Each Their Own

Market Insights provides opportunity to understanding IDNs…one at a time

Even 20 years after the term “integrated delivery network” came into widespread use, the old saying still rings true: “If you’ve seen one IDN, you’ve seen one IDN.” That said, there’s plenty to learn about IDNs simply by meeting with and listening to them. Such was the opportunity afforded suppliers and others at the recent Market Insights Supply Chain Forum in Charlotte, N.C., sponsored by MDSI, publisher of the Journal of Healthcare Contracting.

In a session aptly titled, “Understanding IDNs,” four supply chain executives spoke about their organizations:

  • Teresa Dail, RN, BSN, chief supply chain officer, Vanderbilt Health System, Nashville, Tenn.
  • Ed Bonetti, director of supply chain operations, Lifespan, Providence, R.I.
  • Jay Kirkpatrick, CEO, MidAmerica Region, HealthTrust, representing HCA.
  • Amy Newman, vice president, supply chain, Huntsville Hospital Health System, Huntsville, Ala.

Vanderbilt Health System

Vanderbilt comprises four hospitals and 3,000 faculty (MDs and PhDs), explained Dail. Its supply chain is responsible for half a billion dollars in spending. Pharmaceuticals comprise roughly 45 percent of that amount, med/surg supplies 44 percent, and lab 6 percent. Its prime distributor, Owens & Minor, delivers products on a low-unit-of-measure basis six days a week from a facility about 12 miles from campus. Total spend going through distribution is about $65 million annually.

Vanderbilt also operates a case cart operations center, a 51,000-square-foot offsite facility that processes more than 175,000 trays annually, and handles roughly 1,500 SKUs.

In 2007, Vanderbilt built an infrastructure, using technology and people, “to allow us to drive contracting and utilization initiatives, thereby reducing our dependency on national GPOs,” Dail told the group. “This infrastructure has allowed us to develop expertise in data analytics and contracting, resulting in about $70 million in savings over seven years.”

Vanderbilt expanded upon its experience in self-contracting by creating the Vanderbilt Supply Chain Services Collaborative. Its mission, said Dail, is to work with participating, non-owned facilities to:

  • Define and implement synergies among the organizations, allowing a focused and joint approach to lowering overall supply, pharmaceutical and purchased service expense through contracting.
  • Share best practices and maximize resource and technology utilization to create an efficient, cost-effective program, which will enhance the supply chain’s contribution to the overall success of the organization.

The Collaborative’s promise to industry is simple, said Dail: Commitment and compliance. In fact, each participant signs a letter of commitment prior to agreements being signed.


Lifespan Corp. comprises five hospitals in Rhode Island, with a total of 1,155 licensed beds, explained Ed Bonetti. It employs a centralized supply chain model, with a common management information system and a low-unit-of-measure distribution center. Lifespan employs an aggressive self-contracting strategy, and uses a variety of analytical tools to benchmark supply chain performance.

Suppliers can work best with Lifespan by keeping these things in mind:

  • Shift from focusing on the cost of components to the total cost of procedures. (Goal: Standardization and utilization.)
  • Move beyond just selling products to providing value. (Goal: Alignment with strategic initiatives.)
  • Use the value analysis process. (Goal: Address a clinical care gap or deliver cost savings.)
  • Improve contract compliance. (Goals: Manage three-way and four-way price integrity; eliminate voucher price discrepancies.)
  • Accommodate acute and non-acute care purchases.

Bonetti described Lifespan’s approach to contract management, price compliance and utilization at the conference:

Contract repository

  • Normalize data.
  • Consolidate spend for the entire enterprise.
  • View spend by vendor, contract, product and category.
  • Identify savings opportunities.
  • Leverage data in the RFP process.
  • Monitor spend and savings.


Contract management

  • Manage entire contracting cycle.
  • Manage contract cycle by complexity levels.
  • Manage contract calendar by category, product group, complexity, vendor.


Contract compliance

  • Matched exceptions. Manage price-matched exceptions; new items; price changes.
  • Lost savings: Vendor invoice errors, manage off-contract spend.


Utilization/price migration

  • Monitor product utilization by product type, vendor.
  • Develop practice standardization metrics and review variance by physician.
  • Control spend creep caused by product migration.



HCA Supply Chain


HealthTrust has a history of creating value since its formation, said Jay Kirkpatrick. Launching its GPO and supply chain operations group in 1999, HealthTrust has evolved to offer integrated, total cost management solutions.


As a GPO, HealthTrust represents 1,350 hospitals, 10,600 sites of care, and more than 600 non-healthcare companies, offering contract savings of 7 percent to 12 percent, using a one-price-for-all approach on supplies, including sub-acute classes. In addition, the company provides a broad supply chain footprint, serving more than 600 total entities, including 219 hospitals (162 of which are HCA facilities). Supply chain services include purchasing, accounts payable, regional warehousing and customer service.


Pursuing its mission of driving strategic cost management and operational efficiencies while enabling quality outcomes, HealthTrust follows three pathways: data and analytics, process improvement and clinical integration, said Kirkpatrick. Its journey has taken HealthTrust and its members from standardization, to alignment, to optimization and innovation, where supply chain is regarded as a strategic asset.



Huntsville Hospital Health System


At 881 beds, Huntsville Hospital Health System is the sixth largest publicly owned hospital system in the nation. At the conference, Amy Newman explained that Huntsville is an owner (with Sarasota Memorial Health Care System, Lee Memorial Health System, and the Central Florida Health Alliance) of Cooperative Services of Florida, Inc., an independent, nonprofit group purchasing organization.


Huntsville is also a participating member of the LeeSar Distribution Center, a 200,000-square-foot facility, which sits adjacent to Cooperative Services of Florida in Fort Myers, Fla. LeeSar is, in essence, a self-distributing operation, receiving bulk supplies directly from the manufacturer, and distributing them in low-unit-of-measure to participating facilities.



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