Buyers, sellers

IDN executives and national account executives compare notes at ANAE conference

ANAE Sponsors

  • Johnson & Johnson Health Care Systems Inc
    Johnson & Johnson Health Care Systems Inc., providing services for Janssen Pharmaceutical Companies of Johnson & Johnson. We have products in the following therapeutic areas: Cardiovascular/Metabolic, Immunology/Oncology, Nephrology, Virology, Infectious Disease, Mental Health and Pain.
  • Mercury Medical
    For over 50 years, Mercury Medical has partnered with clinicians to provide cutting-edge technologies and solutions for optimal patient care. Throughout these years Mercury has adhered to 5 core values focused on customer commitment; Be Responsive, Be Courteous, Be Honest, Be Resourceful, Be Efficient.

Having the expertise in medical device development, manufacture, sales and marketing to meet today’s increasingly technical demands and keeping the patient’s well-being in the forefront of everything we do is and always will be the ultimate goal of Mercury Medical.

  • How can IDN executives and suppliers balance the demands of demonstrated savings and enhanced patient outcomes?
  • How will accountable care organizations affect manufacturers, distributors, providers and patients?
  • How should vendors approach IDNs with hospital-owned or -affiliated physician practices?
  • What’s the latest thinking on regional purchasing coalitions and direct contracting?

National account executives came with questions; and supply chain executives, payers and GPOs came with answers, to the 2013 Annual Conference of the Association of National Account Executives.

ANAE is focused on professional development for corporate and national account executives calling on GPOs, RPCs, ACOs, IDNs, individual hospitals, distribution companies and managed care organizations. Founded in 2006, ANAE was acquired in March 2013 by MDSI, publisher of the Journal of Healthcare Contracting.


The clinically integrated supply chain
Matt Pehrson, vice president, supply chain, Presbyterian Healthcare Services, Albuquerque, N.M.

Presbyterian is an IDN comprising eight hospitals in six communities and a multispecialty, employed physician group with 600 providers. Its 9,000 employees provide services to one in three New Mexicans. Presbyterian’s goal is to radically improve the customer experience by transforming itself to produce best clinical quality, One Presbyterian, and affordability and sustainability. Non-labor expenses in 2012 were $178 million on supplies, $280 million on purchased services.

The focus of supply chain is shifting, with ramifications for providers and suppliers. Price negotiation is still important, but healthcare reform calls for emphasis to be placed on utilization, quality outcomes, strategic sourcing, logistics management, and supply chain strategic planning. What’s more, the supply chain must be strategically and operationally aligned with the clinical and business goals of the organization.

At the center of the clinically integrated supply chain is sourcing, specifically, of physician preference items. Supporting that are utilization management strategies (i.e., tools, data sets and behavioral changes to reduce resource consumption), clinical supply chain education (of the clinical staff) and value analysis (a process involving clinical stakeholders to ensure participation and adoption of selecting the highest-valued supplies and services). The last – value analysis – depends on the support of executive leadership, and is service-line-driven, not supply-chain-driven.

Presbyterian participates in Premier’s ASCEND program, designed for members who commit, in advance, to a limited number of suppliers across the Premier portfolio. The program also involves benchmarking and knowledge-sharing. Approximately 430 acute-care facilities and 145 supplier partners participate. Presbyterian aligns with Premier/ASCEND contracts with the greatest value, but self-contracts in some physician-preference and complex purchased-services categories.

Suppliers wishing to work with Presbyterian should understand the IDN’s product selection considerations, including: quality/safety impact on patients, clinicians and physicians; utilization reduction opportunities; pre-existing contractual agreements; conversion costs; ability to source through distribution channels; and business/corporate growth potential. Suppliers should be able to answer this question: “What is your value proposition, and what does that mean for your customer?”


The elusive ‘system-ness’ of healthcare
James Eppel, Jr., senior vice president, Optum Insight, Eden Prairie, Minn.

It’s a challenging time for healthcare providers and payers, as they face increased regulation and pressure to cut costs while improving quality. One key thing is missing, though – alignment of incentives. The healthcare system has not acted as a “system.” Accountable care organizations could help.

