INSIDE THE CURRENT ISSUE

July 2008

People & Opinions

SMI pursuing healthcare supply chain improvements

by Dennis P. Orthman

With a collective emphasis squarely focused on creating sustainable positive changes to the healthcare supply chain, more than 100 members of the Strategic Marketplace Initiative rolled up their sleeves and got to work at the SMI Spring Forum in Orlando in May.

"The great part about SMI is that the members don’t just talk about change, they actually work at it!" said Phil Profeta, corporate director of purchasing for the University of Rochester (NY) Medical Center/Strong Health System.

Thought leaders from across the country participated, including invited guests and active participants from the FDA, AHRMM, University of Arkansas Center for Innovation in Healthcare Logistics (CIHL), The Advisory Board, and GS1 US Healthcare. Said SMI Board Member Keith Kuchta of Kimberly-Clark: "SMI members are energized by our continuing collaborative efforts to advance the healthcare supply chain."

SMI’s Spring 2008 Forum featured multiple working sessions where trading partners continued their improvement efforts to address industry data standards, electronic invoicing, supply chain revenue optimization opportunities and vendor-managed inventory models. In addition to the many working sessions, SMI members were informed and inspired by presentations from notable industry experts:

• Bradford Koles, principal, The Advisory Board, on the state of healthcare

• Greg White, senior director, Johnson & Johnson, on reimbursement regulations

• Gene Kirtser, COO, Resource Optimization and Innovation (ROi) on the future of healthcare supply costs

Dennis Harrison, president of GS1 US Healthcare, provided attendees with a detailed look at his organization, offering valuable insight into the global non-profit company that has assumed an industry leadership position for standards development and adoption. The Forum also introduced a new feature, interactive luncheon sessions. In these sessions, subject matter experts presented information on advanced industry topics while soliciting feedback, comments and real-life application descriptions from session attendees. The topics and experts featured were:

• Eliminating Versus Shifting Supply Chain Costs – Nancy LeMaster of BJC Healthcare and Ken Kohler of Cardinal Health

• Receiving-to-Patient Hospital Supply Digitalization – Ron Rardin of the Center for Innovative Healthcare Logistics

• Regulations/Reimbursement Impacting the Healthcare Supply Chain – Greg White of Johnson and Johnson

• Industry Value At The Center – Bradford Koles of The Advisory Board

In addition to the Forum’s planned agenda, SMI members expressed increasing concern about the growing emphasis on vendor access and credentialing programs, and the costs associated with these programs. SMI’s 2006 publication Management Guidelines for Vendor Access, endorsed by AORN, continue to be a valuable industry resource to assist organizations in creating and managing their own vendor access programs. The guidelines are available at no charge at www.smisupplychain.com

Breakout sessions

At the Forum SMI members, organized as Initiative Teams and Workgroups, worked in afternoon breakout sessions on five specific initiatives:

SMI’s five active initiatives

1. Data Standards Adoption: GLN

2. Data Standards Adoption: GTIN and Data Synchronization

3. The Link Between Supply Chain and Revenue

4. 810 Transaction

5. Vendor Managed Inventory

Data standards adoption: GLN

SMI’s GLN Workgroup members continued both their individual and industry-wide progress for adoption in breakout session, gathering the latest information on both SMI members’ and industry-wide efforts to adopt the Global Location Number (GLN) as the industry standard for location identification. The GLN was endorsed in late 2007 by the Healthcare Supply Chain Standards Coalition (HSCSC), of which SMI is a member. HSCSC’s endorsement has helped the industry build the critical mass needed to bring the various industry stakeholders into alignment on a single standard.

SMI’s GLN Workgroup, working in conjunction with the HSCSC GLN team, is now focusing their efforts on integrating member adoption work with GS1 US Healthcare’s efforts. Creation of industry tools and the testing of transactional processes using the GLN are the primary focuses of these newly aligned efforts to support industry adoption. SMI Workgroup Leader Mary Pat Elwood of BD said, "For the first time, healthcare supply chain is aligned behind one location standard and now many groups are coming together with GS1 US Healthcare to support adoption efforts."

Data standards adoption: GTIN and data synchronization

The SMI Workgroup on Global Trade Item Number (GTIN) Adoption and Data Synchronization also met in a breakout session to work on adoption efforts. The overall goal of data synchronization is for all parties in healthcare to use common global product identifiers and standardized product data attributes with consistent business rules to share the information. To progress toward this goal, several workgroup members are actively involved in the Department of Defense Global Data Synchronization Network Pilot program. In the DoD pilot effort, suppliers have deposited their standardized product information into a central data pool where it is then extracted by providers and industry stakeholders and used to conduct transactions. Dennis Black, SMI’s Workgroup Leader, reported that among the many lessons learned in the pilot is that the data pooling process does work and standardized product information is achievable.

Linking supply chain and revenue

This SMI Initiative Team, led by Florence Doyle of Catholic Health East, previewed their seven-minute narrated video presentation on the links that connect routine supply chain responsibilities with revenue generation. The preliminary presentation includes recommendations for supply chain professionals to consider in assisting revenue optimization efforts. "Our Team’s goal is to help supply chain professionals understand that they can positively impact revenue in addition to costs," said Doyle. The SMI Team is working during the summer to enhance the presentation, with plans to release the video to the industry as a training tool by September.

The 810 transaction initiative

Focused keenly on the goal to increase the utilization of EDI 810 transactions within the SMI membership and the industry, the 810 Transaction Initiative Team continued their fast-paced progress in their working breakout session. Team Co-Leaders Rammi Gill of GHX and Ed Robinson of OhioHealth reviewed with the Team the preliminary SMI member survey results, which showed unanimous agreement that invoice automation was extremely important to supply chain efficiency.

Sub-teams of providers and industry partners continue to work on refining "roadmaps" to assist both parties in successfully implementing 810 electronic invoice transactions as part of a business relationship. Work also continues on completing value calculators to assist both providers and suppliers in quantifying the potential financial value of implementation. Following the testing of the tools in pilot programs, the 810 Transaction Team plans to package all of these solutions into an "810 Transaction Toolkit" for the industry.

Vendor-managed inventory

The breakout session for the Vendor Managed Inventory (VMI) Initiative followed a productive initial period for the team where they had explored the world of VMI both internally and externally to healthcare. Led by Eric Nelson of Cardinal Health, the VMI team established a goal to develop and promote a detailed understanding of how a properly implemented and managed VMI program can bring value to a healthcare supply chain. The team identified and analyzed a variety of models currently operating in the consumer goods and retail industries. Vendor-managed inventory models within healthcare were also researched. Having determined that VMI can have many versions, the team worked on creating a common definition of VMI, the key enablers and critical components. The team plans to focus next on developing an analytical tool that assists trading partners to determine whether a vendor managed inventory program would be of value in selected applications.

During the next six months, these SMI Initiative Teams will continue their work via conference calls, webinars and e-mail to keep progress moving. At the Fall 2008 SMI Forum in Orlando, these teams will update all SMI members on adoption efforts and initiative progress, and will share information and tools.

The Strategic Marketplace Initiative (SMI) is a non-profit organization dedicated to shaping the healthcare supply chain. SMI’s members are all executives from both healthcare providers and the supplier community. Through SMI, the members participate in a non-competitive, collaborative process designed to go beyond discussion to yield actions. SMI’s mission is to establish new standards of supply chain performance for delivering healthcare to patients and their communities. Dennis P. Orthman is Project Director of SMI. For more information about SMI and its ongoing and future initiatives visit the organization’s Web site at www.smisupplychain.com.