When you consider the accomplishments of the purchasing department at University Health Care System, Augusta, GA, since 2004, several figure prominently.

The 551-bed not-for-profit hospital, which serves a 25-county region, wasn’t about to wait for the healthcare industry to develop or at least reach a consensus on establishing a single source of synchronized data for all trading partners. Instead, UHCS created its own pilot product data utility (PDU), a short-term step to solve immediate supply chain needs, for sure, but with long-term implications. That’s because the purchasing team at UHCS patterned its program on the best practices of the grocery and retail industries and its PDU after the pilot program implemented by the Department of Defense.

"Once a PDU becomes available, University would be in a strong position to seamlessly convert our standardization and synchronization processes to support and leverage the industry-wide solution," noted Mike Brown, director of purchasing.

"Having standardized and synchronized product data in hospital item files to save costs, increase supply chain effectiveness and even improve patient safety may seem like a no-brainer, but in healthcare, such data quality is the exception and not the rule," he continued. So UHCS "developed and deployed solutions that are based on successful models used in other industries to address hospital needs to reduce operating costs while growing hospital revenue, and is beating the industry financial averages as a result."

For example, net operating revenue for the 12 months ending April 2007 was $410,588,836 and corresponding total patient supply cost was $54,506,758, resulting in a patient supply cost to net operating revenue ratio of 13.3 percent, according to Brown. Hospitals are generally considered to be performing well financially if they have a patient supply cost to net operating revenue less than or equal to 15 percent, he noted.

Brown’s strategy involved presenting accurate and reliable data to the clinical and medical staff but they had to ensure the quality of the data they were using first. So they implemented the UNSPSC commodity code as a financial analysis tool because it facilitates financial analysis of patient care supply items based on the clinical characteristics of a product.

Brown’s team launched the strategy in 2004, immediately generating more than $900,000 in savings, "more than paying for the cost of implementing the commodity codes in the first place," he indicated.

From daily usage of the UNSPSC, the purchasing department then worked to synchronize data in its item master with those in the vendors’ systems starting in January 2006.

UHCS began tracking the costs of patient care supply items to net operating revenue, making necessary changes without sacrificing patient care quality or clinical department satisfaction. By the end of April 2007, the year-to-date ratio had dropped to 12.7 percent from 13.9 percent in 2004. Brown’s team worked to gain physician support on the clinical product evaluation team for managing preference items and using group purchasing organization contracts better, developing positive professional relationships with nursing, surgical services, cath lab and radiology.

The purchasing department also synchronized its item file with the GPO contract files, including the off-line database, and enforcing its electronic price change notification policy, including "more aggressive management of invoice exceptions and moving away from using invoice exceptions as price change notifications," he noted.

"Like all hospitals, University must reduce costs while improving the quality of care," he stated. "University executives are finding new ways to streamline operations without affecting patient safety, and since patient supplies are a significant part of our operating budget, the supply chain represents a place we can turn to for savings opportunities.

"Unlike in other major industries, product information in the healthcare supply chain is inconsistent and inaccurate," he continued. "Currently, the industry suffers from the lack of a systematic way to consistently identify distinct medical/surgical products, which causes a ripple effect throughout the supply chain. Manufacturers, distributors, group purchasing organizations and hospitals each maintain their data separately, using different information systems of varying sophistication. In addition, the data between trading partners is not synchronized, meaning the information becomes rapidly out of date, adding complexity and cost to supply chain transactions and analyses."

Brown is proud that UHCS is "seizing opportunities to clean, standardize and synchronize its supply chain data to provide an accurate foundation for all of its ecommerce transactions."

Brown manages UHCS’ $54.5-million annual supply budget with 17 years of supply chain management experience. He became UHCS’ purchasing director in 2004 – entering the healthcare market from the manufacturing industry – demonstrating that it took a proverbial industry outsider to implement in two years what industry insiders have debated and discussed for more than two decades. That’s telling.