“You can never underestimate the effort that goes into change management,” says Gary Fennessy, vice president and chief supply chain executive for Northwestern Memorial HealthCare in Chicago. He knows. After all, Northwestern – like many health systems around the country – has seen its share of change and growth in the recent past.
Much of that effort falls on the shoulders of supply chain executives.
Donna Van Vlerah
“Success for the supply chain leader of the future will have less to do with being a subject matter expert, and more to do with the ability to manage change in people,” adds Donna Van Vlerah, senior vice president of support division, Parkview Health, Fort Wayne, Indiana. The willingness and ability to tap into the talents and knowledge of others will be key in a complex world.
Fennessy, Van Vlerah and executives from Indiana University Health (Jennifer Alvey, Pharm D, executive director, strategic sourcing, supply chain operations) and UChicago Medicine (Eric Tritch, vice president supply chain and logistics) recently participated in a panel discussion about change and the supply chain executive. They agreed the ingredients for success are communication, collaboration and leadership. The event was sponsored by Suture Express.
Change is about people
Due to mergers and acquisitions, Northwestern has grown from 6,000 employees and $1.3B in revenue to more than 20,000 employees and $5B in just a few years. In September 2018, the system completed its most recent merger, this with Centegra Health System.
With growth comes additional complexity, said Fennessy. Rapid growth tests your systems and support structures. It may take a while, but you can work through those thorny logistics and business issues, he said. “But at the end of the day, the real complexity revolves around people and change management.”
Northwestern merged with Cadence Health three and a half years ago, and only recently has it felt that supply chain services have been fully transformed. “If you try to rush it, you’re in a world of hurt, and it can actually delay the integration efforts,” said Fennessy. And that goes both ways. That is to say, not only have the former Cadence Health hospitals been called to adapt to the Northwestern way of doing things, but Northwestern has had to adapt to new ways as well. “We can’t jump to the assumption that historical practices were always best practices. During every integration, there have been best practices adopted within supply chain from the acquired facility. It is a two-way integration. Every integration effort results in a ‘better Northwestern.’”
In a system undergoing rapid change, direct conversations with employees are a necessity. And those conversations are, at least initially, quite personal.
“The most frequent questions are: ‘Who’s my boss?’ ‘Where will I be located and do I have to move?’ ‘Will my role change?’ ‘Will my compensation and benefits change?’” said Fennessy. Only after those questions have been honestly and succinctly answered can the supply chain team take its customers to the next level of integration. Employees want to know what disruption will occur to them personally as part of the merger and integration. Further, the existing management team may be assuming new areas of responsibility, and those same questions need to be answered. Never assume, and let the dialogue continue.
Every month, Fennessy and his team travel to meet with management and the executives of the facilities that have become part of the Northwestern system. “It calls for lots of traveling, lots of face-to-face time,” he said. “But you can’t get the same results through Webex and conference calls.
“My experience, and what we hear back from the customer, is that a personalized approach with face-to-face contact makes all the difference in terms of how well integration is accepted.”
Some departments continue to hold on to their supply chain duties, but that’s changing. “We identify those areas that are willing to move forward with us, and we build on their successes,” said Fennessy. “Now we’ve gotten to the point where we’re asking ourselves, ‘Do we need a customer service person on our team?’
“We are shifting from a supply chain to a value chain support structure, and driving customer satisfaction as a key outcome for success”
The mission is changing
On Chicago’s South Side, UC Medicine is undergoing its own metamorphosis, said Eric Tritch. “We’re early in our development as a system, but the shift has been dramatic.” Acquiring a community hospital, physician practices and a myriad of ambulatory care facilities, including family care centers, has forced the academic medical center to think differently about its mission. Supply chain has followed suit.
“We realized non-acute care was coming at us quickly,” said Tritch. So supply chain installed someone who focuses solely on non-acute-care supply chain management. “It’s an evolution in management. But it leads to a consistent approach to supply chain management, one that we hope we can replicate as we continue to grow.”
With growth comes more business transactions – RFPs, contracts, purchase orders, invoices, returns, etc. That calls for integration of data systems throughout the health system. That in turn calls for implementing industry standards for identifying products and ship-to locations, Tritch said.
Regarding newly acquired non-hospital sites, supply chain executives quickly learn that purchasing and managing supplies is often a part-time job for someone in those locations – a nurse or office manager. Supply chain’s job is to automate the process, so the people at those facilities can focus on their primary responsibilities, including patient care.
Supply chain teams can use all the help they can get when managing conversions of products, distributors or GPOs, he added. “We are asking our manufacturer partners, ‘Can you help us through that change? Can you ‘live’ with us as we go through a conversion?’
“I’m optimistic there are still big opportunities for cost-savings, particularly in physician preference items, the lab, pharmacy, etc.,” Tritch said. “And there are still opportunities for us in improved utilization.”
A holistic approach
Since joining Parkview Health eight years ago, Donna Van Vlerah has been a change champion. As such, she has adopted a broad perspective on supply chain management – one that extends far beyond supplies.
“I’m not focused on med/surg only; I’m focused on facilities, environmental services, nutrition, pharmacy and more,” she said. In fact, Van Vlerah doesn’t think in terms of “supply chain,” but rather, “logistics.” Having that broader focus is critical if health systems are to achieve the cost-savings they’re looking for, she believes.
