Henry Ford Health’s CSC Strategy

High density items, and physician preference items, priorities at major IDN facility.

February 2024 – The Journal of Healthcare Contracting

Some advantages of a strong CSC strategy include the reduction of supply chain complexity and streamlining operations. Viewed as a strategic asset to health systems, it can leverage operational and logistical scale, minimize risk and help deliver effective patient care.

Henry Ford Health’s mission is to provide quality healthcare by placing “each patient first,” serving metropolitan Detroit and southeast Michigan. It opened its 45,000-square-foot CSC this past September with an aim toward high density items and physician preference items (PPIs).

“What we’ve done uniquely with physician preference items is driving additional value through reduced PAR levels within our hospitals, reduced prevalence of product expiry and greater resiliency by reducing supply disruption,” said Joe Pettinato, vice president, supply chain operations for Henry Ford Health.

From a resiliency perspective, Pettinato said Henry Ford Health is able to better prepare for known or expected supply disruptions at a much lower cost and more reliably than before, while also eliminating the prevalence of substitute product that is typically at higher cost than its contracted standards.

Henry Ford Health’s CSC has five full-time employees and will ramp up as business and volume grows. “Our business practices are established, and it’s gone exceptionally well since we started,” Pettinato said.

“It gives us more options for our vendors and helps reduce their cost structure too,” Pettinato continued. “Shipping larger quantities into a singular facility benefits vendors by having the ability to participate in a bulk buy program or agreement that decrease their transactional costs.”

The CSC includes PPIs on the first floor and pharmaceutical distribution on the second floor with an additional 45,000 square feet. It’s smaller than other health system CSCs but aims to drive value through its unique design and resiliency strategy.

“One of the key stocking criteria of the CSC is the items must be on agreement and approved through our value analysis teams (VATs) with a set amount of inventory assurance,” Pettinato added. “That’s all tied into our clinical partners through our clinical VATs and committees further driving compliance and reducing costs.”

He said Henry Ford Health wants to increase its SKU count and inventory throughput to drive revenue and savings and decrease its stockouts through its resiliency efforts. Its supply chain operations team collaborates with its strategic sourcing, supplier relationship management, and supply chain systems and analytics teams to ensure compliance to its supply chain policies.

Henry Ford Health signed an agreement with Ascension Michigan this past October to enter a joint venture to bring together Ascension’s southeast Michigan and Genesys healthcare facilities and assets with Henry Ford Health’s facilities and assets. If the joint venture is approved, Henry Ford Health will be the largest healthcare provider in metropolitan Detroit. The health system is a champion of increasing diversity spend in the communities it serves. Its supply chain connects with departments from across Henry Ford Health to increase diversity spend in different areas that have targets for growth. Sourcing diverse and local suppliers is critically important to the health system.

“Domestic manufacturing not only helps to derisk the supply chain, but also helps to create jobs, which is huge for health equity,” Bill Moir, senior vice president, supply chain management for Henry Ford Health, told JHC last year.

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