When old tricks no longer work

Model of the Future
Armed with the right experience and a healthy mindset, one supply chain leader re-engineers one of the country’s largest healthcare organizations.

It calls for nothing short of top-level supply chain leadership to run an organization the size of the Los Angeles County Department of Health Services (LACDHS). One of the largest publicly held healthcare systems in the nation, the LACDHS employs a staff of about 22,000 and makes its services available to nearly 10 million local residents, including about 2 million under-insured people. It is comprised of four hospitals (1,850 licensed beds), two multi-disciplinary ambulatory care centers and six comprehensive health centers. The organization’s emergency medical services agency reportedly is the largest multi-jurisdiction EMS system in the country, with over 18,000 certified EMS personnel working in county fire departments, law enforcement agencies, ambulance companies, hospitals and other privately owned healthcare organizations.

Until recently, however, the LACDHS was struggling to keep pace with current healthcare delivery challenges and cost-reduction strategies, according to Gary McMann, who was hired in 2010 as chief, department of health services supply chain network. Certain processes introduced through the years no longer brought value to the program, he says. For the past 1½ years, McMann has endeavored to re-invent the program’s supply chain department with “a solid dose of next-level supply chain thought and leadership.” To date, his record is a testimony of his – and his organization’s – success.

40 years of experience
McMann knew very well that “given the large geographic size, the immense population served and the complexity of Los Angeles County, this job was not for the faint-of-heart.” With 40 years of healthcare-related experience from which to draw, however, he assumed his new position on solid footing. Indeed, he has drawn on “all of my past training, education, experience – and then some,” he points out. “My professional background includes nine years of clinical experience early on, followed by 10 years of solid healthcare-related management and leadership, and finally 21 years of executive-level healthcare administration in ambulatory care centers, hospitals and health systems. For the past 12 years, I’ve specialized in supply chain turnaround and restructuring activities for free-standing hospitals and health systems.” In addition, he has 21 years of active duty military experience as a medical service corps officer, which he believes has helped prepare him to effectively deal with the governmental bureaucracy common in county service positions.

Just prior to joining the LACDHS, McMann re-engineered the supply chain department at Billings Clinic (Billings, Mont.), a 272-bed hospital with multiple critical access hospitals and clinics throughout southern Montana and northern Wyoming. The supportive and forward-thinking executive leadership at Billings enabled McMann’s team to accomplish “much more than anticipated,” he points out. “Billings Clinic is a wonderful organization and I truly enjoyed my job and the people I worked with.” However, when a colleague mentioned the newly created LACHDS supply chain leadership role, “it immediately got my attention,” he says. “For whatever the reason, I am drawn toward new and formidable challenges. When assessing [everything] in my arsenal of preparedness [for the position at LACHDS], I was acutely aware of the two most important things that had been the determining factors for [my] success so many times before: tenacity and stick-to-it-ness!”

The greatest challenge
Upon joining LACDHS, McMann set out to “establish widespread solidarity of purpose” across the health system’s supply chain programs. “It was my job to develop a solid set of goals and objectives, which could serve as a roadmap for what needed to be done and how to get it done,” he explains. The goals – to redesign, rebuild and restructure the antiquated and fragmented materials management function – were relatively straightforward, he points out. “The how-to-get-it-done objectives were considerably more difficult to determine. When I was in grad school a how-to-turnaround 101 class was non-existent. As it turns out, that was a good thing because, in my experience, turnarounds are all different, with their own set of rules and expectations.

“Whenever I take on challenging turnaround and re-engineering opportunities, it is always useful to first gather information from others in the organization,” McMann continues. The best way to jump-start the process and understand people’s perceptions is to ask them what is going well within the organization and what is not, he points out. “I pose the same line of questioning to two different groups of people – key upper- and middle-management throughout the organization (our customers), as well as our own departmental staff. With regard to turnaround and restructuring efforts, it’s always intriguing to me to see how the two groups’ views are different yet similar. [They each appear to] find several problems with differing sets of solutions and yet their organizational goals are communicated as being very closely related. This method of ferreting out defects is important and is also very effective in [helping] identify strengths and cultural considerations, neither of which one would want to misread or violate in the early stages of a turnaround operation.”

McMann has not veered from his original goals, though some of his strategies have changed. “Projects of this breadth and depth require considerable attention to detail, methodical yet flexible planning of tasks and unyielding persistence.”

Indeed, McMann has encountered his share of challenges in his efforts to restructure the LACDHS supply chain. For one, the program was disjointed, with four hospitals, two full-service ambulatory care centers and a corporate materials management staff (responsible for non-medical materials and equipment acquisitions and the clinical value analysis processes) all working independently of one another. The result was seven individually managed materials management departments located throughout Los Angeles County. “The corporate-level materials management operation was independent from the other individually operated medical related materials management functions in the hospitals and ambulatory care centers,” he says. “None of them had any direct reporting responsibility or accountability to the LACHDS Health Services Administration.”

