Ten People to Watch 2011

Welcome to the Journal of Healthcare Contracting’s annual listing of the Ten People to Watch in Healthcare Contracting, each of whom was selected based off of suggestions from readers.

JOE ARRUDA
vice president, supply chain & design and construction
Indiana University Health

Over 19 hospitals, 10 surgery centers and over 150 physician clinics. For the 2010 calendar year, supplies and purchased services (excluding pharmacy) was estimated to be over $1 billion.

Joe Arruda joined Indiana University Health in 2009 as vice president of supply chain & design and construction. Today, he oversees all purchasing, contracting, value analysis and logistics activities for the health system. His responsibilities include redesign of process flow/services in all areas, negotiating, collaborating with clinicians (including the balancing process, costs and outcomes) and developing partnerships with vendors and group purchasing organizations to maximize savings opportunities. He focuses on optimizing operations through the use of technology and implementing best practices.

The Journal of Healthcare Contracting: What has been the most challenging and rewarding project you have been involved in recently?

Joe Arruda: IU Health has taken steps toward value-based purchasing. Our approach has been trifold:

  • Physician/clinical integration. We collaborated with physicians throughout the system to review outcomes, best practices and cost. We looked to ensure that our process supported evidence-based medicine and asked physicians to focus on product technology and best outcomes. We also established a physician committee to review and approve any exceptions across the system and created an environment in which stakeholders’ perspectives were considered.
  • Operational best practices. We implemented Kanban to manage our inventory at one of our hospitals. Supply bins are all right-sized, restricting staff from overstocking and counting product so that nursing can focus on patient care instead of supplies. We also leveraged mobile technology to reduce our manual process. Our staff now spends more time in front of the customers, and clinicians spend more time with their patients.
  • Technology. This year, we collaborated with our information services department and developed a web-based order entry system that integrates our Lawson ERP system. This tool offers such capabilities as a product standardization tool, enhanced product information (product pictures) and live chat with a product specialist.

JHC: Describe a project you are excited to implement in the near future.

Arruda: We are developing a best-in-class data warehouse application that will provide actionable information to key decision makers. Aside from a web portal, the data warehouse visualizations and metrics will deploy to mobile devices, such as iPads, such that actionable financial and operation information will always be available to leaders.

JHC: What is the most important quality you look for in a supplier partner?

Arruda: Transparency, integrity and goal alignment. As healthcare continues to focus on improving patient value at a lower cost, it is important that suppliers take time to understand our challenges and
position their products around best outcomes and price. Due to the economic conditions, suppliers and manufacturers must understand that hospitals are working on very small margins.

JHC: What is the biggest change we can expect to see in healthcare contracting in the next five years?

Joe Arruda: Everything we do will have to be patient-centered. So, when manufacturers design new products, they will need to ask themselves, “Is this going to add value to the patient experience/outcome?” We also will have to better evaluate products on the basis of price, operations and outcomes.

BILL ABELTIN
director, corporate procurement
Memorial Sloan-Kettering Cancer Center, New York, N.Y.

470 beds, one hospital, 20 treatment/counseling facilities, one research facility, annual spend of approximately $773 million in purchased supplies and services.

Bill Abeltin joined Memorial Sloan-Kettering Cancer Center in 2005 following a longtime career in financial services, including 17 years as a sourcing and/or purchasing manager. He began at MSKCC as an assistant director of corporate procurement and in January 2009, he was promoted to director. Memorial Sloan-Kettering Cancer Center includes one hospital and 20 treatment centers in the New York City Metro Area. Abeltin oversees all medical, research and non-clinical spend. Procurement is partially decentralized at MSKCC, his department being the largest unit, responsible for about $180 million in annual spend.

The Journal of Healthcare Contracting: What has been the most challenging and rewarding project you have been involved in recently?

Bill Abeltin: As with many organizations, our procurement department was overlooked for years. It lacked direction and purpose, and its primary objective focused on completing transactions, rather than managing spend and suppliers. As such, some departments took charge of their own spend. My challenge was to reverse this trend by building a department that was both effective and supportive to its stakeholders. Three years ago, we added a sourcing team, which provided us with the necessary resources to seek opportunities with our larger or more complicated relationships. We have also worked on optimizing our GPO relationship to reduce costs, which has led to a change in our GPO relationship and additional savings opportunities. Our department’s success can be attributed to returning to the basics and seeking standardization and vendor consolidation.

