A Common Calling

One IDN finds a unique approach to balancing value, efficiency and compliance.

The concept that there is more to hospital contracting than securing the best price may not be new. But, Sisters of Charity at Leavenworth Hospital System (SCLHS) Supply Chain Director Don Klusmeier has taken a new approach to balancing value, efficiency and compliance in his contracting decisions.

Prior to joining SCLHS in 2006, Klusmeier worked in supply chain management at University of Missouri Health System, where he was associate director of administration. Today, his years of supply chain experience enable him to accomplish three things at SCLHS. “I motivate our value analysis teams and ensure we have a clinically driven supply chain,” he explains. “I also oversee our outsourced relationship with Broadlane with regard to contracting, procurement and logistics functions. And, I am the liaison between our hospital C-suites and supply chain management.”

Today, SCLHS is a highly centralized, eight-acute-care hospital system with facilities and associated clinics spread across four states. Its annual net revenue is $1.4 billion, and supply expenses for fiscal year 2008 approached $256 million. About four or five years ago, the IDN’s hospitals had a “common calling” to move from a decentralized model to a centralized one, says Klusmeier. “At the same time, we recognized that there is more than just price involved in the contracting process. “Around 2004, we completed a consultant study specific to supply chain, and [initiated the] move toward making SCLHS more centralized.” Although he didn’t step into the process until two years later, he found the transition easy to make. “They already had gone through some of the learning process beforehand,” he points out.

“The value analysis teams already were in place,” he continues. “Initially, I had to build relationships with the clinicians and gain their trust that first and foremost we would take care of our patients. I also had to make it clear that I didn’t have all of the answers and wouldn’t force products on them. But, it was nice to have that infrastructure in place.” Still, it was up to Klusmeier to shape the value analysis teams according to his vision for SCLHS, and that was no easy task. “It was a challenge at first to get members to attend meetings,” he explains. “We had to show them that we couldn’t get their input if they weren’t present.”

A knowledge base
Indeed, Klusmeier got this message across to his committee members. Today, SCLHS boasts peer-driven committees, not hospital-driven ones, he points out. The IDN relies on six teams in all:

  • Surgery
  • Cardiology
  • Medical
  • Pharmacy
  • Lab
  • Radiology

“We employ these groups as our knowledge base and look to them to make and implement decisions for their hospitals,” says Klusmeier. “We identify department chairs to lead these groups, individuals who have displayed leadership capability and can carry messages back to the [hospital departments] and ensure there is follow-through. [Essentially], we try to consider three things when we work with our teams: value, efficiency and compliance with regard to contracting decisions we make.

“Do we select products that enable us to perform efficiently, with the right supply partners?” he says. “And, are we compliant with [those choices]? If not, why? That’s where the value analysis teams come in.”

“Our value analysis teams help us evaluate the value we are deriving [from certain products and services] for our clinicians and patients,” he continues. “It’s not just about what products cost or which products are least expensive. Those products aren’t always the most [efficient], and then we struggle with compliance issues.” Which leads Klusmeier and his teams to their next point of consideration – efficiency.

“We ask ourselves, ‘Are we using key products in the right amount – no more, no less?’” he says. “Does a certain product contribute to patient comfort, patient safety and clinical productivity? Do we have evidence that a product actually makes a difference in patient care?” By beginning the process with obtaining clinical alignment, it makes it that much easier to procure buy-in, he adds.

“We are open and aggressive about reporting our compliance,” Klusmeier continues. “This leads to discussions and a focus on why some [departments or] hospitals may be compliant while others are not. For instance, if seven hospitals are doing fine with a particular product, but the eighth hospital is not, the first seven can demonstrate how they worked through any problems.” The goal is to weed out variation and the potential for error it may cause, he adds.

Peer-driven, not supply-driven
“We let the clinicians influence their agendas rather than have supply chain management put one together,” he says. “The key is, the focus is peer-driven, not supply-driven.” In fact, notes Klusmeier, “We are at a point where it’s not a matter of supply chain management pointing out some contract areas that are expiring. The teams initiate these discussions on their own when they meet via monthly teleconference calls.”

So, recently, the surgery team initiated a spine project, he explains. “Team members gathered data and developed their own approaches (e.g., with regard to metal, biologics, BMP, etc.). Previously, the cardiology and radiology groups looked at contrast media appropriateness, working closely with their physicians.” It helps that each value analysis team is comprised of individuals heading the same department, albeit different hospitals, says Klusmeier. “So, we have surgery [experts] explaining their position to other surgery [experts]. And, because team leaders and physicians are driving product initiatives, they are more amenable to working with supply chain management to adopt new contracts, he adds.

An evolution
“It’s not that our goals have changed, but as our value analysis teams become more sophisticated and confident, they can take on more challenges,” says Klusmeier. “We are at a point where the lines are blurring between where our value analysis teams leave off and where other quality structures and initiatives pick up. I think it’s great that [the teams] are initiating discussions on how to mobilize patient-oriented activity.”

There was a time when the surgery group would not have acted independently to facilitate change, he points out. Likewise, years ago, the radiology team probably wouldn’t have set its goal at 95 percent contract compliance. “Initially, the radiology team was content with 90 percent compliance,” he says. “Then, on its own, it decided to go for 95 percent.” Did it reach its goal? “They’re awfully close,” he says.

“These kinds of victories spur our team members on,” he continues. “In the beginning, we had to learn how to get on base. Now we can pick and choose some opportunities to try for that home run.”

About Laura Thill

Laura Thill is a contributing editor for The Journal of Healthcare Contracting.

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