But St. Louis-based SSM Health Care was one of those few high-profile first movers that seemingly found the right formula and continues working today.

In fact, the supply chain management department at SSM Health Care-St. Louis, which represents half of parent organization SSM Health Care’s sprawling four-state regional reach, paved the way for its perception as an IDN role model and helped the organization secure the 2002 Malcolm Baldrige National Quality Award, the first healthcare organization to win. Two years after SSM Health Care-St. Louis’ 1994 debut it rolled out supply chain management as the first centralized and integrated function of the new organization as a litmus test before launching additional programs.

The pressure and scope wasn’t lost on Anthony Trupiano, SSM Health Care-St. Louis’ network vice president of supply chain management, who had been affiliated since 1981 with predecessor organizations that would become SSM. "Everyone wanted to see the first integrated service succeed," Trupiano told Healthcare Purchasing News. "We had to work through our contracting side, convincing physicians to work with us as part of an IDN. In some cases they came from competitive hospitals. But we were able to change the culture of the organization in those two years thanks to our leadership."

The SSM Health Care-St. Louis Supply Chain Management team:
Back row, left to right: Loretta Christeck, Al Poretti, Patricia Schmittgens, Jim Degnan,
Monique Kreps, Denis Riley, David Cheese, Gary Peters Second to back row: Zita Locher,
Phil Atkins, Leisa Fitzgerald, Rachel Johnston, Darlene Rollin, Sherry Campbell, Alice Peerman, Pam Venhaus, Dawn Allen, Terry Lehman Seated on bench: Diane Mueller, Robert Jackson, Tony Trupiano, Walter Grueninger, Kim Culbertson, Lisa Scholtes
Seated in front: Betsy Paschall, Mark Strobl, Gail Jobs.
Not shown: Terry Hatcher, Laura Riggin, Tina LaPlante, Cheryl Burgess & Jerry Nelms

Trupiano credits SSM’s leaders and their focus on continuous quality improvement for the success of the parent organization, the regional organization in which he serves and the administrative management department he leads to service the regional entity. "We have a group of presidents who work for the hospitals and have a duty to the IDN," he said. "We own our facilities and are responsible for their operations. These aren’t loose affiliations, so everyone has a duty to the IDN’s success, which is key."

While top-down administrative support may have boosted the stature and status of SSM Health Care-St. Louis’s supply chain management group among its hospital-based doctors and clinical department heads, Trupiano’s team also earned its props the old-fashioned way. They committed themselves to delivering effective and efficient service regardless of operational hurdles, whether those challenges were climate-related, technology-based or rooted in ego.

Amid a spate of weather-related power outages, for example, the supply chain management team kept communication lines open and its self-described complicated information technology system running smoothly to prevent interruptions in supply traffic. Using the same IT system, the team tracks a variety of benchmarks and indicators to bolster productivity and minimize contract pricing and payment discrepancies. To protect the bottom lines of its facilities and practicing surgeons, the team also took a hard line – and a huge risk – on high-end physician preference product pricing that resulted in millions of dollars in annual savings. And it didn’t involve the traditional approach of standardizing on products or reducing the number of vendors. Plus, implementing hand-held bar coding at the point-of-use and incorporating lean methods to improve processes and speed up performance so that clinicians get what they need in six seconds drive their strategic direction this year and beyond.

For these accomplishments HPN chose SSM Health Care-St. Louis’ supply chain management department as the 2007 Materials Management Department of the Year.

A spate of ice and wind storms that struck the metropolitan St. Louis area within the last year rattled businesses and residents alike, leaving several hundred thousand people without power, including SSM Health Care-St. Louis facilities and many staff member homes.

But the severe power outages, which lasted from more than three days to more than a week, didn’t cripple SSM Health Care-St. Louis’ supply channel nor keep the organization in the dark. Everyone in the supply chain management department reported to work during the various outages where they were then deployed to the six member hospitals throughout the storm-ravaged two-county area where they physically placed orders. Working by flashlight, they kept supply and communications lines open with suppliers and between facilities.

"This represented a significant effort by our staff," said Robert Jackson, network director, contracts and purchasing. "We are the link to our major suppliers so we have to make sure suppliers get what’s needed to our hospitals. We made sure computer links were maintained so they could function while in recovery mode and coordinated with local agencies for relief and support efforts."