JHC: Describe a project you are excited to implement in the near future.

Abeltin: First, we plan to work on building stronger relationships with our stakeholders. We need to obtain stakeholder acceptance so as not to exclude them from the decision-making process. Second, we look forward to exploring integrated systems to automate existing processes and leverage common databases for improved reporting, analysis and metrics. Our objective is to minimize manual tasks so that we can redeploy staff to build stakeholder relationships and focus on vendor management.

JHC: What is the most important quality you look for in a supplier partner?

Abeltin: I look for suppliers that will bring timely and appropriate ideas and solutions to the table. I view partnerships like a marriage. Both sides need to consistently put effort into the partnership and contribute to frequent, open discussions to ensure a long, rewarding relationship.

JHC: What is the biggest change we can expect to see in healthcare contracting in the next five years?

Abeltin: In comparison to other industries, healthcare overall has not grasped the value of supply management principles. However, I see [more hospitals] investing in the supply chain. If the trend continues, I expect more hospitals will pursue their own contracts in areas where they have leveraged – and continue to utilize – GPOs to supplement their remaining needs. I expect suppliers will need to react accordingly by being more competitive and [offer] better services if they expect to survive.

ANN ARCHULETA
supply contracts administrator
MidMichigan Health, Midland, Mich.

459 beds across four medical centers; annual spend of approximately $100 million in supplies.

Prior to joining MidMichigan Health in 2001, Ann Archuleta worked in the chemical, automotive and thermoplastics industries. She started out as a purchasing agent for MidMichigan Health. After realizing there was an opportunity to identify and document contract prices within the health system, she created the organization’s current supply contract team. She assumed her present role in 2006 and oversees MidMichigan Health’s annual supply spend, as well as the development, growth and leadership of the supply contracts team. Her team’s mission is to optimize supply pricing and provide accurate, relevant data to enhance the decision-making process for product selection. She negotiates and maintains spine, CRM and orthopedic agreements and most physician preference product categories.

Journal of Healthcare Contracting: What has been the most challenging and rewarding project you have been involved in recently?

Ann Archuleta: Our most challenging and rewarding project has been the reorganization of our value analysis physician preference process. Our goal was to improve communication and reduce the lead time. We are still in the implementation phase and working on education of all clinicians and physicians involved.

JHC: Describe a project you are excited to implement in the near future.

Archuleta: I am excited to continue to focus on building the supply contracts team for our organization, as well as to continue to educate our physicians, clinicians, materials managers and vendors in pursuit of the best practices in healthcare. We become salespeople of our trade and it is important to remind the entire supply chain of our value and how we can work together for the benefit of the patients and insurers.

JHC: What is the most important quality you look for in a supplier partner?

Archuleta: The most important quality in a supplier is integrity – a supplier that acts according to the beliefs, values and principles it claims to hold. In addition, there must be shared beliefs between the supplier and the health system. Seneca Medical, our primary distributor, has always strived to provide us with excellent service so that we in turn can provide excellent healthcare services to our patients. Seneca Medical has taken our ideas and suggestions and worked with us to improve their services beyond a standard mainstream distributor.

JHC: What is the biggest change we can expect to see in healthcare contracting in the next five years?

Archuleta: The biggest change we can expect to see in healthcare contracting in the next five years will be linking procedural supply costs to reimbursement. We also will have to engage physicians in the processes such that they work with the health systems and are accountable and financially responsible when bringing new technology to the health system. Physicians will increasingly collaborate with health systems on cost reduction initiatives as they see the effects these initiatives have on the health system in which they work, as well as on the healthcare industry as a whole.

ERIC BERGER
director of materials management
Northeast Hospitals, Beverly, Mass.

300 beds across two acute care hospitals, one inpatient psychiatric hospital, one ambulatory care/outpatient surgery center, 17 physician practices. Annual supply and purchased services spend of approximately $90 million.

Eric Berger’s career in healthcare began as an officer in the Army and saw him though a number of positions with various organizations, including Partners HealthCare, CSC, Cardinal Health and Brockton Hospital. He joined Northeast Hospitals in 2006, where he currently is responsible for centralized purchasing/contracting, supply and distribution operations across the organizations’ campuses, as well as internal courier services and the mail and copy center.

