Partnering for Supply Chain Cost Reduction SCA3

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Partnering for Supply Chain
Cost Reduction (SCA-3)

• Joe Loya, Director of Purchasing and Distribution
• St. Joseph/Candler Health System
• Tim Berkey, Principal
• Premier, Inc.

Premier Breakthroughs Meeting June 22, 2006
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Presentation Objectives

• Review the results of a multi-year non-labor
  expense reduction (NLER) partnership between a
  two-hospital system and Premier, Inc.
• Educate audience members on an approach to
  non-labor expense reduction
• Discuss methods to gain acceptance of annualized
  savings totals
• Address general audience questions

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St. Josephs/Candler

• Faith-based Healthcare
• Two hospital system
• Largest provider in coastal GA and SC Lowcountry
• Regional Leader in
• Cardiac
• Orthopedics
• Neurosciences
• Oncology and Womens Services

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St. Josephs/Candler

• St. Josephs Hospital was founded in 1875 by the
  religious Sisters of Mercy
• Catholic Affiliation
• 303 beds

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St. Josephs/Candler

• Candler Hospital was founded in 1804
• Second oldest continuously operating hospital in
  the country
• Methodist affiliation
• 330 beds

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St. Josephs/Candler

• SJ/C Health System began with Joint Operating
  Agreement (1997)
• Created more efficient delivery of health
  services
• Streamlined resources
• Eliminated duplicative services
• Enhanced patient quality

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St. Josephs/Candler

• Recent Facility Addition Nancy N. and J.C. Lewis
  Cancer Research Pavilion
• 24 million project
• Free standing cancer center
• 56,000 square feet
• Opened Fall 2005

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Impetus for Change
Market Forces
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SJCHS/Premier Partnership

• GPO evaluation in 2003/2004
• Goals set by discipline (e.g., Med/Surg, Lab, OR)
• Partnership with Premier began 7/1/04
• Three-year partnership
• Goal 580,000 in annual, implemented savings
• - Count pro-rated savings in each year
• - Capital savings not included
• New savings stream in each successive year

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Non-Labor Expense Reduction General
Non-Labor Opportunity Supplies Purchased
Services
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Specific NLER Focus
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Price vs. Utilization

• Premier Regional Medical Center
• IV tubing utilization
• Scenario 1
• Two suppliers for IV tubing 60 of volume with
  Supplier 1 and 40 with Supplier 2
• Clinical standardization to Supplier 1 for 80 of
  total volume
• Five (5) to ten (10) percent price savings
  commonly possible
• Scenario 2
• Keep same suppliers
• Switch from a q72 to q96 tubing change
• Conservative estimate of fifteen (15) percent
  less tubing utilized
• Price matters, but utilization matters MORE!

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Typical Breadth of NLER Focus
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(No Transcript)
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Your Supply Chain is Broken When..

• Your definition of just in time delivery is 10
  minutes before the surgeon throws something
• Suppliers call you for backup when they run out
  of product
• Your three primary methods of ordering supplies
  are Telephone, Telefax and Tell Doug
• The local Orthopedic rep conducts your new
  physician orientation program
• The ceiling tiles on 2-South are listed as an
  official inventory location
• 3rd World countries reject your expired products
• Your staff turns over faster than your inventory

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Partnership Approach Overview

• Year 1
• Initial data request
• Identify and implement initial opportunities
• Year 2
• Refresh initiatives
• Continued implementation
• Year 3
• Hold the gains
• Continued implementation

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Partnership Approach

• Purchase history
• General ledger
• SupplyFocus (high-level supply chain metrics)
• Area-specific surveys (e.g., Pharmacy)

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Partnership Approach

• One to two-day visits
• One to two Premier specialists
• Interviews, tours, analysis of data
• Engage clinicians, physicians, etc.
• Purpose identify clinically appropriate and
  operationally feasible opportunities
• Secondary site visit/call for initiative approval

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Partnership Approach

• Example initiative list for Patient Care Services

sjchs_Initiative Tracking_062206.xls
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Partnership Approach

• Conducted in year 2
• Purpose identify new opportunities
• New product entry
• Variation in clinical practice
• New clinician preference
• Examine areas not initially assessed
• Other purchased services

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Partnership Approach

• Examine market-competitiveness of implants and
  higher cost supplies
• Orthopedic
• Spine
• Cardiac
• Data validated that SJCHS had good pricing in
  many cases

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Partnership Approach Price Comparison
Maximum National Price
Average National Price (red line)
Fusion Products
Medtronic
Your Price (top of gray bar)
10,000
NationalPrices without Your facilitys pricing
NationalPrices without Your facilitys pricing
8,000

6,000
4,000
Your Hospital
2,000
-
A
B

Minimum National Price

3,850.00
-
HS157

Min
3,200.00
3,397.00
7,940.00
8,745.00
Max
Average
5,984.70
6,030.29

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Partnership Approach

• Monthly VAT
• Premier created spreadsheets by area (e.g., OR)
• All VA agendas have Premier update
• Assigned responsible parties per project
• Measured results at completion of projects

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Partnership Approach Savings Tracker

• All Savings based on pro-rated implementation
• Monthly refresh on savings tracking and pipeline
  totals
• Parking lot for full initiative capture

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Partnership Approach Savings Tracker

• Savings by area, as of pipeline, reported
  monthly

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Partnership Approach Validating Savings
By signature below, you attest that the non-labor
expense reduction initiative IV Tubing and Site
changes described as Revise Policy From
Changing Up To q72 hrs To Up To q96 hrs has
been implemented at Premier Regional Medical
Center Implementation means that the initiative
is both "clinically acceptable" and/or
"operationally feasible". The signature below
also attests to the most recent projected
annualized (one-year) savings 98,276 as of
the date of this signature. Signed_______________
______ Date_______________________Signed______
_______________ Date_______________________
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Results to Date

• 1.76M in current implemented, annualized
  savings
• Eighty-seven (87) initiatives

• Intangible benefits
• The use of Premier specialists to identify
  opportunities
• The speed of financial impact analysis with
  third-party assistance

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Lessons Learned

• From SJCHSs perspective
• Keys to successful implementation
• A tracking mechanism to manage process and
  results
• Monthly summary reporting
• Keeping the data on the forefront (VA agendas)
• From Premiers perspective
• VAT meetings were 75 SJCHS and 25 Premier
• CFO also in attendance at each VAT meeting

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Next Steps

• The formal partnership continues to advance
• Closure of open projects and parking lot list
• Ortho, Spine, and CardiacFocus tools
• Expanding Affiliate program
• West Central Regional Collaborative
• Involvement in Premier Supply Chain committees
• Ongoing contract utilization