An ACO is an organization willing and able to assume accountability for managing the care – and ultimately, the health status – of a defined population. Early ACOs are centered on large, integrated delivery systems, and are characterized by sophisticated data systems and capabilities; an unrelenting focus on cost, quality, efficiency and effectiveness; the ability to assume appropriate level of risk; and an acceptable patient attribution model.

Assuming accountability – becoming an “ACO” – will require significant huge changes on the part of providers. The traditional “production” mentality of healthcare shifts to an “efficiency” mentality, profit centers become cost centers, and the focus shifts to reducing the cost of care. Suppliers will likely be asked to participate in risk assumption and cost reduction, and should be prepared to participate in the alignment of incentives that will result in the healthcare system truly behaving like a system.


A future beyond pricing
Sandy Wise, RN, MBA, director contracting and resource utilization, CHRISTUS Health, Irving, Texas

CHRISTUS Health is a Catholic, faith-based, not-for-profit health system comprised of almost 350 services and facilities including more than 60 hospitals and long-term care facilities, 175 clinics and outpatient centers, and dozens of other health ministries and ventures.

The IDN supply chain envisions its mission as a stack of building blocks. On the bottom are non-negotiable tenets, such as accountability, transparency, collaboration and innovation. Above that are industry-best professionals, that is, people who have been hired to exceptional standards, are team-oriented, and who benefit from professional development and growth. Above that: High-performance governance. Above that: Organizational recognition, that is, recognition by those within CHRISTUS of supply chain’s status as the go-to owners of non-labor spend and contributors to clinical outcomes. And on top: Recognition throughout the industry, including vendors, for industry-best performance.

Supply chain management at CHRISTUS rests on a collaborative model. Leadership is flanked by a strategic advisory council (comprising senior clinical, operational and financial leadership), resource utilization groups (facility-based leaders from key spend areas, with support from MedAssets), and a partner advisory council (comprised of 24 key vendors and suppliers).

Collaboration among suppliers and providers will be necessary as supply chain executives at CHRISTUS and other providers work toward a future beyond pricing – that is, one focused on utilization. The challenge is to drive out waste and extra costs while focusing on clinical quality and evidence-based practices. Providers need to decrease costs and improve practices. Suppliers, meanwhile, need to provide expertise in the best use of their products, and form true partnerships with providers. Together, they must address not just “perceived cost,” that is, price, but “actual total cost,” including quality, reliability, service, support, training, warranty, billing errors, shipping errors, manual procedures, obsolete inventory and transition costs.

A future beyond pricing also addresses clinical integration. Supply chain and vendors must lead with a focus on evidence-based medicine. Clinical stakeholders – chief medical officers, chief nursing officers, value analysis committees, etc. – must also get involved.

Sidebar:
The IDN supply chain envisions its mission as a stack of building blocks. On the bottom are non-negotiable tenets, such as accountability, transparency, collaboration and innovation. Above that are industry-best professionals, that is, people who have been hired to exceptional standards, are team-oriented, and who benefit from professional development and growth. Above that: High-performance governance. Above that: Organizational recognition. And on top: Recognition throughout the industry, including vendors, for industry-best performance.


Future-focused
Dave Hunter, vice president supply chain, Providence Health and Services, Renton, Wash.

Providence Health and Services employs about 57,000 people, including almost 3,000 physicians. They work in 32 acute-care hospitals, 400 physician clinics and other sites in Alaska, California, Montana, Oregon and Washington.

The IDN operates on four assumptions concerning the future.

  • Consumer/customer empowerment or engagement, including digitization, mobility, sensors and the use of data and algorithms.
  • Continued revenue pressure from all payers, and a combination of both fee-for-service and risk-based/accountable-care payment models, depending on the purchaser channel. But over time, the predominant payment method in most markets will be total-cost-of-care management.
  • The need for providers to become capable of monitoring cost per unit and utilization management. Successful care models will assume accountability for overall health and cost of a given population. The usage of information and data to predict and treat will increase dramatically.
  • The emergence of new competitors, some from outside the healthcare industry, disrupting the business. Speed will matter. And political actions at the federal and state level will become more focused and impactful.

