Cleveland Clinic hopes its LLC with VHA will yield sustainable improvement
Being physician-led, Cleveland Clinic knows a lot about selecting physician-preference items, and their clinicians know a lot about using those items to achieve successful patient outcomes. Now the health system wants to get even better at sourcing, managing product utilization and monitoring results – and then offer that expertise to other hospitals and IDNs around the country. The vehicle Cleveland Clinic is using is a newly formed corporation – an LLC – which the system has formed with VHA.
Forming the LLC with VHA stems from Cleveland Clinic’s desire to keep getting better, says Bill Donato, executive director, supply chain management. It’s what the IDN refers to as sustainability. “You have to get more efficient through better technology and process improvement; you have to take your costs down. And in the environment we’re in – and it’s no different for any other organization – we have to get better every year.”
Pricing and contracting are important components of the strategy, says Donato. But there’s much more. “There’s so much waste – and opportunity – in the supply chain,” he says. Inefficiencies in pricing, distribution and internal logistics are just a few.
Donato joined Cleveland Clinic in 2009. Prior to that, he worked for 15 years for Ethicon in a variety of marketing, contracting and compliance roles. Before that, he held a variety of hospital supply chain and GPO roles.
Cleveland Clinic chose VHA following a robust selection process. “We wanted to build a relationship that put skin in the game for both organizations, that defined value, and delivered value to both parties,” says Donato. “We weren’t interested in a traditional relationship.
“VHA brings scale, analytics, a network and data sources. And we bring our physician leadership, which presents us with clinical relevance in a real-life setting; repeatable processes; a strong experience-based understanding of the true distinctive features of physician and clinically preferred items; and other learning from over a thousand projects we’ve managed over the last 36 months. It is a very complementary relationship.”
VHA believes it is well-equipped to help Cleveland Clinic achieve its goals. Although the yet-to-be-named LLC is a new approach for it, VHA has experience developing member-owned supply networks with flexibility around contracting practices, says Byron Jobe, executive vice president. These 18 networks, which represent more than $5 billion of spending, leverage the contracting and analytics capabilities of VHA and its supply contracting company, Novation, while giving the networks much autonomy, he says. “They have diverse members at the table, who guide and direct their strategy in terms of contracting practices.” By contrast, contracting decisions for the LLC will be driven by the owners, and will call for a high level of physician- and executive-level engagement and commitment, he adds.
LLC corporations, such as the one formed by VHA and Cleveland Clinic, can help IDNs expand their footprint by creating integrated clinical relationships with other providers, says Jobe. The Cleveland Clinic/VHA LLC, for example, calls for the IDN to integrate its service-line-oriented clinical protocols with a supply chain strategy. “Bring that together with consulting and analytics capabilities, and we can market that to organizations that may want to use this approach to clinical management.”
Such IDNs will initially target their efforts at the physician preference area, says Jobe. Cleveland Clinic is a prime example. “That’s the difference-maker for most organizations, and also the toughest problem to solve. It calls for a whole new level of physician engagement and buy-in.
“Cleveland Clinic has a proven approach to how they select products, how they use them, and how they manage outcomes. The LLC will help them do that, and give them the analytics to guide decisions and monitor performance.”
Although Cleveland Clinic is the LLC’s “Customer No. 1,” the IDN’s affiliates are “Customer No. 2,” says Donato. Cleveland Clinic has had an affiliate program for a number of years, organized by service lines, including cardiothoracic surgery and cardiovascular medicine, neurosurgery, transplant and oncology. The Cleveland Clinic Heart and Vascular Affiliate Program, for example, began in 1994. Through these affiliate relationships, Cleveland Clinic works with hospitals and IDNs to provide management services including clinical direction, quality assurance, and access to up-to-date technologies and techniques. All affiliate surgeons are credentialed by Cleveland Clinic and participate in training, conferences and educational programs provided by Cleveland Clinic.
The LLC structure will allow affiliates to access the joint venture’s contract portfolio, says Donato. That’s good for existing affiliates, and a potential marketing tool for prospects. It will also allow Cleveland Clinic to offer solutions to a variety of supply chain challenges.
“Cleveland Clinic provides opportunities to test different solutions to the problems we face in the supply chain,” says Donato. “If – through testing, incubation and implementation of solutions – we’ve discovered something that can expedite the redesign of the supply chain, we would put that solution into the LLC so our affiliates and other members can access it.”
For example, this year, Cleveland Clinic plans to work with its college of medicine to develop a clinical training and education program for non-clinical supply chain professionals. “We want to teach them about procedures, devices and supplies, so that as we develop talent and move people around the supply chain, they have a fundamental knowledge [of clinical principles],” says Donato. The IDN is working on a project that will “submap” supplies, devices and equipment associated with specific clinical protocols. “As we get further along, we believe that will give us a more granular look at cost.”
Cleveland Clinic and Community Health Systems form strategic alliance
Supply chain will be part of the recently announced strategic alliance between Cleveland Clinic and Community Health Systems. The two announced an alliance in March intended to “enhance the quality of patient care, improve access to healthcare services, reduce costs and drive operational excellence.” Based in Brentwood, Tenn., Community Health Systems owns, operates or leases 135 hospitals in 29 states.
“Working together, Community Health Systems and Cleveland Clinic will draw on each other’s extensive resources and expertise, maximizing strengths in areas such as clinical services, physician alignment and integration, supply chain processes and other aspects of hospital operations,” Cleveland Clinic said in a statement. The two organizations will remain independent entities.
Initially, the relationship will focus on three specific areas of collaboration, according to Cleveland Clinic:
- Quality alliance. The Cleveland Clinic will assist Community Health Systems in establishing clinical integration programs at its affiliated hospitals. Physicians will be able to share best practices and capture, report and compare data in a standardized format. Over time, the two organizations expect that recorded data will support predictive modeling for patient outcomes and reducing the cost of care.
- Cardiovascular services. Cleveland Clinic’s Heart & Vascular Institute will assess selected CHS-affiliated hospitals for the opportunity to apply the Institute’s expertise in cardiovascular services – including quality and data infrastructure – in CHS-affiliated hospitals.
- Clinical and operational services. The organizations will explore other engagements to share best practices and produce synergies, according to Cleveland Clinic. These may include telemedicine initiatives, second opinion services for physicians and patients, complex care coordination, and other practices in care and cost containment.