News
2006 Materials
Management Honor Roll
Air Force Medical Logistics Flight
West Penn Allegheny Health System Corporate Contracting Division
Air Force Medical Logistics Flight
Soaring through adversity
At first glance it might be easy to dismiss the Air Force Medical Logistics Flight, the United States Air Force Academy’s materials management department, as not even being in the same league as the departments in private sector not-for-profit and investor-owned hospitals.
After all, is it not part of a government-sponsored group (technically, taxpayer-supported) with a presumably fat federal military budget to play with, courtesy of a hawkish Republican White House and a GOP-dominated Capitol Hill? But succumbing to such a stereotype would be unfair and just plain wrong.
Why? Because the 38-member Air Force Medical Logistics Flight actually struggles with similar budgetary woes, must operate in a detailed bureaucratic structure that would overshadow even the most minutia-focused hospital committee and have to maintain service quality in times of peace and war, even when it loses staff members to the front lines of battle in places like Afghanistan and Iraq. Imagine having to deal with budget crunches, critical supply demands with life-and-death consequences every day and a revolving door of staff members?
Plus, it’s hard to argue with a highly motivated organization whose motto is "Whatever It Takes," a philosophy that might improve hundreds, if not thousands of hospital-based materials management departments in the private sector.
Still, the Air Force Medical Logistics Flight’s past and ongoing accomplishments warrant its placement in Healthcare Purchasing News’ Materials Management Honor Roll, thanks to the closest finish for any materials management-related award in HPN’s 29-year history.
Balancing a massive logistics bureaucracy with high clinical and operational staff turnover, courtesy of wartime, is a monumental, if not a seemingly Sisyphean, task. But Maj. Christopher Dunn, Medical Logistics Flight Commander, and his crew of more than three dozen, make it happen.
They construct and fortify teams of supply custodians and professional staff, incorporate some of the latest technology to streamline operations and processes.
The Medical Logistics Flight uses robotics to generate 3,600 prescriptions daily to accurately and efficiently support the annual $17 million operation. The robotics technology enables pharmacy inventory turns of two per day with more than 80 percent fill rates. Staffers rely on "personal data assistants" (PDAs) to interface with its procurement and management system, giving logisticians the ability to scan bar codes as part of its electronic ordering and replenishment process for pharmaceutical, medical and dental supplies, the latter two of which involve $21 million worth of in-use assets . This year alone, the group achieved an inventory accuracy rate of 99 percent.
Dun’s group also is migrating toward a "paperless environment" by employing a $32,000 document scanning system for electronic filing, storage and retrieval.
They turned the tables on customer relations, too. Rather than having the customer come to them for support they moved the customer service and support department closer to the end users for improved responsiveness and satisfaction.
The group was instrumental in setting up and supporting three new services – cardiology, GI and sleep lab – within the organization in partnership with the clinical staff. They work with their prime vendor and other suppliers in operating a just-in-time inventory methodology, which is something the military started offering barely a decade ago even though it’s been entrenched in the private sector for nearly half a century. Consequently, on-hand inventory has been reduced to an average of $39,000 monthly. They manage $6 million in service contracts, too.
They worked with the radiology department to set up a centralized teleradiology hub, providing digital reading capability for 11 satellite clinical locations. It amounted to investing in more than $3 million in equipment, which facilitated reading more than 75,000 images annually and generating $1.1 million in yearly cost savings.
They brought together infection control and safety officers with housekeeping and facilities management and several vendors to support a product standardization effort for sharps containers. During a $21 million modernization project, Dun’s group seamlessly moved more than 200 professional staff members to a temporary facility and then to the renovated areas with no degradation in services and assigned a materials management specialist to handle the supply chain issues during the transition. The group also dedicated a buyer for surgical commodities and services.
"In our attempt to facilitate teamwork and create a cohesive department, we focused on motivating our staff to develop and utilize their full potential," Dun noted. Indeed.
West Penn Allegheny Health System Corporate Contracting Division
Carving out a legacy
If there was ever a rags-to-riches tale in healthcare with materials management as one of the marquee players then West Penn Allegheny Health System’s yarn should top the list.
As the old beleaguered AHERF organization, the Pittsburgh-based multi-hospital system nearly collapsed under the weight of financial and operational inefficiencies in the late 1990s. But you’d never know it today.
As West Penn Allegheny under new management, the system found new a new lease on life and continually pushes the envelope in terms of patient care and materials management operations. In fact, its corporate contracting division under Vice President David Zimba has been a worthy finalist in HPN’s Materials Management Department of the Year competition for the last three consecutive years. Ironically, several nominees and at least one winner over the years actually admitted to visiting West Penn Allegheny’s facilities en route to their own successes. So if any organization is deserving of HPN’s award it is West Penn Allegheny.
Zimba, who actively promotes strategic sourcing and competitive friction as keys to materials management success based on West Penn Allegheny’s golden track record, can’t express enough appreciation for the 39 direct and more than 500 indirect employees that have built up the corporate contracting division during the last six years to support patients, physicians, nurses, technicians and administrators.
"This group has gone far beyond the call of duty," Zimba noted. "The group has facilitated a cultural transformation by moving from a transactional focus to a strategic focus. They have emerged from the ‘basement’ as a core strategic asset of the organization. They have employed a data centric philosophy to drive the improvement in performance and guide our greater than 14,000 employee organization to a new supply chain vision. This group has totally transformed itself by adopting an industry leading strategic sourcing approach, a visionary closed-loop, electronically driven supply replenishment and distribution process, an appreciation for the necessity of clean useable data, and a sincere understanding of the need to exceed our customers’ expectations. Their inspiration, hard work, and diligence have helped our organization create the most effective and efficient supply chain in this industry."
