $50 million profit. That’s an increase in revenue of 100%, an almost herculean task that would likely involve significant investment, addition of service lines, possible acquisitions, etc.

While reducing costs is no easy task, it is far easier than doubling existing revenues. As mentioned in Intalere’s previous post on transforming the perception on the importance of the supply chain, the low hanging fruit, or value, of supply chain is still easier to obtain than laying nurses off at bedsides or cutting clinical care or adding service lines. We have a great opportunity to help the industry navigate the future with success.

Contact Intalere to learn more about how we can help your organization thrive with its supply chain.

Member Best Practice Spotlight: Towner County Medical Center – Saving a Rural Hospital

TCMC photo

We continue our monthly series focused on how our members are tackling their daily challenges through innovative solutions with Towner County Medical Center, illustrating how they worked with Intalere and other partners to implement a financial turnaround.

Issue

Towner County Medical Center (TCMC) was on the path to becoming one of the casualties we hear about in rural healthcare today. The fiscal year ended in June 2013 with a -13.1 percent margin. The facility had a maxed out credit line and an extended accounts payable balance of more than $1.3 million. It was apparent that vendors were taking advantage of the facility, and the supply chain needed expertise to help improve financial outcomes.

Solution

An independent supply chain consultant was hired to help with training and expertise in the supply chain and TCMC partnered closely with their Intalere representatives to review cost savings opportunities. The consultant and Intalere representatives reviewed all aspects of operations. Methods used included:

  • An independent analysis from the consultant.
  • An Intalere Savings Roadmap.
  • Intalere assistance with software ensuring proper purchasing. 

Outcome

The turnaround at TCMC in just one year was substantial. A -13.1 percent margin from FY 2013 was turned into a positive 1.8 percent margin for FY 2014. Net revenue increased 11.1 percent and with the help of Intalere, TCMC was able to add all of the revenue and decrease expenses by 1 percent over the prior year. The credit line has been cut almost in half and TCMC’s accounts payable balance has decreased to below $500,000.

About Towner County Medical Center

Towner County Medical Center consists of a 20-bed critical access hospital, a 37-bed long-term care facility, a rural health clinic, a provider-based clinic, assisted and independent senior living facilities. 

Read more Intalere member success stories, including best practices now!

Best Practices in Benchmarking Medical Equipment

by Bryan Ramey, Mitchell Planning Associates, and Mike Gerhardt, Senior Director, Facility Management Specialists, Intalere

Across every industry, benchmarking is an essential tool to help organizations understand key metrics in determining their position in the marketplace. In today’s healthcare hospital industry, Supply Chain departments are using monthly, quarterly and annual metrics such as the hospital’s total patient days versus their total spend for disposable and consumable supplies, medical devices, implants and instruments to gauge not only how they compare to similar hospitals, but also how similar departments within the hospital compare to each other, i.e. Medical, Cardiac, Surgical and Neuro ICUs. But the capital equipment process within hospitals still lacks efficiency and an effective way to drive down the cost to acquire medical equipment.

Hospitals are now being challenged more than ever to find ways of cutting cost and reducing their overall bottom line. Benchmarking medical equipment by utilizing good, reliable data, along with competitive pricing is a way to contribute to the organizational cost reduction goal. After all, over the course of a hospital fiscal year, the total spend for medical equipment ends up being one of the largest cash outflows. Furthermore, medical equipment procured for new hospital construction projects remains to be the second largest line item cost next to the overall cost of actual construction. So a process which incorporates unreliable data and non-competitive pricing, along with bad habits like benchmarking only to “check the box” doesn’t provide much value for the hospital.

So as you begin to procure your equipment during the annual capital process, it’s important that you can trust the information. The data should be transparent and easy to understand, the provider of the data should be knowledgeable about the benchmarks they are presenting, and the benchmarks should be representative of best-in-class pricing. What good is it to compare your potential equipment purchase to quotes that haven’t been negotiated down to the final price when there are resources to help determine what you should actually be paying? Having transparent data and best-in-class pricing strengthens the ability to determine the “end” price so you can “begin” negotiations with the end in mind. Possessing knowledge of final landed costs can produce an additional cost savings of 7-10%.

