Beaumont takes hand-off approach to bill-only transactions

Like many healthcare supply chain executives around the nation, Renee Bouren, director, materials management, and Chuck Carson, administrative director, supply chain, at Royal Oak, MI-based Beaumont Hospitals, certainly felt that way. A regional, integrated health network, Beaumont is comprised of 3 hospitals totalling 1,711 patient beds, medical centers, nursing homes, rehab facilities and hundreds of physician offices.

"We always looked at spine, orthopedics and cardiology transactions as high-risk areas," Bouren said. "These items account for nearly $30M or 20% of our entire supply budget and for a long time we were asking, ‘Can somebody help us with this?’"

Beaumont’s search spanned several years and several product trials. "We had been looking for an application that could automate bill-only transactions, specifically for orthopedic and spine implants," she noted. "But there was no one application that could actually meet the criteria that we thought we needed."

Bouren indicated that the variability of pricing for implantable products and accessories and their procedure-based delivery process warranted the need for software support. "Not only are these products consigned or walked in by the vendor representatives, there are literally thousands and thousands of different pricing scenarios that arise when physicians are implanting these products," she said. "Our contracts make extensive use of capitations and so we were dealing with a constant challenge of documenting utilization and correctly pricing products on POs.

Beaumont’s manual process of tracking and tracing implantable product consumption motivated Bouren and Carson to seek an automated solution. Absent a technological solution, implant coordinators in the operating room would rely heavily on the vendor reps to document what products were used and what pricing – line item or capitation – applied, according to Bouren. Her team then would check with the OR record to confirm utilization, type requisition into the MMIS, give the vendor a PO and complete a receipt. "We had numerous discussions that this process was far too informal for such a large spend and left the hospital exposed from a pricing and audit/control standpoint," commented Carson.

In the interest of compiling some quantifiable data on their current state, Beaumont’s supply chain team conducted a three-month retrospective invoice evaluation focusing solely on orthopedic items from just two vendors. "We compared the vendor’s invoices with what our pricing should have been based on the contracts we had for those products," Bouren recalled. "We found an $80,000 discrepancy in that three-month period. Based on that information, we went forward to find something that could help us contain those costs."

Ultimately, Beaumont chose a Web-based solution, BlackTie Medical’s HandOff service, which allowed for the customization they needed.

"We wanted a system that would complement our Oracle platform by storing contract pricing, managing the receipt/requisition/approval workflow and get the PO back to the vendor," Carson said. "Contract price management is the most critical element that we wanted to get under control. We want these vendor agreements to be competitive, and they are very complex – more than our MMIS [materials management information system] could effectively manage. BlackTie’s HandOff solution ‘super-charges’ our MMIS by electronically storing our pricing and by having functionality to track and manage complex pricing such as capitations, rebates, levels, etc."

Further, Carson credited HandOff for improving Beaumont’s PO process by fully automating workflow – "workflow that starts with initial documentation of the procedure and product details and continues though reviews by implant coordinators, billing clerks when necessary and then directly into our MMIS."

"In our case, we elected to use BlackTie in a ‘vendor self-serve’ model tasking them with all initial documentation, which reduced considerably the amount of work that our implant coordinators and buyers need to do," Carson continued. Each vendor can create a record of products used in a case, and the HandOff application automatically applies the appropriate contract price, be it by line item or capitation, and then routes it for review and approval by the appropriate implant coordinator.

Beaumont originally contracted with BlackTie in April and started using HandOff in early May after the requisition interface with Oracle was completed. Three times a day HandOff will pass all of the approved requisitions to Oracle, and about an hour later Oracle will pass all of the corresponding PO numbers back to HandOff, according to Carson. HandOff then automatically forwards the POs on to each vendor.

Beaumont uses HandOff for total joints and spine implants currently, but Bouren and Carson acknowledge that the application can be used for other products, too. In fact, Bouren revealed that the next product line on the agenda is cardiac rhythm management products, which they may start tackling in first quarter 2010.

Beaumont’s doctors have been "very engaged and helpful" in deciding what products and vendors to use as well as in working with HandOff as Bouren and her team have been educating them on the different pricing levels. In addition, they like the data it provides.

