Contracting Professional of the Year: Change Agent

Former auditor Michele Tarantino has a recipe for effecting change: Examine processes, communicate results, then let the stakeholders take it from there.

Auditing. Corporate contracting. Consulting. Michele Tarantino’s credentials and experience have uniquely prepared her for the challenges of healthcare contracting. But in the end, it is something much simpler that has led to her achievements and those of Carilion Clinic’s corporate contracting team – the willingness and ability to communicate with others.

Tarantino is vice president of corporate contracting for Carilion Clinic in Roanoke, Va. The Clinic comprises eight acute-care hospitals, one surgery center, and about 90 physician offices. Until 2006, Carilion was known as Carilion Health System. But in that year, administration began a radical reorganization, which led to its current structure, which finds the Clinic employing approximately 550 physicians.

Thanks to the efforts of Tarantino’s team, the clinical staff, Premier healthcare alliance and the consulting firm Deloitte & Touche, Carilion was able to identify $15 million in supply chain opportunities and implement $8 million in recurring and one-time cost reductions in FY10. Tarantino also formed a new department to centralize sourcing, value analysis and contracting functions. What’s more, she has embarked on a program to centralize non-clinical and purchased-services sourcing and contracting, a project that could result in savings of as much as $10 million in FY11.

A career as an auditor
Originally from Queens, N.Y., Tarantino grew up in Westchester County and graduated from The King’s College in Westchester County. Following graduation, she began a career in auditing while pursuing a master’s degree in public administration at New York University. (She ultimately completed a master’s degree in health promotion from Virginia Tech, following her move to Roanoke.)

Working for Merrill Lynch, Tarantino focused on auditing its commercial real estate portfolio. As an audit supervisor, she traveled the country examining financial statements. Several years later, she went to work for Corporate Property Investors, a real estate investment company. She audited tenants of the shopping malls owned by CPI, making sure the companies were implementing appropriate internal controls and collecting percentage rent.

“The major educational piece of that part of my career – looking at processes, focusing on improving them and internal controls – ties into corporate contracting,” she says. “When we start to look at purchase orders, invoice matching processes, e-commerce, the discipline of building good corporate contracts, aggregating volume – [my past experience laid a] good foundation for the work I do now.”

Later, working for CPI’s chief financial officer, Tarantino got involved in mergers and acquisitions. Much of the work involved running cash-flow scenarios. For example, if the company were to acquire one shopping center and sell another, what would be the impact on cash flow? She also worked with the bond-rating agencies, such as Standard & Poor’s and Moody’s.

“That was an amazing experience,” she says. “What I really gained was a lot of analytical experience, as well as high-pressure, high-finance experience. I got used to working with large amounts of money,” she adds. “You get comfortable working with $100 million or $150 million debt offerings.”

Leap of faith
In 1997, for family-related reasons, Tarantino and her husband, Jim, a radio personality, made a big move, from the Big Apple to Roanoke. “We took a leap of faith, and it’s been good,” she says.

Roanoke is a community of approximately 300,000 people, located in the southwestern part of Virginia. Moving from New York to Roanoke has been an adventure, Tarantino admits. “But it’s been terrific. Sometimes it’s good to be part of a smaller community; you feel like you’re contributing more.” Helping to make improvements at Carilion, which employs more than 10,000 people, is one way she feels she is doing that.

Largely because of Tarantino’s analytical skills, Carilion hired her as part of its healthcare consulting department, focusing on process improvement projects. Her first challenge was working with the OR to improve turnaround time, start time, and other processes. Approximately two years later, she was hired as Carilion’s corporate purchasing director as well as OR materials director for two of the system’s largest hospitals. She did that for seven years, and then, in 2006, she decided to join Aspen Healthcare Metrics, whom she had engaged to help Carilion with its implant contracting program. She worked for Aspen for two years, helping clients drive value in their implant programs. “The experience I received being exposed to different hospitals and C-suite folks was really fantastic.”

But then she got a call from Carilion, which needed someone to head up its supply chain and contracting programs. “I thought to myself, ‘I’m assisting other hospitals in their communities,’ but I really wanted to come back home and help my own community, and work with our physicians,” she says. She took the position.

Transition to clinic model
The organization to which she returned was different from the one she had left a couple of years earlier. That’s because Carilion had changed its organizational structure in 2006, creating what it calls an “integrated physician organization.” The Clinic, which employs about 550 physicians, is based on an academic and clinic model, explains Tarantino. A handful of department chairs represent various specialties, such as surgery, medicine and radiology. Reporting to them are section chiefs, who are “very, very active” in running the organization, she says. For example, a section chief for orthopedics reports to the chair of surgery.

“The idea is, the patient benefits,” she says. “The patient becomes the center of the model.”

And the model is coming together, in ways that are affecting the supply chain, says Tarantino. “In this model, we have strong physician alignment, strong leadership.” Cost-savings occur almost naturally, because the physicians are involved in driving product decisions, especially decisions about so-called physician-preference items. “They are helping drive the discussion,” says Tarantino, referring to Carilion’s physicians.

“Physicians and surgeons will always have the patient first in their minds, always. I really didn’t know what Carilion would look like when [the reorganization] happened; but they’re still oriented that way. And physicians are entrepreneurs at heart; they know exactly what to do; they intuitively know how to run a business. They’ve taken care of patients and run their own businesses. They know how to negotiate. You don’t have to teach them anything.”
In March 2009, Carilion decided to benchmark its expenses to try to reach bigger savings goals. “We looked at every non-labor expense statistic and said, ‘How do we look?’” says Tarantino. The exercise helped Carilion identify potential supply chain savings of between $7 million and $12 million. Based on that estimate, the IDN set a goal: It would take $8 million out of the supply chain in fiscal year 2010, which began Oct. 1, 2009. “We did it,” she says.

Can’t follow the status quo
Partnering with Premier and Deloitte, Carilion undertook a number of supply and contracting initiatives. “We had tremendous support – and we still do – from our senior leadership to centralize our contracting model and aggregate our contracting volume,” says Tarantino. “We did some big, innovative things,” she continues. “You can’t get to $8 million by following the status quo.” One example: Carilion saved $300,000 by putting contrast media out to bid.

“It’s change management; educating a lot of people about contracting, about how you aggregate volume, how you negotiate.”

Physician involvement and support throughout the process has been critical to the success of each of the initiatives undertaken, says Tarantino. For example, the chair of radiology was involved in the contrast media initiative.

The fact that Carilion employs its physicians certainly helps in achieving supply chain savings. But Tarantino and others on the team employed the same strategies that any successful supply chain team would. “You share data, ‘Here are the vendors we’re using; here’s what we’re spending; here’s where we think the opportunities are.’ That’s what makes it possible to do this – to educate people, and then follow the steps.”

Rather than the supply chain team leading the peer-to-peer discussion among the doctors, the department chairs and section chiefs do so, says Tarantino. “That’s really the only way it can be done. It has to be a peer-to-peer discussion.” That’s true whether physicians are employed or not, she adds. “Physicians respect each other, they speak the same language.”

“[It’s more about] your communication ability, that is, your ability to share information and data that’s accurate,” says Tarantino. “And your relationships are important. Have you built trust?

“I don’t think a physician ever looks at a supply chain executive and says, ‘They have – or don’t have – the right degree or right experience.’ Rather, the important thing is, Do they understand what you’re communicating? Do they trust you that you will allow them to make the best decision for their patients? If they don’t feel that, they won’t partner with you.

“At the end of the day, for physicians, it’s really about their patients. Do they think you care? If so, you can do amazing things.”