For example, to be the fastest runner in the world, one must know that the fastest time is 9.58 seconds to run 100 meters. If the runner is unaware of the world’s best time, then he only beats himself for not dedicating the resources to knowing and understanding the facts. The same goes for benchmarking medical equipment. Understanding the data and knowing the actual prices paid will help your Supply Chain team deliver deeper discounts and better deals, hence, making the capital process much more efficient and effective.

Where will you end up? What is your target? What is the outcome? These are questions that should be answered prior to negotiating. How do you determine the appropriate end? Compare to previous purchases, compare to similar purchases, compare to other organizations with like or similar purchases, and compare to best-in-class purchases. For an aspiring Supply Chain team that truly wants to be the best, one must know what constitutes as being the best, how high the bar is set to reach the best, and in the world of procurement, how low the actual price is to be the best in class.

To learn more about Intalere and Mitchell Planning’s Equipment Planning solutions, click here.

Member Best Practice Spotlight: Intermountain Healthcare – Category Captainship Provides Strategic Relationship and Benefits for Provider and Supplier

The Intalere Member Best Practice Spotlight continues its focus on the supply chain this month. Next up is Intermountain Healthcare’s Category Captainship program.

Issue:

In today’s dynamic reality of healthcare reform, hospitals are charged more than ever to reduce costs, while simultaneously increasing value and improving patient outcomes and satisfaction. Because every child has individual needs, there is a variety of infant and pediatric formulas from which to choose. Intermountain Healthcare was purchasing various pediatric formulas from three different suppliers and wanted to look at consolidating the purchasing process.

Solution:

Intermountain had an opportunity to adopt their suppliers as a collaborative extension of their own staff, ultimately sourcing them not only for product offerings and price, but also for cost reduction opportunities and value propositions. Thus, in addition to conducting a review of the various types of formulas and their indications for use, Intermountain also introduced the concept of Category Captainship. Abbott Nutrition was selected as Category Captain for infant nutrition. As Category Captain, Abbott ensures Intermountain always has the correct product for the need of the patient, even if the product is not made by the company itself. If there is a disease-specific or specialty product that is only made by a company that is not the Category Captain, they are required to permit the use of that product when needed. In addition, by primarily offering only one formula brand, Intermountain staff will remain focused on their commitment to breastfeeding initiatives and not feel a need to discuss various formula options with patients.

Outcome:

Selecting one company to be the infant nutrition Category Captain, and therefore standardizing to their product line, has reduced the number of products and costs the distributor, facility store rooms and floor locations, carry and manage. Previously, Intermountain’s annual spend for infant formulary items formula and ancillaries was $1.6 million. After program implementation, Intermountain saved over $400,000 (25 percent savings) due to item consolidation, price negotiation and new formulary protocols.

About Intermountain Healthcare

Intermountain Healthcare, headquartered in Salt Lake City, Utah, is an integrated delivery network (IDN) of 22 hospitals, 186 clinics, a health insurance arm and home health care operating in Utah and Idaho. It was founded in 1975 and now leads, endorses and sets leading practices by using evidence-based medicine to deliver outstanding patient care that earns recognition from business, healthcare, finance and political sources.

Read more Intalere member success stories now!

Member Best Practice Spotlight: Dana-Farber Cancer Institute – Painful Product Conversions? Partner with Nursing for Positive Results

This month, the Intalere Member Best Practice Spotlight focuses on the supply chain.  First up is the Dana Farber Cancer Insitute.

Issue:

Dana-Farber Cancer Institute’s Product Standards team faced recurring challenges when it approved a new product for conversion, because of issues including key nursing contacts not being informed, products not being available at the announced start times, contract pricing requests never making it to the distributor, the product conversion communication not making it to all appropriate stakeholders.

Solution:

Dana-Farber implemented a formal product conversion process, including a checklist, to ensure steps were not missed in the process. Once a product has been approved for conversion, the Product Standards team leader will call a huddle with appropriate stakeholders, at which time the checklist is used to guide the members on the steps each person needs to complete for a successful conversion.

