Financial Finesse

From accountant to financial analyst to healthcare chief procurement officer, Donna Drummond has managed to keep spending down and satisfaction up.

When Donna Drummond joined North Shore-Long Island Jewish Medical Center in 2002, her initial goal was to use her background in finance to create a financial team within the hospital system’s supply chain. Not surprisingly, she quickly discovered her new role was very similar to her previous positions with financial services firm, JP Morgan, and accounting firm, Deloitte.

“In both cases, my role has been to ensure that the front office (in this case, the clinicians) receive what they need to perform their job efficiently and expeditiously,” says Drummond. “In such a support role, no matter what industry you are in, consensus, collaboration and teamwork are essential.” Indeed, her skills and approach have paid off, as she continued with the health system as chief administrative officer of two tertiary care facilities from 2004 to 2006, and then as chief procurement officer.

Today, the 10-year-old health system comprises 15 hospitals (including three tertiary care facilities) and serves Long Island, Queens and Staten Island, N.Y. It is the largest employer on Long Island, with an operating budget of $4 billion.

Although Drummond’s talent as a financial analyst was what originally prompted North Shore-LIJ to bring her on board, she clearly has grown to be healthcare savvy as well. In part, she attributes this to the time she spent working in two of the health system’s tertiary care facilities. “This time was invaluable to providing me with an understanding of hospital operations and the need for supply chain management to provide support seamlessly, with minimal intervention by clinicians,” she says. Perhaps one of the greatest lessons Drummond learned from this experience was that “it is our responsibility to listen to the needs of the clinicians and others in hospital operations, and translate that into the [most appropriate] products and services, at the right price, at the right time and in the right place.”

“Since assuming my role of chief procurement officer in 2007, I have focused primarily on supply cost reductions and the development of North Shore-LIJ’s internal supply chain capabilities,” she says. Drummond believes that proper alignment of the collective knowledge and skills of those involved in supply chain processes is core to effective supply chain management. “Working closely with my team, the supply chain management team has articulated a vision for the strategic development of supply chain management that is directly linked to [our IDN’s] business plan and supported by a performance incentive plan,” she says. “This strategic vision effort has enabled my management team to define measures to track supply cost performance and provide the foundation for the organizational supply chain management strategy. Ongoing hiring and education in the areas of supply chain best practices, data analysis, and negotiation will elevate collective supply chain competence.”

Centralizing supply chain management
Between January and May 2007, Drummond and her contract management team worked to revamp the way North Shore-LIJ conducted its supply contracting business. They established a clear and consistent set of roles and responsibilities for individuals involved in the contract management process, and placed clinical and business leaders in charge of product selection and cost performance. “To understand the value of particular decisions within the system, it is important to involve the clinical and business leaders, as well as materials managers, in the buying decision,” Drummond says. “However, this has required substantial training in managing change, leading teams and communicating effectively to facilitate the new cross-functional participation in supply chain management efforts.” These steps have allowed the contracting team to focus on identifying cost-reduction opportunities, as well as on sourcing and developing competitive offers and contract management, she says. Her approach has produced some dramatic cost savings, she adds.

“The simultaneous delivery of cost reductions and development of corporate supply chain function is critical to our corporate strategy,” says Drummond. “Centralization of the supply chain was triggered by two simultaneous factors: the shift of corporate focus from mergers and acquisitions to improving internal productivity and cross-functional synergy; and the critical need to service the debt that will be associated with a major building construction plan.” At press time, Drummond estimated the program would save North Shore-LIJ nearly $25 million in 2007 alone.

And that’s not all. In formulating the health system’s 2007 year end report, Drummond noted several benchmarks the organization achieved that year, including the implementation of:

  • A new technology assessment and introduction program.
  • A data management infrastructure, designed to facilitate more sophisticated spend analyses.
  • A performance incentive structure for the organization’s key supply chain leaders.

Drummond was also working with the value analysis team leaders to develop self-assessment and performance improvement plans for 2008. “We are embracing our role as a support department, becoming more customer focused, streamlining the procurement process and cleaning up our data for easier product searches by end users and data-gathering for contracting purposes,” she adds.

The direction of healthcare
Perhaps the weakest aspect of healthcare today is the industry’s lack of point-of-use supply tracking technology, which “limits visibility to supply consumption and perpetrates an inefficient, over-stocked, push supply chain,” says Drummond. The solution, she says, is “to improve the integration of process and technology around order management, distribution and replenishment process and ongoing inventory.

“Demand management will be critical to fundamentally changing the points of control in the system,” she continues. “The more we can influence end-users’ buying decisions to drive compliance and decisions on viable substitutes, the greater our leverage will be in contracting with manufacturers.”

That said, Drummond also is quick to point out several strengths of the healthcare industry today. For one, she praises the shifting focus from merger and growth to improved internal efficiency. Add to that the availability of inexpensive, reliable contract management software and greater involvement of skilled finance and clinical managers in supply chain management, and Drummond believes the industry is headed in a positive direction. “Continuing to focus on involving key stakeholders in the decision process will allow healthcare organizations to make more informed decisions about new [products], while considering both clinical quality and financial implications,” she says. But, this requires people, processes and technology to be flexible to changes in clinical demands, reimbursement, service lines and more, she adds.

Drummond foresees a strong future for healthcare, which includes a growing awareness that “a lean, customer-friendly supply chain can create a competitive business advantage.” In addition, she looks ahead to improved safety for patients and healthcare workers; closer collaboration between best-practice healthcare systems and key suppliers, which should reduce costs; and more cost-effective point-of-use data collection processes, due to greater use of bar codes and radio frequency identification technology.

In all likelihood, Drummond will be a visible part of tomorrow’s healthcare landscape. Her goal is to “develop a comprehensive supply chain intelligence that allows users to more productively manage the rate of healthcare inflation; drive decisions around resource allocation and investment; and provide access to accurate, timely information, which could ultimately change consumer and vendor behavior.” Within that framework, she hopes to provide leadership, vision, alignment of incentives, and the necessary resources. Certainly no small order, but one she is confident she can carry out.

About the Author

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