The Journal of Healthcare Contracting: What has been the most challenging and rewarding project you have been involved in recently?

Eric Berger: Over the last 18 or so months, we evaluated new GPO relationships and made the decision to change ours. We have completed the analysis of the RFP responses, coordinated the change, signed letters of commitment and participation, and ensured that the correct pricing was loaded across the entire supply chain spectrum. Communications and change management were essential in all aspects of this decision. We coordinated product conversions and evaluations with our various value analysis teams and broke down some long-standing relationships, not just with our old GPO.

JHC: Describe a project you are excited to implement in the near future.

Berger: Due to some recent personnel changes in my department, I have the unique opportunity to overhaul the entire structure of the department. It is exciting to lay out various options and contemplate how they will enable the department to meet the organization’s strategic goals and objectives.

JHC: What is the most important quality you look for in a supplier partner?

Berger: I think it boils down to communication. This needs to occur in the day-to-day activities, such as order/transaction management, and in the strategic level discussions about the goals, needs and plans for each organization. There has to be a contact at the supplier that operates at a high enough level in its organization to understand my big picture and how its organization can support that picture across their many divisions. I think Cardinal Health does this well.

JHC: What is the biggest change we can expect to see in healthcare contracting in the next five years?

Berger: I think that the biggest change will be a heightened awareness of the supply chain and, more specifically, contracting, by the C-suite. Facilities will wrestle with GPO relationships vs. self-contracting. At the same time, senior leaders will need to evaluate what those decisions will require from a staffing and skill set perspective. The old days of doing more with less won’t work in tough times. You can’t expect to identify and implement the kinds of savings that organizations will require in the future with today’s staffing models. Strategic sourcing and physician preference item contracting and management require a different skill set than the traditional paper pushing organizational structure, and those skills have not historically been in place in
most organizations.

RICHARD BLACKBURN
assistant vice president for support services
CaroMont Health, Gastonia, N.C.

435 bed non-profit hospital integrated system, annual supply and purchased services spend of approximately $130 million.

Richard Blackburn joined CaroMont Health in 1986. During his first 17 years with the organization, he worked in materials management. Since then, he has served as the director, and in 2010, he assumed responsibility for support services. Today, he oversees facility services & construction, food services, housekeeping, materials management, medical records, safety & security, and sterile processing.

The Journal of Healthcare Contracting: What has been the most challenging and rewarding project you have been involved in recently?

Richard Blackburn: We have continuously improved our relationship with physicians and suppliers and now have physician councils that review service line performance, which includes cost, quality and patient satisfaction, among other things. Our supply chain processes link clinical, financial, and operational elements to deliver value for patients and clinicians. Perhaps the most rewarding aspect is receiving a call from a neurosurgeon, cardiologist, or orthopedic surgeon asking for our advice about how to control cost.

JHC: Describe a project you are excited to implement in the near future.

Blackburn: Our organization’s vision is to be a nationally recognized leader and valued partner in promoting individual health and building vibrant communities. For materials management, this gives us an opportunity to do a number of things. First, we hope to identify local suppliers that can provide services and products. We want to put money back into our local economy. We are exploring different options. For instance, we currently use a linen product that comes from a local textile company. Second, with CaroMont’s focus on wellness, including reducing chronic disease in our communities, materials management is collaborating with clinicians, local agencies, and vendor partners to identify products and services to foster improvements in health. Third, every hospital is focusing on reducing readmissions. Materials management must source products and services for physicians and nurses, to enable them to improve patients’ chronic and acute conditions, assisting to prevent unnecessary readmissions. Lastly, CaroMont is striving for Baldrige recognition. We firmly believe our supply chain processes will demonstrate performance excellence with our approach, deployment, alignment, and integration of supply chain across our organization.

JHC: What is the most important quality you look for in a supplier partner?

Blackburn: Responsiveness is an important quality. The measure of a vendor is how it responds to and resolves issues when they occur. A vendor’s responsiveness to a problem communicates its integrity and commitment to CaroMont. Two vendors that exemplify our value of responsiveness are Owens & Minor and Hospira. However, we have many others that provide exceptional service and responsiveness.

JHC: What is the biggest change we can expect to see in healthcare contracting in the next five years?