"The HandOff application has a very comprehensive report builder and graphics package that enables our financial and operational managers to build a wide variety of reports that we can share with the medical staff leadership and individual physicians," Carson said.

Bouren lauded Beaumont’s vendors that have been working with the organization to use HandOff. "One benefit they realize is that they get paid more quickly," she said. That realization isn’t lost on Jeanette Lukofsky, customer service manager, Biomet Inc.’s Detroit office.

"At some locations, we would be looking at approximately three days – or longer – to get purchase orders from hospitals," Lukofsky said, "therefore delaying invoicing and unnecessarily creating financial strain and inaccurate sales numbers. We were excited to know that if our PO requests were accurately submitted, a 24-hour turnaround would be the norm."

In addition to the expedited turnaround time, Lukofsky indicated that they appreciate the access to data, not only for accuracy but also for multiple facilities at one time.

"It’s easy to log onto BlackTie at our convenience to pick-up PO numbers or submit additional information," she said. "When things are faxed or phoned, there is always the possibility that information is lost and messages can be misconstrued."

Lukofsky admitted, however, that their "inventory software still requires that we open the order as we had before, so the online submission is an extra step on our end. However, the pros of HandOff highly outweigh this issue."

Cindi Brazen, customer service manager, KOA Orthopedics, a Wixom, MI-based exclusive distributor for Smith & Nephew, appreciates the HandOff application because it eliminates the need for calling, faxing and e-mailing hospital purchasing agents to get PO numbers by the end of the month. In fact, Brazen estimated she spends on average 20 minutes per account to do this.

"Black Tie eliminates the need for any other form of communication because everything is all in one place," she said. "We can track the progression from inception to PO application."

Absent of an automated application like HandOff, the manual progression from inception to PO application can be lengthy and tedious. Brazen estimated that it takes usually 24 to 48 hours to get the rep to send the appropriate paperwork to the hospital and then another 48 to 72 hours for processing. "With BlackTie, usually the whole process can be completed in 24 hours," she said.

"It definitely eliminates the need for duplicate and repeat phone calls and e-mails," Brazen continued. "With many hospitals calls may be open for a week or two. Voice mails and e-mails every other day take up a lot of time."

Depending on the customer, these delays can translate into large sums of money floating in limbo.

"The very worst customers may have $50,000 a month hanging out in processing limbo," Brazen noted. "The very best customers will submit their paperwork via e-mail or fax the same day of surgery. But we don’t have as many of them as we’d like.

"I would think that an application like HandOff would move more facilities in that direction, so long as they retrieve their data in a timely manner," she continued. "Even with such an application you still have human interaction, but because it frees up some of their time they should be able to get to it sooner."

Brazen said that an automated application like HandOff can help identify problems or questions with an order more quickly to prevent further processing delays. "You also can see if there’s a problem with the order right away, particularly line-item discrepancies," she indicated. "For example, they may have a problem with something on line 5 and delay payment. But I won’t know it for some time."

By and large, Brazen appreciated what HandOff contributes to the process. "There is less chance for billing errors because orders can be easily matched to what is loaded in our system, eliminating the need for credits later, it frees up customer service to deal with more pressing issues, such as contracts and pricing. Purchasing personnel can load POs for retrieval at their leisure instead of getting harassing phone calls from vendors."

Carson said he felt training was "very straight-forward and quick" because the staff and vendors all learned how to use the HandOff application after a brief orientation. It features numerous graphics and icons that convey information to a user at a glance. For example, when looking at a page of pending requisitions a user can see which ones have capitated pricing, wasted items, trial items, explanted items and notes.

HandOff is "very affordable," too, according to Carson. In addition to a one-time interface fee and an initial set-up charge, Beaumont only pays a monthly subscription fee as part of its three-year contract. "BlackTie’s subscription fees are clearly based on the value of the bill-only spend being managed, so a large hospital will pay more than a small hospital," he noted. "Our fee equates to approximately 0.75% of the spend being managed, which we consider to be very appropriate for the value we receive."