The Journal of Healthcare Contracting

Cleveland Clinic Follows Many Paths to Cost Reduction
By Linda Alter

Cleveland Clinic Health System doesn't buy just one supply chain solution for its 14 hospitals and many non-acute facilities in the Cleveland area and Florida. Instead, it combines and customizes solutions to meet specific needs. "I don't really have one solution, one company that solves all of my problems," says Alan Wilde, Jr., director of purchasing and vendor relations. "I try to pick the best in class or the most unique. We look at technologies that are out there in the market and try to take advantage of what they have to offer us."

One such solution is QSight by Owens & Minor. QSight is a point-of-use inventory tracking system that uses manufacturers' bar codes to track receipts and usage of items. Cleveland Clinic uses the Web-based tool in its interventional radiology, cardiology and electrophysiology units. (Cleveland Clinic didn't buy the entire Owens & Minor software solution. Another company's software is being blended with QSight to clean up the system's data.)

"I have more real-time information on what is being used vs. what is ordered," says Wilde. "I am able to actually look at usage patterns and make suggestions on what we should order less of or what we should order more frequently. [And] I actually know what physician uses what item."

Armed with this information, Wilde and his team can approach administrators and physicians to begin standardizing items purchased by the system. "Now we have information about which items are being used, and which doctors are using what. We know which doctors we need to talk to." Administrators are then approached individually.

Product evaluation committees consider physician requests for new products, and new products in general. Wilde attributes much of the success of these committees Ð particularly those that evaluate physician-preference items - to physician involvement. For example, a physician serves on the operating room committee, and another will participate in a committee that is being formed for cardiology-related supplies and equipment.

Reverse auctions
Over the past five years, Cleveland Clinic has realized over $66 million in cost reductions. One cost-cutting tool it has adopted is the reverse auction. For some product categories, reverse auctions have replaced the traditional RFP process and have speeded up the purchasing process.

Using software by Ariba (Sunnyvale, Calif.), the IDN hosts reverse auctions for perfusion items, contrast media, gloves, patient beds, mattresses, furniture and other items. Manufacturers are alerted that items are going up for bid and are invited to participate. They log on electronically and bid against each other, with the lowest price winning the contract.

Because of its size and clout, Cleveland Clinic can help vendors grow their business and market share; in return, the IDN gets reduced prices. When Wilde and his staff analyze potential contracts, they do so with an eye on the different tiers offered. They ask questions such as, "If we sign up today at tier 1, will we save money?" "How about tiers 2 or 3?" "And if we commit to a higher tier, how will we reach it? Will we need to consolidate the business between two different suppliers?" The IDN tries to answer these questions as quickly as possible in order to take advantage of cost-savings as soon as they are available.

Outside assistance
In order to maximize its efficiency, Cleveland Clinic seeks outside expertise when necessary. For example, the IDN has hired an external auditing group to look at its GPO contracts and make sure it receives the pricing at the tier by the date indicated on the contract. The auditing group recoups any cost savings that is due the health system that it didn't receive.

By maximizing manufacturers' rebate programs, Cleveland Clinic has been able to get money back after spending it. "We've signed up for every single one and we meet with our suppliers to try to meet the goals that are outlined," says Wilde. "We've had about a 20 percent increase in the amount of rebates that we've gotten traditionally."

Buying certain products in bulk has helped the health system save money. "We'll sit down with our supplier and talk to them about a bulk buy. They may be trying to meet certain numbers at the end of their quarter," says Wilde. At first the purchasing staff had to approach their suppliers about buying in bulk. Now the vendors approach them. "Bulk buys help the sales reps meet their numbers and Cleveland Clinic save money," says Wilde.

No single cost-saving method is more effective than another. "All of them are effective and there isn't one method that works best for all circumstances," says Wilde. When asked about the most pressing challenges facing Cleveland Clinic's purchasing department, Wilde notes that it is trying to keep the costs of new products in line with the cost of the old ones.

Cleveland Clinic facts
Founded in 1921, The Cleveland Clinic is structured as a group practice. The doctors on staff are salaried employees and are not in private practice.

The main campus in Cleveland occupies 140 acres and 37 buildings, including a hospital, outpatient clinic, cancer center, eye institute, research institute and supporting labs and facilities. The Cleveland Clinic operates 13 family health centers in the surrounding area, staffed by Cleveland Clinic primary care physicians, as well as medical and surgical specialists.

The Cleveland Clinic Health System comprises nine community hospitals and two affiliate hospitals, in addition to the Clinic. The Cleveland Clinic operates two facilities in Florida:

An integrated medical campus incorporating a 150-bed hospital (co-owned through a partnership with Tenet South Florida), outpatient clinic and educational facilities in Weston.
A 70-room hospital and outpatient facility in Naples.

Cleveland Clinic is proud of its clinical expertise, particularly:

The Cleveland Clinic Heart Center, which is said to be the largest and busiest heart program in the United States. It accommodates more than 190,000 patient visits a year and has the largest surgical valve practice in the country (2,058 procedures performed in 2002).
The Urological Institute. With more than 55 full-time urologists, the Institute treats virtually every disorder of the genitourinary system.
The Neuroscience Center, where more than 76 full-time neurologists provide care for a wide range of neurologically based concerns, including cerebrovascular disease, epilepsy, Parkinson disease, multiple sclerosis and spinal concerns.
The Cole Eye Institute, said to be one of the largest eye institutes in the United States, with a team of clinicians and researchers studying and treating retinal diseases.
The Cancer Center, where 250 physicians, plus scientists, nurses and technicians focus on cancer prevention, diagnosis, treatment, follow-up and palliative care.
The ChildrenÕs Hospital at The Cleveland Clinic, which includes beds for medical/surgical, psychiatric and intensive care. The Cleveland Clinic ChildrenÕs Hospital for Rehabilitation offers an additional 52 beds for children requiring chronic care.
The Minimally Invasive Surgery Center, which includes four operating rooms and two endovascular suites. Cleveland Clinic MISC surgeons perform approximately 1,800 procedures annually.
The Digestive Disease Center, said to be the only medical center in the United States to fully integrate its departments of colorectal surgery and gastroenterology.
Orthopedics and Sports Medicine, where more than 60 full-time physicians and surgeons manage more than 200,000 outpatient visits and perform more than 9,000 surgical procedures at the main hospital campus and nine regional practices.

Vital stats (for 2002):

Total visits: 2,492,415.
Total admissions: 51,162.
Surgical cases: 65,684.
Physicians: 1,100.
Available beds: 1,058.
Operating rooms: 78.
Residents and fellows in training: 804.

Medical students from 70
medical schools: 548.

Total National Institutes of Health multiyear grants awarded: 187.
Source: The Cleveland Clinic

Linda Alter is a writer for The MAXTM , the on-line supply chain community and national accounts database of U.S. Lifeline, an MDSI company. She may be reached at lalter@mdsi.org