Blackburn: As pricing becomes more transparent in the market, price will be easier to negotiate [and] there will be an expectation for suppliers to be price transparent. In addition, hospitals and providers will continue to confront the mandate for quality. We will also see revenue shrink. Materials management will serve a vital role as organizations try to master the cost-to-quality ratio.

TOM HARVIEUX
vice president, supply chain management
Sanford Health, Sioux Falls, S.D.

1,528 staffed beds, $2.3 billion net patient revenue, $400 million supply/pharmaceutical spend. Reportedly the largest U.S. rural healthcare provider.

Tom Harvieux joined Sanford Health in 2008 as executive director, supply chain management, and in 2009, he was promoted to vice president, supply chain management. He also serves as operations committee chair of VHA’s Upper Midwest Consolidated Service Center and is an active participant in numerous national supply chain professional organizations and groups. His system responsibility includes contracting for material and purchased services, value analysis, purchasing, central stores, mobile equipment management, warehousing, inventory, distribution, materials management information system, capital acquisition, vendor management and regional accountability for courier services and print operations.

The Journal of Healthcare Contracting: What has been the most challenging and rewarding project you have been involved in recently?

Tom Harvieux: Three major projects come to mind. The contracting and value analysis teams have delivered over $17.5 million in savings in the past two years. The team has aggressively tackled price parity opportunities from our recent merger and aggregated purchasing volume to renegotiate contracts. Our distribution team has implemented lean in 80 percent of nursing PAR locations, and in 100 percent of mobile medical equipment cleaning and distribution, and has completely redesigned the central warehouse in our Sioux Falls Medical Center. These changes have significantly improved service levels to nursing and dramatically increased our team’s accuracy and efficiency. Finally, the supply chain and information technology teams have implemented Lawson in half of Sanford business units.

JHC: Describe a project you are excited to implement in the near future.

Harvieux: I am very excited about expanding lean lessons to all of our warehouses, PAR locations and clinics to continue to minimize the time nursing spends on materials-related tasks and make work more efficient and accurate for our team. I am equally excited to begin redesigning how physicians, clinical leaders and administrators collaborate on material utilization and standardization. We will be expanding our use of analytical tools, benchmarking and clinical outcomes data to improve patient care, while lowering healthcare costs.

JHC: What is the most important quality you look for in a supplier partner?

Harvieux: Without a doubt, it is integrity. With the looming changes in healthcare, we will need to move to an entirely new level of trust and collaboration with suppliers. This will require supplier partners that consistently exceed our service expectations, aggressively bring forward opportunities for reduction in acquisition cost or utilization, and do so while protecting their own companies’ interest and long-term
financial viability.

JHC: What is the biggest change we can expect to see in healthcare contracting in the next five years?

Harvieux: It will be the impact of Accountable Care measures and declining reimbursements. The transition to payment based on clinical outcomes and the overall reduction in reimbursement will be a watershed time in healthcare. Many are projecting that providers will need to drive up to 20 percent out of our cost structure. This new environment will require data-driven tools and processes, solid partnerships with physicians and supplier relationships that extend past price alone.

LAUREL JUNK
vice president, supply chain
Kaiser Permanente

8,000+ licensed beds, 35 hospitals, 450+ medical office buildings, 15,000 physicians, $14 billion purchasing volume, $42 billion operating revenue

Laurel Junk has been with Kaiser Permanente for about two years. Although she is relatively new to healthcare delivery, she has served in the healthcare industry for a number of years on the product manufacturing side. Today, she is responsible for materials management, patient records management/warehousing, product distribution, transportation and courier management, print shop/document service operations, mail services and product support (contract conversion and implementation within the medical facilities). She has oversight of the national supply chain strategy, for which she is currently leading a major transformation initiative to drive end-to-end supply chain integration and standardization within the various medical facilities, as well as across all regions and departments.

The Journal of Healthcare Contracting: What has been the most challenging and rewarding project you have been involved in recently?

Laurel Junk: We have made significant inroads over the last 24 months, including transportation centralization; the deployment of a new single-instance ERP system for purchasing and inventory management; improvement of our reporting capabilities; and alignment of the organization on the importance of end-to-end supply chain integration. In addition, we are excited about a collaborative supply chain initiative we recently started with the top supply chain executives from Geisinger Health, Mayo Clinic, Intermountain Health, and Sisters of Mercy. Known as the Healthcare Transformation Group, the coalition is looking to bring our collective provider influence and passion to bear on accelerating healthcare supply chain transformation in the areas of improved patient safety, with better product identification and tracking, as well as significant supply chain processing efficiencies.