Outcome:

The product conversion process is much more organized and communication has improved. Different ways of communicating news within the organization have been developed, especially within nursing contacts. The checklist has been an effective tool and the process continues to improve. Nursing’s involvement is a key element to this success. The new process has helped to clearly identify gaps and flaws in product conversions. Product conversions are a constant work in progress, but Dana-Farber is very happy with what has been accomplished!

About Dana-Farber Cancer Institute

Dana-Farber Cancer Institute is a principal teaching affiliate of the Harvard Medical School and is among the leading cancer research and care centers in the United States. Dana-Farber is the top-ranked cancer center in New England, according to U.S. News & World Report, and one of the largest recipients among independent hospitals of National Cancer Institute and National Institutes of Health grant funding.

Read more Intalere member success stories now!

Cost Reduction – Deeper Value Beyond a Portfolio

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By Dale Wright, Senior Vice President of Contracting, Intalere and President, Intalere Choice

A healthy and sustainable operating margin is vital for every healthcare provider. In maintaining that margin, optimizing the supply chain is of critical importance, not simply through cost of products, but through identifying new revenue streams and identifying all opportunities to improve efficiency and achieve savings by prioritizing opportunities and matching initiatives to the organization’s strategic plan.

What are some of the keys to cost reduction in the healthcare supply chain to consider?

Access to a comprehensive, competitive portfolio of product and service contracts – Whether you work with a group purchasing organization (GPO) or not, the depth and breadth of contract portfolio you have access to can offer a clear advantage. Without a contract for coverage, you may be forced to:

  • Negotiate directly with suppliers – given the limitations of resources in many materials management departments, this can be a huge drain on efficiency and resources.
  • Use a different product/manufacturer, if clinically acceptable this would require time-consuming evaluations and assumes a different product/manufacturer is readily available.
  • Pay a higher price

 Not just on the clinical side, with things like:

  • Diagnostic Imaging ​
  • Laboratory
  • Medical/Surgical
  • Physician Preference
  • Pharmacy

 But also on the non-clinical side:

  • Office  
  • Environmental Services
  • Executive
  • Facility Management  
  • Financial Management
  • Foodservice
  • Information Technology (IT)
  • Telecommunications Services and Equipment

Standardization, Utilization and Volume Commitment – Identifying and eliminating duplication, in some cases helping or guiding members to use less of something or eliminating its usage entirely, is very important. Supply chain data analysis can also provide opportunities for the use of comparable products that can drive costs down dramatically. In many situations, similar products from different manufacturers can be reviewed and declared comparable. The best price then becomes a leading differentiator. Also, in some cases, the same product by different distributors can be found at different costs.

To take it a step further, if providers are willing to standardize and also commit a high volume to a supplier or distributor, they can drive further savings.

  • Custom Contracting – Health systems, integrated delivery networks (IDNs) and regional health alliances can also take advantage of custom contracting to maximize savings in high-impact areas. You can engage your GPO to handle the RFP, office and back-office activities, assist with identifying target projects, help evaluate suppliers and monitor contract compliance. Each custom contract represents a unique savings agreement that gives your organization a competitive advantage.
  • Physician Preference Items – Even more significant to the overall success of the supply chain is the effective management of clinical preference items, with their significant cost and impact to the quality of services delivered to the patient. Efficient value analysis processes will ensure that all bases are covered with regard to high tech and high touch healthcare products, including reimbursement, safety, education and clinical credentialing, product standardization, appropriate utilization, and finally, and most importantly to the organization’s cost structure, compliance with negotiated contracts and agreements. 
  • Data and Business Intelligence – Any successful supply chain initiative must be based on good data and tools that can help you  analyze daily spend and provide workable and actionable information to effectively manage costs. This can encompass every supply chain function, including the basics such as contracting and price integrity, e-procurement, inventory control and distribution efficiency that will ensure high quality and cost effective product availability and delivery.

For more insight on the importance of reaching beyond the portfolio to enhance cost reduction, view this video.