Zimba buttressed his praise with a veritable laundry list of achievements. The list includes:
• An internal customer satisfaction rate of 96 percent
• A product fill rate of 99 percent
• Combined official and unofficial inventory turn rate of 12.1, culminating in an $11.1 million improvement in cash
• Annual recurring cost savings of $76.6 million; a total baseline reduction amounting to $330 million in cumulative savings
• 84 percent of total purchases documented by the department’s materials management information system
• 89 percent of transactions completed by using full cycle EDI over 25 internally supported vendor connections and up to 96 percent when auto-fax is added
• An 81 percent match of items in its supply chain database make it one of the cleanest among provider organizations
During the past year, Zimba’s group developed full cycle EDI capability with its pharmacy distributor, continued implementation of its nationally recognized e-materials strategy, renewed primary business partner relationships with all of its primary business partners, executed reverse auctions in major categories, optimized the use of electronic cabinetry and even influenced the release of one key vendor’s new software and platform.
"We believe we are leading a productive change in the fundamentals under which the healthcare supply chain is strategically sourced, organized, and delivered," Zimba noted. "During this transformation we were met with a mountain of skepticism, resistance and disregard."
As Zimba and West Penn Allegheny gain accolades from a growing number of associations, GPOs, providers, suppliers and media outlets, it’s become a challenge to identify any scoffers unconvinced by the organization’s achievements in teamwork, innovation, creativity, customer service and cost reduction. HPN
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August 2006
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25 Questions for the Best in Class 2006 Baptist Health System’s supply chain team leader provides some keen insights into their attitudes and operations. |
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What’s the secret
formula that makes a leader in supply chain management? How does
your department implement that secret formula? Work closely with end users, clinical team, M.D.s, R.N.s, R.Ph. Involve them in key decisions and value analysis. We have key functional clinical teams which meet routinely to drive compliance and standardization. The next big trend in healthcare supply chain management will be...[efficient operations and out of the box contracts]. Why? Improved prices with GPOs are done. We need to continue to search for contracts that are not just centered around the price of a product. We all need to work on efficiencies for both manufacturers and hospitals like the ‘Perfect Order’ project, which could reduce the whole supply chain cost, use software to be more efficient. Some in the "C-suite" have criticized materials managers for being too technical and not strategic enough to "join their club." Do you agree? Why? No. I have seen more successful strategic plans in the last five years than the previous 15 years. Key strategies to align with administration is critical for success. What specific project did materials management complete where you felt they didn’t live up to your expectations? Particular physician preference products – orthopedic standardization. What specific project did your department complete where you felt they exceeded your expectations? Total cost reductions two years in a row exceeded expectations by $1 million each year while improving the quality of the products we use. If you could change one thing about your facility’s materials management department, what would it be and why? Have more FTEs to accomplish more projects. In your opinion, what is your department’s toughest
administrative To save another large sum of dollars in supply cost for a third straight year. What is your department’s toughest operational challenge? Standardization across multiple hospitals and clinics. Continue working with clinical and non-clinical staff. What are your top three priorities for the remainder of 2006 and for 2007? GPO conversion, year-end inventory, perpetual inventory start up in all our O.R.s and cath labs. What do you believe are some barriers to growth for your department in the future and how do you plan to overcome them? Resources, continuing education dollars. What’s the most enjoyable part of your department’s function? Working with great folks. What’s the most difficult part of your department’s function? Balancing the need for input from the clinical staff and moving fast to get everything done in a timely manner. Handling capital, contracts, operational efficiencies, advance with IT software with only a four-person corporate office. How does the CEO view the materials management department? Does he or she see it as a strategic function or a support service? Statregic function is up there with the core strategies for the BHS Board. What resources can the department count on and will they come every year – and not just in response to clinician complaints? Resources are dwindling. Where is materials management on the organizational chart? Reporting to corporate CFO, No. 2 position in the organization. What’s the one project or task you’ve always wanted materials management to tackle but the department has yet to pick up the ball? Lean Six Sigma training. What are some practical, common sense ways that materials managers can keep patient satisfaction in mind as they’re performing their duties? Ask, ‘What would I do if the patient were my mother, father or my child?’ If you could change one public perception of your department, what would it be and why? That we are not only a purchasing department but a complete supply chain solution. What’s the one job/assignment your department probably should have turned down? Initiating perpetual inventory in the O.R. What’s the most creative thing your department has ever done? [Cardiovascular] contracting where we pay per case not per supply item. Other departments/professionals in your facility love/respect your department because… We first aim to serve; first our patients, then our physicians, our clinical staff and all other employees. Other departments/professionals in your facility can’t stand your department because… We have the best offices and are not located in the C suite. How can materials managers collaborate with other departments and professionals and convince them that their decisions are based on the financial health of the organization and not in denying them quality products or dictating patient care as the clinicians might tell the CEOs? Allow the clinicians to be an integral part in selecting products. See our example of how we use many clinical teams to be the decision makers on selecting products. What advice do you have for professionals outside of healthcare wanting to enter into the field of healthcare materials management? Get ready for a lot of challenge. Healthcare is still half art and half science. I’ve heard anecdotes from materials managers that work for physician-centric, physician-driven organizations as saying that materials management simply exists to do what physicians want. The doctors have the control. How would you respond to these materials managers? How is the situation different at Baptist Health System? Not necessarily different, but don’t give up. I believe you first have to develop a trusting relationship with physicians first. Then they are like everyone else. You need to demonstrate how any change will improve their ability to take care of patients, which is their first goal. HPN |
