Growing Pains

Today’s IDN issues are both old and new.

Beyond the headlines of hospital mergers lies the hard work of creating healthcare systems that deliver high-quality patient care, cost effectively. That work is never ending, according to five integrated delivery network (IDN) executives participating in a panel discussion at the 2004 HIGPA International Expo.

As IDNs continue to grow beyond the infancy stage, they face a number of challenges, some old and some new. The idea of reducing supply expenses is never outdated. Nor is the importance of enlisting the support of clinicians in supply chain initiatives. Still, because they’re dealing with multiple facilities, today’s supply chain executives find their tasks more complicated than did their predecessors, many of whom managed just one institution. Today’s executives must work to standardize materials management information systems across multiple facilities, and organize centralized contracting and distribution programs. Yet, according to the IDN executives, the potential payoffs of such initiatives are precisely the reason that many hospitals united to form IDNs in the first place.

The bottom line still counts
Executives at Salt Lake City-based Intermountain Health Care (IHC) never keep their eyes off supply expenses. Over the past two years, the 22-hospital IDN has saved $2.8 and $2.9 million, respectively, in supply expenses according to IHC’s VP, Bruce Hanks. The IDN has saved more than $3 million in each of the past two years in diagnostic imaging equipment alone, thanks to a major capital equipment initiative that began two years ago.

“We are actively working on system-wide integration of materials management and supply management practices,” said Hanks. And IHC continues to narrow the number of contract manufacturers with which it deals.

LeeSar Cooperative Services of Florida has taken a much different route. LeeSar is a purchasing cooperative owned jointly by Sarasota Memorial Hospital and Lee Memorial Hospital in Fort Myers. It represents four acute care facilities in the southwestern part of the state.

Although “proud members of VHA,” LeeSar has chosen to contract on its own rather than use Novation’s contracts, said Cooperative Services’ president and CEO Bob Simpson. “Our medical staff wanted more input in the product selection process,” he said. “So our end users select what they’re going to use first and tell us what is medically and operationally acceptable. Then we drive 90 percent compliance with each of our own contracts.”

What’s more, Cooperative Services of Florida has set up its own 60,000-square-foot regional warehouse and distribution center, accepting shipments directly from manufacturers – bypassing distributors in the process.

In many ways, Denver, Colo.-based Catholic Health Initiatives (CHI) is playing catch-up with other IDNs across the country. That’s because when CHI was formed eight years ago, it was designed to be a holding company, not an operating company, said Phil Mears, senior VP of supply chain. But when that vision changed just a couple of years ago, CHI executives hurried to put together the pieces of an integrated network.

“We hadn’t created an infrastructure for contracting, so we had no staff,” said Mears. CHI contracted with its GPO – Schaumburg, Ill.-based Consorta – to negotiate custom contracts on CHI’s behalf. It also made a decision to implement the Lawson Software (St. Paul, Minn.) enterprise resource planning system throughout the IDN.

Building an infrastructure
Meanwhile, executives and staff at Resource Optimization & Innovation (ROI) in St. Louis continue to build an electronic and physical infrastructure to support self-contracting and self-distribution programs, said ROI’s president, Lynn Britton. Based in Chesterfield, Mo., ROI is the contracting and distribution arm for the Sisters of Mercy Health System in St. Louis.

ROI executives and staff have worked for several years to build a centralized purchasing program and master item file for all of Mercy’s hospitals, which are spread among seven states. By acting as its own distributor, “we are assuming greater accountability within the supply chain,” said Britton.

In Tupelo, Miss., North Mississippi Medical Center implemented a common materials management system 10 years ago in its flagship hospital in Tupelo, as well as in its five community hospitals, said Corporate Director of Purchasing Services Calvin White.

Two years ago, the IDN elected to adopt Atlanta-based MedAssets Supply Chain Systems as its primary GPO. And today, it continues to examine the merits of buying direct vs. buying through distributors. “Everything is up for change. We have no preconceived ideas.”

Working with clinicians
The clinician is still important in developing efficient supply chain processes. “We’re focusing on the clinical implications of the supply chain,” said Hanks.

“Like other systems, we have had our own battles with clinicians, both those employed by the company and those who are outside physicians. But we believe that by fostering a much closer interaction with the clinical side of the business, we can achieve long-term bearing on how the supply chain is impacted and managed.”

Hanks believes that interacting with clinicians can affect far more than the price of goods. “Clinical benchmarking initiatives are rising above what we would call the supply chain,” he said. By working together, clinicians and operations people can arrive at best clinical practices.

At Cooperative Services of Florida, Simpson and staff have worked with physicians for the past two years to raise awareness of the cost of the procedures performed. Simpson said it helps that Cooperative Services’ VP, William Tousey, is a former OR director. Tousey’s former position brings credibility among the surgeons, many of whom he has worked with in years past.

Because Florida houses the largest number of General Motors (GM) retirees in the country, GM offered to work with LeeSar to explore the most efficient ways to perform surgical procedures. From there, the IDN has begun to explore other opportunities for improvement.

Mears said getting reliable and useful data remains a challenge for Catholic Health Initiatives. With so many facilities, many with different materials information systems and value analysis teams, he and his staff are challenged to “try to collapse them and spell the word ‘synergy,’” he said. “We have to get our heads around products and try to understand how we can help clinicians be true contributors to (the supply chain) part of the equation. We need more than the anecdotal ‘This device failed for me,’ whereas in another part of the country, clinicians are saying ‘We have to have this.’”

Meanwhile, Sisters of Mercy and ROI have spanned the clinical and materials divide with its Mercy Meds program, which Britton called “a big transformation of the medication administration process.” In an effort to eliminate bedside medication errors, Mercy instituted a medication-repackaging program and installed bedside scanning units.

White said the clinical piece is very important at North Mississippi. For years, the IDN has been comparing surgeons’ performances for similar procedures. But until recently, supply chain considerations were not part of the equation. Now, White and his staff talk with the clinicians about standardizing the supplies and devices they use in their procedures.

“We have gotten the clinicians’ attention, because they understand that they need to look at more than just overall costs and outcomes,” said White. “They also need to look at the supplies being used in their practice.”

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