Thankfully, SSM Health Care-St. Louis hospitals all operate on a common SAP enterprise resource planning (ERP) network, which made the process a bit less complicated than if each facility had its own standalone system.

Certainly, the storm-created power outages tested the organization’s disaster plans, Jackson agreed. "With the events that took place it helped us further define our responsibilities and what to do," he said. "We don’t have hurricanes like in the Southeast. Wind storms are isolated events. But we had enough to get started and learned where we needed to improve."

Ironically, the supply chain management team initiated a decentralized deployment strategy to keep its centralized process going. "The power outages allowed us to see that our staff and supply chain ordering process was seamless to the ordering departments and patients," Trupiano noted.

Jim Degnan, network contract manager, Patricia Schmittgens, network contract manager, Diane Mueller, network centralized purchasing manager.

Seven years ago, SSM Health Care became one of the few early adopters of SAP’s IT system, a process that seemed to go a lot more smoothly on paper than in practice. But rather than complain about the system not being tailored to healthcare and decry its complexity back then the supply chain management team instead made it work for them.

Prior to 2000, SSM’s 20 hospitals each operated their own IT systems and independent item masters that were not connected to finance, according to Walter Grueninger, network director, resource management. "We agreed to convert to SAP to do a three-way match system-wide, establishing one item master for all hospitals," he said. "Utilizing the item master we were able to capture accurate purchase history, validate rebates and maintain good contract data." In fact, they learned that 41 percent of expenditures were being purchased outside of the master item file as text when they started tracking non-file compliance in 2004. So far this year, Grueninger noted, non-file compliance has dropped to 12 percent.

Although admitting that the SAP materials management system is not "overly user friendly" Trupiano indicated they’ve developed a methodology for extracting information from the business warehouse function to create a "supply expense per adjusted patient day" report. "We found that the system was very good for inputting data but less so in getting information out," he said. "It’s programmable but that’s expensive to do because it may require middleware."

But supply chain management wasn’t forced to go with SAP by another department, according to Trupiano. "I’ve been on other end where finance drives decision but that didn’t happen here," he said. "We did have input into the decision – equal participation as part of the decision-making team – and did site visits." Essentially, Trupiano’s team learned after-the-fact that certain system capabilities they needed, such as hand-held bar code readers, required additional programming or middleware.

At best, the system brought supply chain management into a closer relationship with the IT department. "We held biweekly conference calls telling them what we needed and why," Jackson said, "specifying the reports that would be necessary and helpful to get out of the system. This was the system we had and we wanted to make the best of it." Jackson added that their tenacity helped supply chain management gain greater visibility with the IT group, which gained more of an understanding of its operations.

None of this was a total surprise, according to Grueninger. "We knew about the complexity upfront," he said. "Do this ASAP out of the can, expedite upfront implementation and devote resources for development after the fact or get everything programmed fully developed upfront, which would delay implementation. Because we didn’t want to wait we knew we had to develop processes on the back end so now we have a process in place to provide feedback to IT for solutions." Also, IT issues occupy a regular spot on the SSM Health Care supply chain executive committee agenda.

Trupiano added he also is working with third-party software tools through its group purchasing organization Premier Inc. for a variety of reporting functions.

Still, the SAP system helps Trupiano demonstrate his department’s efficiency and overall performance. For example, they are able to track increased lines per purchase order and annual contract savings and compliance to negotiated pricing. For example, contract savings in fiscal year 2005 amounted to $2.6 million. It jumped to $4.6 million in fiscal 2006. For fiscal 2007, as of June 30, Trupiano’s team is up to $4.5 million in contract savings.

Furthermore, the finance department hired an outside auditing agency to evaluate supply chain management’s fiscal performance in the areas of contract and pricing compliance and claims recovery. The agency examined procurement procedures from the beginning of the process through invoice processing and financial disbursement during a set period last year, including expenses, product and supply purchases and capital expenditures. The firm found nearly $261,000 in potentially recoverable funds, representing approximately 0.03 percent of the total payable transactions within the audit period. The accepted healthcare industry benchmark is 0.1 percent of purchases for the period reviewed, according to Trupiano, who was pleased with the results.

"Normally, they expect to find four times the errors that they found," he said. "But this showed we maintain a tight process after all with very few pricing mistakes."