JHC: Describe a project you are excited to implement in the near future.

Junk: We are in the process of piloting end-to-end supply chain management in the operating room, whereby we will look to develop better demand forecasting capabilities by linking the schedules in our EMR with the supply requirements of the procedure card, along with the ability to track actual product usage at the point of care to allow for improved service while achieving lower overall inventory levels. The most exciting part of this work is the opportunity to return extremely valuable clinical resources back to serving our members and delivering the best care possible to our patients.

JHC: What is the most important quality you look for in a supplier partner?

Junk: We look for alignment with our mission and goals; trust in making it a true partnership; and patience in dealing with a very complex customer. It’s important that our suppliers share our view of the future.

JHC: What is the biggest change we can expect to see in healthcare contracting in the next five years?

Junk: We will be required to focus on evidence-based medicine and drive that through to the use of medical technology and supplies. We will have to step up our leadership capabilities at all levels in supply chain to help our mission of ensuring quality, affordable healthcare for everyone. This will require a level of integration, on everything from tactical execution to strategic alignment, with data, on new and planned product technology.

CINDY KASSOTIS
director, materials management
Torrance Memorial Medical Center, Torrance, Calif.

401 beds at nonprofit, stand-alone medical center, annual spend of approximately $69 million.

After serving as materials management business director for the Catholic Healthcare West at Lawson Software (and prior to that, senior procurement application consultant for Lawson software), Cindy Kassotis began working at Torrance Memorial Medical Center in March 2008 as the interim director of materials management. She was named director of materials management in January 2010. Today, she is responsible for purchasing, receiving, contracting, value analysis and central supply, and her team processes about 28,000 purchase orders each year. In her early days as director of materials management, it quickly became apparent to her that a very small percentage of Torrance Memorial’s annual medical-surgical supply spend was on contract. At the same time, the CFO’s goal was to cut the supply budget by $4 million. Kassotis recognized that gaining the trust of the rest of the organization and developing a contracts team to implement necessary changes were crucial. So, she hired a system administrator and a data analyst, promoted the contracts coordinator to contracts manager and hired two contract analysts. In addition, she made sure that everyone was trained to use new contract management technology and follow new processes. To build trust, she established a value analysis program that involved a steering committee and six teams representing everyone involved in the hospital’s procurement process. Kassotis believes that by involving all stakeholders in the process, Torrance Memorial has been able to overcome some of the hurdles that could have derailed its supply chain transformation efforts. In the end, the organization realized the cost savings goal set by its CFO.

The Journal of Healthcare Contracting: What has been the most challenging and rewarding project you have been involved in recently?

Cindy Kassotis: Implementing value analysis at Torrance Memorial. We hired a team of contracts analysts to support the process and developed six value analysis teams that are chaired by department directors from the various disciplines. We have saved $9.5 million in the past two years. I am excited to see what other opportunities are out there to help bring value and save money. We are presently starting to take a look at physician preference items. We know this project will be challenging, but also rewarding.

JHC: What is the most important quality you look for in a supplier partner?

Kassotis: What I look for in a supplier partner is a willingness to work with us, to help us obtain the best products for the best value. I expect that our partners will look out for our mutual best interests and present opportunities. Owens and Minor has been that type of partner to Torrance Memorial.

JHC: What is the biggest change we can expect to see in healthcare contracting in the next five years?

Kassotis: With healthcare reform, we are going to be challenged even more than we have been in the past to save money, while still providing quality patient care. Partnerships with physicians have always been important, but going forward, I believe that strong partnerships with our physicians will be vital in order to achieve success.

RICHARD KILLEEN
director of purchasing
Hackensack University Medical Center, Hackensack, N.J.

775-bed acute care/trauma medical center. Purchasing department handles expense purchases and agreements exceeding $260 million annually.