“We’re focusing on value proposition, that is, thinking about the dollars that flow from all these various logistical activities in the health system,” she said. “We have to get people to start thinking about what’s critical.”
Parkview Health’s supply chain pushes products to its customers, freeing them from the burden of acquisition and inventory management, she said. “Our goal is to be proactive, not reactive. We want to help free up people to do what they’re supposed to do – provide patient care. Savings are a natural consequence, because you have practices that are consistently managed in every sector of your business.”
Keeping tight control of product movement with a point-of-use system has improved charge capture and inventory turns, as well as product availability, at Parkview. “Departments have jumped onto our bandwagon because of our high fill rate,” she said.
Van Vlerah thinks about and manages her department as a support division, not simply a supply chain division. “We are constantly asking ourselves, “‘Who are our stakeholders?’ ‘How can we influence them to get the outcomes we’re after?’
“You have to constantly re-evaluate your practices, and that means creating a culture that people can challenge. It’s a holistic approach. And our leaders are empowered to run their book of business as they see fit.”
Self-distribution
When Jennifer Alvey joined Indiana University 17 years ago, the system comprised four hospitals. Now IU has 17.
To service all those facilities, the health system opened a self-distribution center in July 2018, bringing it up in phases – first servicing four acute-care sites, then another three. Next will be the academic health center.
“It has been an adventure,” said Alvey. By reviewing product usage at each of the facilities and then stocking the center with inventory, supply chain uncovered a plethora of products and vendors throughout the system. “Cleaning that up has allowed us to optimize the service center and leverage key partners,” she said.
Although a handful of bigger vendors balked at shipping to the health system’s distribution center, most of the smaller ones were happy to do so. “I think that vendors that don’t sell exclusively to the healthcare market don’t see the financial benefit of working with us on our center; they just like working with their distributors. But vendors that are solely in healthcare seem to be more open to it.”
Technology makes the whole operation efficient, she added. “There is significant cost saving, when you consider distribution fees and other factors, and we’re looking at expanding services.”
Alvey’s team is looking at things like backorders and – working with IU’s Office of Clinical Effectiveness – is moving business to more reliable partners. “I think it helps to give a wakeup call to vendors every so often.”
In the next couple of years, IU supply chain will focus on optimization and standardization. And it will do so in conjunction with clinicians. “We have more people at the table,” said Alvey. At the same time, the “traditional” salesperson will be forced to change his or her approach. “We’re looking at more of a partner relationship with our vendors, where we share data, including clinical outcomes.”
Building blocks to managing change
- Engage in honest, open dialogue with key stakeholders. Answer the tough questions.
- Build on your successes. The results are contagious.
- Ask trading partners for help in effecting change, including product conversions.
- Keep the service aspect of supply chain front and center among the entire team.
- Focus less on being a subject-matter expert, and more on learning how to tap into the skills of others.
Meet the disruptors
Change is characterized by disruption. In fact, change is disruption. Successful leaders embrace it. That was the opinion of four supply chain leaders who participated in the recent Suture Express-sponsored roundtable discussion in Chicago.
The “Amazon experience” may be the Holy Grail for healthcare purchasing, according to the supply chain executives. It is quick, easy, and user-friendly. But can the online shopping experience that consumers enjoy at home be transferred to B2B purchasing, particularly one as complex as healthcare? Not easily.
Amazon-style “shopping” and health system formularies don’t mix well, said Gary Fennessy, vice president and chief supply chain executive for Northwestern Memorial HealthCare in Chicago. Nor does the Amazon experience encourage users to grasp the complexity and full cost of transactions within healthcare.
“However, we would be foolish to ignore the role Amazon plays in the healthcare market,” he said. “At a minimum, they are forcing us to re-examine the way we think about our customers, the way we do business, and our current business relationships. From my perspective, those are positive and productive discussions. The market over time will dictate how this all plays out, and from my perspective it will be important to watch closely and adapt when necessary.”
Eric Tritc
Added Eric Tritch, vice president supply chain and logistics, UChicago Medicine, “We want our team to be thoughtful and critical thinkers. Amazon-like tools don’t necessarily encourage that.”
But technology isn’t the only disruptor that healthcare executives are likely to encounter in the next few years.
Healthcare providers will start thinking like retail businesses, says Donna Van Vlerah, senior vice president of support division, Parkview Health, Fort Wayne, Indiana. Some already are, she says, pointing to concierge medicine among physicians as an example. (In concierge medicine relationships, the patient pays the physician an annual fee or retainer for healthcare on demand.)
In response to inexorably rising costs, hospitals and health systems will take matters into their own hands and dabble in manufacturing and distribution, said Jennifer Alvey, Pharm D, executive director, strategic sourcing, Indiana University Health Supply Chain Operations. Case in point: Civica Rx, the non-profit manufacturer of generic medicines, formed recently by Intermountain Healthcare and four other health systems.
Tritch believes the fact that some payers are becoming providers has the potential to disrupt healthcare delivery in ways that are still not understood. UnitedHealth’s Optum, for example, already has 30,000 physicians (employed and affiliated), and if its proposed acquisition of DaVita Medical Group is consummated, it will add an additional 17,000 physicians and other care providers.
Fennessy believes that the way hospitals are reimbursed may be the ultimate disruptor. High-deductible health plans have already changed the way consumers view healthcare and purchasing decisions, he pointed out. “Just imagine what would happen if there was a movement to a single-payer system or a significant shift to direct contracting with large employers,” he said.