SSM Health Care-St. Louis is looking to revenue cycle linkages next, connecting a standardized charge master and an electronic medical record system to the item master, Trupiano added. He admitted it’s a tremendous task that could take several years to develop and implement system-wide.

With SSM Health Care-St. Louis’ orthopedics service line operating at a loss, Trupiano’s team last year opted to offer its help. They went into data-gathering mode, tracking implant cost by surgeon, patient number and age, and compared that data to reimbursement. "We also benchmarked those costs through Premier to tell a story to our physicians – where we were positioned relative to revenue and where they were positioned in relation to cost," Trupiano said.

Supply chain management presented the data to the hospital presidents and the surgeons and developed a curious solution. Rather than standardize on implants and reduce the number of vendors they use, which would have involved considerable behavioral changes and product conversions, they opted instead to set a capitated price that the organization was willing to pay any or all of the participating vendors.

"We work with 12 orthopedic vendors, four of which represent 80 percent of our volume," Trupiano said. "As long as they agree with our pricing we’ll play. We’ll let anyone participate so long as they meet our price, which we determined on data, factoring in the cost of the implant and reimbursement."

Drawing a line in the sand led to some tense moments, he recalled. "We went three days where we performed very few cases to get the vendors to comply with our capitated price," he said. So far, they’ve generated roughly $2 million in annual savings and have implemented the same tactic with spinal products this year. "We received great support from administration in holding the line and managing the strategy with the surgeons," he added. "Because we had data we were able to demonstrate what we were doing was reasonable." Plus, they incorporated a "new technology" provision that solicits physician input.

Supply chain management also established and developed a history and working relationship with physicians from inception. In fact, Trupiano served on a physician-led committee that decided to change blood suppliers and improve blood conservation and utilization from a patient safety standpoint. The award-winning project also netted the organization $1.1 million in savings. Trupiano admitted that his participation gave supply chain management "great visibility" with the physicians and offered a "great opportunity" to network with them.

David Cheese (right), a resource manager for surgical services at SSM St. Joseph Health Center in St. Charles, examines an angiographic catheter with vascular surgeon T.J. Schnieder II, M.D.

Trupiano may lead the supply chain management department for SSM Health Care-St. Louis but his isn’t the only face that the IDN facilities see, particularly outside of crisis mode.

Jackson developed a "Purchasing Power" training class last year for managers that covers the role, responsibilities and policies of supply chain management, vendor policy and ethics, negotiations and contract management activities. The goal was to present a "unified and standardized methodology" for IDN procurement activities.

Besides promoting supply chain management throughout the IDN, it also reinforces the centralized philosophy process by encouraging compliance to vendor access restrictions, according to Jackson. Course material resides on the department’s intranet site, along with detailed customer surveys, and Jackson teaches the class at the various facilities like a traveling road show.

"Even though we may have long-standing relations with vendors we use this program to refresh them about our policies," Jackson noted. "It gives us a mechanism to grow compliance and allow people to see what we’re doing."

Grueninger is spearheading a lean management project, not only with SSM Health Care-St. Louis’ existing facilities, but also on the front end with the ongoing construction of a new facility that will serve as a replacement for an existing hospital. "We’re doing 100-day onsite walk-throughs to identify inventory reduction opportunities and methods to flow processes that eliminate steps," he said. "We’re trying to follow the six-second rule, such as how to get supplies into the hands of a physician in six seconds. We’re also working to determine lean processes for supply distribution in the new hospital – not just a PAR cart on the floor or in a closet."

The department also is pursuing hand-held bar coding at the point of use, extending supply chain management’s reach outside of the storerooms and surgical areas, and into the high-end clinical areas, such as the cath lab and interventional radiology, according to Grueninger.

Trupiano participates in an IDN-wide capital acquisition committee that is developing plans for standardized maintenance and replacement policies. He also helped to launch a new Clinical Technology Assessment Committee to share ideas, strategies and support with top administration and physicians.

All in all, SSM Health Care-St. Louis stresses its cohesiveness, which is recognized by staff and suppliers.

"We can demonstrate the link between our office and the corporate office and with our facilities," Grueninger said. "It’s a sealed process that involves all stakeholders. Our mission pulls the whole process together."