Following a position as regional director of materials management for Franciscan Healthcare in Suffern, N.Y., Richard Killeen joined Hackensack University Medical Center in 1998 as director of purchasing. His responsibilities have included oversight for the print shop, the mailroom, couriers, purchasing and asset management. Today, he manages all expense transactions, contracted services, capital purchasing and asset management for both the main complex medical center at HUMC, as well as HUMC North (Pascack Valley, N.Y.), a stand-alone emergency department, outpatient radiology and laboratory services. He oversees a total purchasing volume of 155,000 purchase orders each year and manages four senior buyers, four buyers, a secretary, a senior analyst and two clerical support people.

The Journal of Healthcare Contracting: What has been the most challenging and rewarding project you have been involved in recently?

Richard Killeen: Last March, we changed group purchasing organizations and have identified potential cost reductions upwards of $13.3 million for the year 2011. Annualized for the year 2012, we anticipate realizing $20 million in cost reductions. This initiative has required modification of 45,000 items in our item master (including data such as vendor, manufacturer, part numbers and unit pricing). In the upcoming months, several thousand additional items will need to be passed through our value analysis process in order to determine whether additional items can be converted in order to maximize savings opportunities.

JHC: What is the most important quality you look for in a supplier partner?

Killeen: The most important quality we look for in a supplier is commitment for the long haul. Vendor-hospital relationships should be built with long-term partnerships in mind. There should be a mechanism in place to arbitrate differences, provide periodic business reviews and create collaborative ventures that benefit both parties. A supplier that exemplifies this quality is Cardinal Health.

JHC: What is the biggest change we can expect to see in healthcare contracting in the next five years?

Killeen: We can continue to expect shrinking reimbursement from insurance providers, as well as state and federal healthcare [payers]. As margins continue to be tighter for both of these healthcare systems, supplier opportunities will be found through greater implementation of technology. The overall cost of doing business will be reduced by electronic data interchange transmission of orders, advanced delivery notification, electronic invoicing, standardized bar coding and electronic funds transfer payments. Both insurance providers and state and federal healthcare providers will reap the benefits of these initiatives.

ROGER WEEMS
senior vice president, performance management
Westchester Medical Center, Valhalla, N.Y.

643 beds across two hospitals and a behavioral health center. Annual supply spend of approximately $125 million, with a total operating budget of $900 million. Level I trauma center with reportedly the highest case mix index nationally for the past five years.

Weems joined WMC in 2005 following a career in healthcare consulting. His original role was to build an internal operations improvement practice to lead the operational and financial turnaround at WMC. In 2009, his role expanded to include oversight of supply chain. Today, he is responsible for all of the organization’s operations improvement initiatives. He has built and manages a team of 12 individuals.

The Journal of Healthcare Contracting: What has been the most challenging and rewarding project you have been involved in recently?

Roger Weems: The most challenging and rewarding project my team has been involved with has been our total supply chain transformation. We have effectively dismantled every aspect of the previous supply chain model and have been rebuilding it with a focus on people, process and technology. We have hired people who don’t necessarily have a supply chain background. In addition, we have purchased and implemented cutting edge technology in a number of areas of the supply chain and re-engaged our physician leaders in the supply chain transformation process. We have decreased our overall annual supply spend by $10 million and are working on further reducing that number while additionally focusing on our inventory management/logistics areas.

JHC: Describe a project you are excited to implement in the near future.

Weems: In order to improve the processes on our nursing units we are implementing open bin technology to manage inventory levels for our lower cost, fast moving supplies on our nursing floors. The technology will be able to identify critical inventory levels and generate orders automatically for replenishment. It is a very exciting new technology that will enable our supply chain team to decrease the “touches” in the inventory management/replenishment process and free them up to become more customer service focused, which we think is tremendously important.

JHC: What is the most important quality you look for in a supplier partner?

Weems: The most important quality we look for in our suppliers is a “big picture” mentality. If the salespeople we interact with are just looking for the next sale or their quarter-end numbers, our relationship will probably be very short. I make it a point for all of our suppliers to clearly understand the financial pressures we are under and that we are looking for true partners, not just a transactional relationship.

JHC: What is the biggest change we can expect to see in healthcare contracting in the next five years?

Weems: I hope to see an increase in transparency around pricing. As healthcare reform takes shape, we should see a more cost-effective delivery model. In order to achieve that, I think healthcare providers, insurers, and suppliers will be pressured to be more transparent about their pricing and expected to have “skin in the game” as we try to reduce costs.

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