The Acquired Practice

Best practices from health systems that have successfully incorporated their acquired physician practices

Hospitals and health systems continue to extend into ambulatory settings to achieve cost savings, maintain stakeholder satisfaction and achieve growth. As they do so, contracting executives are learning that the acute and non-acute markets are very different. Each has unique capabilities, rules for success and requirements for distribution, alignment/coordination, products, contracting, inventory management, technologies, support and geography. The following Acquired Practice column highlights some best practices from health systems executives in this growing and important market.

Make the proper introductions

When a new practice is brought in at Weill Cornell Medical College in New York, a team from supply chain visits the doctors and staff to smooth the transition, says John Frain, director of purchasing. They handle the outfitting of any needs the practice has, and they introduce the practice to the IDN’s prime vendors, in medical/surgical, office supplies, pharmaceuticals (e.g., vaccines), etc. Weill Cornell uses different prime vendors for acute and the non-acute settings to maximize physician satisfaction and reduce the “total cost” of product (i.e., cost of goods, cost of delivery, unit of measure and service to a given site of care).

Frain and his team know that consistency of products drives volume and lessens uniqueness. “Uniqueness costs money,” he says. “Having many different brands for the same commodity means higher costs for us and may lead to higher costs for the vendor, who has less volume and higher stocking costs if they are not accustomed to serving the physician office.” Even so, Frain knows that to drive standardization among newly acquired physician practices might be too much and lead to alienation.

For that reason, the purchasing team focuses on driving better prices for the myriad of products currently in use among Weill Cornell’s physician practices. “We’re not qualified to tell them what products they should use, but we are qualified [to get better prices] for the products they already use. That’s the first step. The second step is to get all the doctors to agree on certain commodities. That will bring additional savings.”

Give physicians a voice

Norfolk, Va.-based Sentara Healthcare launched DOCxdirect – a purchasing program for community physicians – in 2001 as a way to help doctors lower their non-labor costs by leveraging Sentara’s buying power. Today, approximately 260 practices participate.

DOCxdirect members can purchase med/surg products, medical equipment, office supplies, pharmaceuticals, even services, such as red-bag-waste removal, document shredding and storage, and instrument sharpening. DOCxdirect delivers additional savings by supplying many of the products on which Sentara Healthcare has standardized – no easy feat among acute and non-acute supply needs. The IDN has several active value analysis committees [that incorporate physician leaders] in such areas as general surgery, orthopedics and spine. “You can’t drive down cost if everyone is using something different,” says Cindy Saeger, program manager for DOCxdirect. “These committees address issues such as standardization and utilization.”

Saeger and her staff’s focus to incorporate the non-acute physicians and their product/equipment requirements into the overall strategy has proven valuable to the IDN. The DOCxdirect staff now actively manage both Sentara owned sites, as well as the DOCxdirect program and serve as a resource to the rest of the materials team, who may be well-versed in acute-care products and services, but less so in non-acute ones. For example, during an ongoing initiative to standardize products among Sentara’s urgent-care facilities, Saeger and her team have been able to shed light on the necessity of some of the equipment and supplies used in those facilities [and the appropriate ‘clinical’ quality for non-acute settings versus acute settings].

Get good data

John Gaida, senior vice president, supply chain management, Texas Health Resources, has experience building a physician program. He did it about 20 years earlier, when he was at Partner’s Healthcare System in Boston. “I learned fast that you have to customize whatever program you are creating to the customer,” he says. “The physician office is nothing like the acute market, and that’s the first thing to get through your head.”

He knew that to launch a successful program, he would need to gather data about the practices’ supply chain activities. That wasn’t easy, given the large number of practices and distributors involved. Pulling data, such as invoices, from each practice’s accounting system was difficult. The bottom line? It was difficult to make logical decisions about taking cost out of the system without good data.

Two things became clear. First, THR needed its own information system, not that of any single supplier. “We needed to own the data; we needed to be able to communicate with all vendors. And it became clear that until we had our own data, we couldn’t make decisions about standardization and cost reduction.” THR ultimately contracted with Inventory Optimization Solutions, LLC, for a supply chain solution that would allow the practices to order equipment and supplies, and track inventory.

It also became clear that THR would need to select a prime distributor. THR was looking for a distributor partner that believed in the same things they did – reducing costs, sharing in savings, automation, and a desire to make the program the very best it could be. “We met with Henry Schein,” says Gaida. “They listened to us and said they would help us build the program we wanted.”

At that point, THR faced a decision: “Do we implement the information system piece first, or the conversion to Henry Schein?” he says. “We decided to do the whole thing at the same time.” In 11 weeks, all 250 offices had been converted.

Market the program

The success of any non-hospital program depends on planning and development, says Jim McManus, vice president of finance, St. Joseph Health System, Orange, Calif., a regional healthcare system with facilities in northern and southern California, west Texas and eastern New Mexico. Supply chain executives have to consciously shift gears, from focusing almost exclusively on the needs of the inpatient setting, to incorporating offices and clinics into the overall program. And the IDN supply chain team has to devote resources to tend to the program, respond to inquiries, work with outside partners, educate and empower staff and physicians, etc.

It helps to create a little excitement around the program, McManus says. So, rather than simply dictate product usage, the St. Joseph team has developed a marketing program to help the physician groups understand the benefits that the supply chain program can offer them. By branding the program and incorporating its partners, such as Henry Schein, MedAssets as well as St. Joseph Health System, physicians are tied closer to the organization, says McManus.

The results speak for themselves. St. Joseph has helped its clinics save anywhere from 18 to 51 percent, thanks to improvement in materials processes and product standardization. “And we have better information now, to help us set up future strategies for contracts,” says McManus. In addition, St. Joseph’s administration reports a level of physician satisfaction. The program is working well according to the operating committee, which bodes well for growth and expansion.