Catholic Healthcare West Seeks Quantifiable Value

Catholic Healthcare West (CHW), headquartered in San Francisco, is the third-largest Catholic healthcare system in the country and the largest healthcare system based in the western United States. In 2004, CHW had revenues of $5.4 billion, and it employs 36,111.

CHW is a vertically integrated system with a market share in 17 metropolitan statistical areas (MSAs). Its members are located in California, Arizona and Nevada. The system was formed in 1986 by the merger of Mercy Health System of Burlingame, Calif., and Mercy Healthcare Organization of Sacramento, Calif. The multi- congregational healthcare system has nine religious sponsors and is committed to delivering compassionate, high-quality, affordable health services.

Forty-two acute care facilities, four acute care affiliates and 1,150 non-hospital sites (such as physicians’ offices, clinics and nursing homes) purchase through the system. Its broad geographic area presents unique supply chain challenges.

JHC spoke with Keith Callahan, CHW’s VP of supply chain management, to gain a better understanding of the system’s challenges and experiences. Following is what he had to say.

JHC: What do you consider to be the benefits of being a member of Premier?

Keith Callahan: The most significant benefit of being a member of a GPO like Premier is the ability for Catholic Healthcare West, with 42 hospitals in three states, to aggregate volume and achieve economies of scale in commodity and clinician products. Premier is our only GPO, and we do not see multi-GPO use as efficient. CHW does do sole contract implementation within GPO multi-source contract awards and for non-GPO products. There continue to be rewards from the marketplace in sole contracting, which yields cost reduction.

JHC: What have you done to centralize purchasing, and what plans do you have for the future?

Callahan: The technology is centralized, such as item master file build and maintenance, but the end user is at the facility level, decentralized. We are seeing cost reductions as a result of centralized item and contract files, which standardize pricing across CHW.

JHC: In 2003, the first of six CHW hospitals went live with Lawson information systems. How many hospitals are now using the system, and what benefits have they gained?

Callahan: Seven are now using the system; eight more will go live between October 2004 and April 2005. Our rollout pace may accelerate, as we have experienced efficiencies following our pilot facilities.

JHC: What is your technology philosophy, and what are your plans for automation, especially automation that impacts the supply chain?

Callahan: We are assessing the “automation” technology currently available and evaluating implementation. Generally, we do not strive to be the first to implement, but prefer to make sure we are using the right product that delivers proven value.

JHC: Your product decisions are made by committees. Who serves on these committees, and how are decisions made?

Callahan: We have Clinical Councils (e.g.: surgery, laboratory, cardiology, imaging, etc.), which are composed of clinicians from CHW hospitals. There is a Materials Management Council composed of facility managers. Each council has a participating executive sponsor.

JHC: Is CHW interested in the recent rise of the custom contracting model? Do you have any plans to work with your GPO in this area?

Callahan: Our GPO structure provides for contracts with best pricing at the IDN tier level. We work with vendors and the GPO to adjust to CHW’s uniform price and sole source strategy. This varies by product segment, commodity and clinician- and M.D.-sensitive products.

JHC: What supply chain issues challenge you? What do you see as major supply chain challenges facing CHW in the next three years?

Callahan: The trend is toward more efficiency in capital aggregation and aggregation of purchased services. Aggregation in these areas has been difficult because of our wide geographic spread and number of facilities.

JHC: What advice would you give to suppliers who want to approach CHW?

Callahan: Approach us with a value proposition that is quantifiable. At times, we move down a path that cannot be financially translated to improvement in cost and quality.

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