Providence will implement several strategies to help fulfill its mission, vision and core values of respect, compassion, justice, excellence and stewardship: 1) inspire and develop its people, 2) build enduring relationships with consumers, 3) create alignment with clinicians and care teams, 4) develop and thrive under new care delivery and economic models, and 5) grow by optimizing expert-to-expert capabilities.


Key to better outcomes? Less clinical variance.
William Kellar, CEO, HCA Nashville Supply Chain Services

Providers and payers are concerned about the wide variation in utilization of healthcare services. Data shows, for example, that in St. Paul, Minn., 12.2 per 1,000 Medicare enrollees had a knee replacement in 2007, while just 7.5 per 1,000 did so in Houston, and 6.5 in Los Angeles.

Variance in clinical care can be characterized as the lack of uniform use of specific treatments by clinicians for a given medical condition. It has been associated with diminished healthcare outcomes and increased costs. Reduction in clinical variance, on the other hand, is associated with more consistent outcomes and reduced costs, not only in fewer hospitalizations, but fewer readmissions for complications.

HCA is engaged in several clinical excellence activities, some of which are site-specific, others which are enterprise-wide. One initiative uses clinical pathways, order sets and processes to reduce variant clinical practice. Another involves physician-preference items that impact a single aspect of clinical practice.

In one project, HCA instituted guidelines for BMP (bone morphogenic protein) use in spinal fusion procedures. After some study, the company found that the majority of these cases may not require large vial sizes of BMP. By switching to small vials, HCA recognized it could save 15 percent to 20 percent – between $8 million and $10 million – on BMP alone.

In another project, HCA-affiliated hospitals implemented a universal decolonization strategy – using antimicrobial soap and ointment on all ICU patients – to reduce bloodstream infections, including methicillin-resistant Staphylococcus aureus, or MRSA, by 44 percent. HCA researchers found that universal decolonization produced far better results than nasal MRSA screenings, followed by isolation when possible, and targeted decolonizaton (that is, screening, followed by isolation and decolonization).

Sidebar: Savings
In one project, HCA instituted guidelines for BMP (bone morphogenic protein) use in spinal fusion procedures. After some study, the company found that the majority of these cases may not require large vial sizes of BMP. By switching to small vials, HCA recognized it could save 15 percent to 20 percent – between $8 million and $10 million – on BMP alone.


Continuous improvement
David Gilfillan, vice president supply chain, IASIS Healthcare, Franklin, Tenn.

IASIS Healthcare is a privately held hospital company with 16 acute-care and one behavioral health site, as well as 160 clinics/physician sites. The company is engaged in a program called the Hospital Medical Management and Quality Program, or HMMQP™.

IASIS’s I-PIP program (IASIS Performance Innovation Program) supports HMMQP by creating a structured methodology for managing process improvement and attainment of achievable objectives throughout IASIS facilities. It is intended to integrate quality and operational efficiency into day-to-day activities, and fix problems permanently (instead of hiding them or working around them). Now is the time to implement programs such as I-PIP, given the rise in bad debt (one in four patients coming into the company’s ERs are indigent), withdrawal of Medicaid DSH payments, etc.

IASIS is using I-PIP to develop a culture that embraces continuous process improvement using a centralized quality team. Delivering results is no longer enough. Today’s healthcare providers have to drive improvements in how work happens inside their departments and facilities. Everyone is involved in improving how things get done.

One example is IASIS’s approach to reducing catheter-associated urinary tract infection, or CAUTI. Actions taken included: implementing evidence-based guidelines; limiting duration of foley catheter use; implementing an electronic infection prevention surveillance system; educating staff on identifying CAUTI on admission, and on preventing it in the facility. Results? Systemwide reduction (2009-2010) of 15 percent of CAUTIs.


Collaborative accountable care
Derek Goldin, vice president, business development and sales, Novant Health, Winston-Salem, N.C.

