IDNs respond to today’s pressures

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How do IDNs and hospital systems handle value analysis, purchased services, group purchasing, self-contracting, strategic sourcing and post-merger consolidation of supply chain functions? How is healthcare reform affecting healthcare providers and their supply chain operations? What are some of the new models and organizations in the healthcare community? Supply chain and GPO professionals shared their perspectives on these topics and others at this spring’s Market Insights Supply Chain Forum in Dallas, Texas.
Hosted by MDSI, publisher of the Journal of Healthcare Contracting, the Market Insights Supply Chain Forum (formerly the Healthcare Supplier/Provider Institute Meeting) offers a safe environment where supplier, provider and GPO executives can share practical and relevant information. Following are some highlights from the Forum.

Community Hospital Corp.
Michael Williams, FACHE, president and CEO of Community Hospital Corp., and Tony Ybarra, senior vice president, supply chain, Community Hospital Corp., shared information about their corporation as well as some key healthcare trends to which it is responding.

Community Hospital Corp. offers a variety of service platforms: hospital ownership; CHC Management & Consulting Services; and CHC ContinueCARE, explained Williams. Among the key issues facing healthcare professionals is the influx of insured patients due to the Affordable Care Act. And many of those patients will be covered by Medicaid – particularly in those states that expanded that program as part of healthcare reform.
Hospital merger-and-acquisition activity remained steady in 2014, driven by many factors, including the need for capital, management and managed care expertise, purchasing leverage and operational cost efficiencies.

However, not all mergers, acquisitions and partnerships are successful, he pointed out. Incompatible cultures – that is, significant differences in organizations’ “personalities” – can unravel a “marriage” of hospitals and hospital systems.

Meanwhile, Ybarra shared the following points about CHC’s value analysis process:

  • Monthly supply chain standardization and value analysis conference calls
  • Separate calls for acute- and post-acute-care facilities
  • Facility supply chain directors acting as chairperson and co-chairperson
  • Sponsorship by CHC executive vice president, chief operating officer and the CHC supply chain team

CHC provides monthly supply chain standardization minutes and cost analysis. A dashboard reflects the current status of product conversions, and open discussion notes are documented for follow-up purposes.

Guiding principles include:

  • Clinical or evidence-based value analysis
  • Cost/quality/outcomes (CQO) model
  • Identification of lower-cost, equivalent products, services and technology
  • Products that meet clinical requirements

CHRISTUS Health operates in six U.S. states, six states in Mexico, and Chile, and comprises more than 50 hospitals and long-term-care facilities, 175 clinics and outpatient centers, and other health ministries and ventures, explained Sandy Wise, BSN, RN, MBA. The IDN has 9,000 physicians on staff.

CHRISTUS Health is an active participant in MedAssets’ client-driven committee process, including the GPO’s spend management board and advisory committees. In addition, the IDN’s supply chain, clinicians and department heads participate in Resource Groups, or RUGs, which meet monthly to discuss contract awards, updates and strategies, clinical compliance, product user rejections, supplier capabilities and any unmet needs at the facility level. The RUG organization, which is supported by CHRISTUS supply chain management and MedAssets, calls for one member per region, one member/one vote.
A product trial tracker and a conversion tracker allow all facilities to view the status of trials and conversions within the IDN.

Meanwhile, David Shamlin CMRP, provided an overview of CHRISTUS Health’s approach to purchased services. For the IDN, purchased services include – but are not limited to – blood management services, elevator services, energy management, linen and laundry, managed print services, reprocessing of SUDs, transcription and voice recognition, integrated waste management and dialysis services. Outsourced departments are clinical engineering, housekeeping, food services and facilities maintenance.

CHRISTUS Health’s purchased services contracts rest on the following principles, explained Shamlin:

  • System contract first objective
  • Transparent costs (best when tied to a unit of service)
  • Incentivized growth
  • Measurable outcomes (baselines documented)
  • Quarterly business reviews
  • Required language
  • Renewal terms.

Bon Secours Health System
Bon Secours Health System comprises 19 acute care hospitals, a psychiatric hospital, five nursing care facilities, four assisted living facilities, seven retirement communities and four home care and hospice providers, explained Jim DeFazio, director, clinical value analysis and pharmacy services. Bon Secours participates in CCG, a Premier-based GPO representing more than 360 hospitals plus affiliates and physician practices, and 19 percent of Premier’s spend, he added.