For McMann, the most challenging – yet rewarding – part of this project was to plan, develop and begin operating the enterprisewide supply chain program within LACDHS. “My first adventurous move was actually two-fold. I changed our department name from ‘materials management’ to ‘supply chain operations.’ At the same time, I announced that we were in the early stage of moving from a decentralized to a centralized supply chain program. It was up to me and my team to develop a system-wide organizational structure that could pass the scrutiny of our 40-department, countywide CEO office, which our department of health services was a part of. The restructure impacted all of our independently run supply chain programs in hospitals, ambulatory care centers, health centers and the LACDHS health service administration. As chief, supply chain network, I would oversee all existing department of health services supply chain functions (except pharmacy). An incredible amount of planning and preparation went into developing our new restructured look, which ultimately [I hoped would] gain the confidence of our county leadership.”

To do so required working his way through “a sea of obstacles,” he recalls, including the following:

  • Convincing the executive leadership staff at each of the seven organizations that restructuring would enhance and improve operational effectiveness within their individual organizations.
  • Realigning supply chain processes and functions related to systemwide centralization of purchasing, invoice processing, value analysis and informatics.
  • Creating new supply chain positions, such as chief of operations, value analysis administrator, information communications manager, systemwide purchasing director and analytics manager.
  • Deleting non-value-added positions and move existing staff into appropriate position without violating human relations and union policies and procedures.
  • Re-evaluating job titles, redesign job duties and rewrite all supply chain duty statements.

All the while, McMann and his team maintained the healthcare system’s daily supply chain operations. “After 14 months of collaboration and development with multiple Los Angeles County organizations and staff, we successfully received the final approval to implement our supply chain restructure on June 1, 2011.”

A giant footprint
With the assistance of a team of “highly dedicated Los Angeles County staff members,” McMann is confident he has achieved “a remarkable footprint as we crafted system-wide programs, which have cleared the way for extraordinary accomplishments throughout the department of health services supply chain network of hospitals, ambulatory care clinics, health centers and administrative offices.” He points to several goals he and his team have attained:

  • Created a system-wide departmental name change from materials management to supply chain operations.
  • Transitioned from seven independently run organizational supply chain units to a joint group of leaders, who have maximized synergies through a well-coordinated system of corporate level communication, support and reporting.
  • Implemented a comprehensive corporate level supply chain operations management function to complement medical facility-based supply chain leadership.
  • Designed, developed, implemented and staffed the new functions of information communications and supply chain analytics departments.
  • Centralized system-wide operations in purchasing and invoice processing.
  • Began full implementation of a new supply chain computer system and development of an associated medical supply formulary.
  • Identified and filled critical supply chain positions at LACDHS’s regional-based healthcare facilities.
  • Established a system-wide supply chain leadership council for cross-pollination of concepts, thought and best-practice sharing.

Looking ahead, McMann is excited to continue working with his organization’s Global Health Exchange (GHX) partners on a new enterprise-wide e-procurement program.

Front and center
Restructuring the LACDHS was McMann’s job. Ensuring the wellbeing of the country’s healthcare requires a nationwide effort, he says. “U.S. national healthcare expenditures could approach $2.8 trillion in 2012, and it’s no secret that the financial challenges in our healthcare sector are formidable and real. Healthcare executives and supply chain leaders in manufacturing, group purchasing, sales, distribution, hospitals, clinics and health systems – front and center!

“Our organizations, communities and the nation need us all to play leading roles in the solutions department,” he says. “Life’s experiences have already taught us that it usually takes more than personal courage and commitment to succeed in the face of challenge and controversy. An important change we can all expect to see and feel is unparalleled unity in purpose as we subscribe to the notion that we must all collectively work toward problem resolution, which, in the end, can and will benefit all.

“Very soon, suppliers, customers and end users alike will have to face some brutal facts related to a new wrinkle in the law of supply and demand,” he continues. “When demand increases consistently over time and there are fewer dollars to pay for the supplies, quality and quantity of supplies are diminished to a point that threatens a nation’s economic fabric. At this point, no one knows what the future holds for our healthcare system. We can be complacent and wait for others to figure it out for us, or we [can] begin to embrace our wonderful opportunity as responsible healthcare professionals and cast off personal agendas in favor of hammering out a magnificent and sustainable healthcare system for the generations that follow.

“In 2012, I believe more healthcare executives and supply chain leaders will increase their awareness that cost control shouldn’t begin at their front door or the loading dock,” McMann says. “Cost control is truly everyone’s job. I like to tell healthcare industry business leaders and suppliers that it’s okay for them to make a reasonable profit as long as they understand that it is up to them to continually help us control costs. If they have a banner year in profits, we should have a banner year in cost saving by using their products. Cost controls begin at the very start of a process – not at the end. Program or item concept, design and manufacturing should carry through all the way to consumption and waste disposal at the end-user level.”

“It should come as no surprise to learn that healthcare contracting will change over the next many years, largely due to the mounting pressure to reduce an [exorbitant] national debt. As such, healthcare reform will remain in vogue and its pace will quicken with each passing year until we get it right. I’m personally in total harmony with the notion that healthcare reform is a necessary evil. Assuming that we likely will get it wrong the first few times around, I take solace in knowing it usually takes a few strikes and foul balls before you can hit a home run. That said, we are entering uncharted waters, but we are no longer in separate boats. We all pay taxes and we all eventually consume our lifetime share of healthcare.”

About Laura Thill

Laura Thill is a contributing editor for The Journal of Healthcare Contracting.

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