Novant Health is a not-for-profit integrated system of 14 medical centers and a medical group consisting of more than 1,100 physicians in close to 350 clinic locations, as well as numerous outpatient surgery centers, medical plazas, rehabilitation programs, diagnostic imaging centers and community health outreach programs. Its 24,400 employees and physician partners care for patients and communities in North Carolina, Virginia, South Carolina and Georgia.

Novant Health’s promise to patients and consumers is to reinvent the healthcare experience so that it is simpler, more convenient and more affordable, so consumers can focus on getting better and staying healthy. The IDN established and then sold a commercial and Medicare Advantage health plan, gaining significant insight into risk-based models. It currently participates in the Centers for Medicare & Medicaid Service’s Physician Group Practice Transition Demonstration project, which it considers a precursor to a Medicare accountable care organization, or ACO. Novant also embraces transparency in pricing, and enhanced public reporting of its clinical performance.

The IDN has elected to participate in a multiyear arrangement with CIGNA called “Collaborative Accountable Care” (CAC). The program focuses efforts around care coordination in the patient-centered medical home, with recognition for improving quality and managing the cost trend for a population of patients. The CAC is intended to: reduce readmission rates, increase quality by identifying and filling gaps in care, reduce the rate of increase in the total cost of care on a risk-adjusted basis, improve preventive visits and medication compliance through care coordinators, improve access and coordination of specialist visits, and reduce avoidable ER visits. The Novant Health/CIGNA CAC collaboration is the largest in CIGNA’s portfolio.

From a cultural perspective, the CIGNA program is a strong fit with Novant Health’s strategies and preparedness to take on more performance risk, as the IDN matures in its usage of the EPIC electronic medical records system, and, in cooperation with CIGNA, enhances its care-coordination capabilities that do not yet exist. Novant Health employees and dependents comprise approximately 25 percent of the population included in the CIGNA program.


Supplying 500+ physicians
Joe Dudas, vice chair of category management, Mayo Clinic.

Every year, more than a million people from all 50 states and nearly 150 countries come to Mayo Clinic for care. Mayo Clinic’s Supply Chain is designed to support this size, scope and level of complexity with over $2 billion in supplies, services, and medical equipment purchased annually.

The need to work differently is underscored by the fact that annual expense growth continues to increase, while reimbursement is headed in another direction. Supply Chain cost is one of the areas that have been targeted as an opportunity to close the gap.
A good example is Mayo Clinic’s creation of a clinical commodity formulary. After reviewing over 13,000 items (within the commodity categories), Mayo has standardized by eliminating over 30 percent of the unique SKUs and over 60 percent of the unique suppliers. Not only has this garnered significant price reductions, but also has greatly improved the quality and reliability of the supply chain.
Participation in Upper Midwest Consolidated Services Center (UMCSC) is another important part of Mayo Clinic’s supply chain strategy. Mayo Clinic is both a member and sourcing and contracting service provider for UMCSC, which comprises 42 members and 150 hospitals, and a combined annual spend (including pharmaceuticals) of $5.5 billion. The intent of its members is to move from individual, independent actions to a committed group, in order to 1) achieve optimal price savings, including leveraging Novation contracts and expertise, 2) reduce individual organization infrastructure costs by standardizing supply chain decision-making, and 3) enable members to redeploy and focus internal resources to other key operational activities aligned with their strategic and business priorities.

UMCSC comprises a board of managers, business development committee, finance committee, operations committee and clinical committee. It has a quarterly contracting calendar and leverages clinical value quality analysis (CQVA) processes to select products, and has signed 275 contracts, accounting for $750 million in spending under contract, and $100 million in documented savings. [Editor’s note: At the time of Joe Dudas’ presentation, UMCSC was on track to triple the amount of spend under contract, and double the savings in 2013.]

Sidebar: By the numbers
After reviewing over 13,000 items (within the commodity categories), Mayo has standardized by eliminating over 30 percent of the unique SKUs and over 60 percent of the unique suppliers. Not only has this garnered significant price reductions, but also has greatly improved the quality and reliability of the supply chain.

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