DeFazio shared with suppliers key value analysis points they should know before approaching the IDN, including its three levels:

  • Leadership committee (15 members – seven clinical, seven business, and the director CVA)
  • Clinical value analysis teams (one vote per facility; majority rules)
  • Local implementation teams (lead service clinicians and key supply chain individuals)

He also explained the IDN’s eight-step approach to value analysis:

  • Agree on the question or issue
  • Identify (and involve) key stakeholders
  • Identify facts
  • Identify values and concerns
  • Consider alternatives
  • Pause and reflect
  • Discuss, decide and explain
  • Follow up (validate achieved stated goal)

St. Joseph Health System
St. Joseph Health System comprises 4,149 licensed beds in three regions – northern California, southern California, and west Texas/eastern New Mexico, said Sam Patel, environmental services and communications manager.

The IDN faced the following challenges in regard to purchased services contracting:

  • Various vendors
  • Non-GPO pricing
  • Inconsistent purchasing practices
  • Lack of standard communication
  • Delay in goods being received

With a transition to a shared-services model in August 2014, St. Joseph has streamlined the process, so that all ministry purchases funnel through the corporate office shared services. All ministries are on the same page insofar as contracting goes, and all use the same product, said Patel.

Baylor Scott & White Health
Baylor Scott & White is the largest non-profit health system in Texas, with $6.8 billion in revenue, explained Pamela Bryant, senior vice president, supply chain services. The IDN comprises 49 facilities, 5,200 beds, more than 5,800 affiliated physicians, and a supply chain budget of $1 billion.

The IDN employs a strategic sourcing process, encompassing clinical evaluation, standardization, innovation, technology, contract terms and conditions, and data analysis, she said.
Baylor Scott & White uses system value analysis teams (14 corporate service line teams) and recruits physicians to serve as champions to drive change and compliance. It strives for data integrity through dashboards and actionable data points.

Insofar as distribution and logistics are concerned, the IDN looks for consolidation (inventory management, SKU rationalization), LEAN processes (to achieve operational efficiencies) and low-unit-of-measure (to reduce redundancy), explained Bryant. To improve operations, the IDN pursues standardization and process improvements, PAR optimization (low-unit-of-measure) and innovation in technology (i.e., a single ERP).
In an era of reform, and as cost pressures continue to impact the bottom line, supply chain is essential to the success of the organization, Bryant said. Supply chain will play a major role in maintaining margins for the organization through key initiatives. In the future, supply chain will be asked to support the changing priorities of the organization due to reform.

Mount Sinai Health System
Based in New York, Mount Sinai Health System comprises 3,571 total certified beds, 138 operating rooms, more than 6,200 credentialed physicians, 10 freestanding ambulatory surgical centers, and 47 ambulatory practices through the five boroughs of New York City as well as Westchester and Long Island, explained Phil Mears, senior vice president, supply chain.

The merger of Mount Sinai and Continuum in 2013 brought a set of challenges, said Mears. The key challenges included people, current operations, leadership, vision, tools, timelines and third parties. But it enhanced leverage as well, in terms of group purchasing, tiers, price parity, etc.

HealthEast Care System
With four hospitals, two ambulatory surgery centers, an imaging center, 14 primary care and 25 specialty clinics, and more, HealthEast is the largest provider of healthcare services in the East Metro Minneapolis-St. Paul market, explained Jim Van Drasek, system director materials management. Its overall strategy is to “drive to increase value by continuously reducing the burden (cost and waste) and increasing the benefits (quality, outcomes and service) of healthcare for patients and communities.”

The IDN faces challenges similar to others, including reduced hospital volumes (the result of care transitions, wellness and prevention programs), the two-midnight rule, the challenges of incorporating new technology and drugs, high-deductible health plans, virtual and telemedicine, and mobile health apps.

At HealthEast, materials management is charged with managing the entire supply chain, a mission encompassing non-acute-care customers; vendor management; GPO management; supply and drug shortages; product and equipment recalls and backorders; and reduction of total cost. Non-salary expense management extends to contracted services, utilization management, vendor consolidation, the 340B drug program, evidence-based decisions, a value analysis program and make-or-buy decisions.

To vendors, Van Drasek offered the following guidelines:

  • Bring solutions, not just products.
  • Present evidence-based medicine (quality and outcomes).
  • Understand the market and cost pressures facing healthcare providers.
  • Ask whether the market can support the cost of the new technology you’re developing.
  • Know HealthEast’s requirements and processes, including centralized decision-making, centralized product selection, centralized value analysis, and its policies and procedures.
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