UPMC is an integrated global health
enterprise headquartered in Pitts-
burgh, Pennsylvania, and one of the leading nonprofit health systems, with 20 hospitals, 400 doctors’ offices and outpatient sites, long-term care facilities, a major health insurance services division and 50,000 employees. As an organization, UPMC was growing by "leaps and bounds" through increased annual revenue and hospital mergers. The system was growing not only from a hospital perspective, but also in other areas, including a for-profit health plan, cancer centers, a physician services division with hundreds of physician offices, and other off-site domestic and global locations.

As a centralized supply chain organization, UPMC was charged with servicing its various facilities without increasing the head count of its supply chain operations. But they faced a number of significant challenges—paper-based processes that were plagued with errors and inefficiencies, poor contract compliance, rampant maverick spending, and a growing user and supplier base—that were compounding these issues.

Michael DeLuca

A culture of automation

Unlike many healthcare institutions, UPMC’s supply chain management department had a relatively easy time making the case to its executive leadership for a supply chain improvement initiative; the health system’s chief financial officer had previously worked for General Electric and understood how vital the supply chain was to the organization.

"We get a lot of time with the C-suite and lots of praise for the initiatives that we undertake," said Michael DeLuca, director of Supply Chain Systems & Consulting Services.

In addition, UPMC’s chief supply chain officer (CSCO) came from Alcoa Inc. (NYSE: AA) and brought with him deep supply chain knowledge from the manufacturing industry. When he came on board in 2006, he evaluated UPMC’s challenges and developed a strategic plan to implement a "culture of automation" to improve data quality, streamline processes and control costs across the entire healthcare system.

Recognizing that a program is only as good as the people who are driving it, UPMC’s supply chain improvement team first focused on addressing issues related to supply chain personnel and clinician buy-in.

UPMC’s supply chain improvement team took steps to increase the supply chain acumen of its employees. They increased the percentage of staff members holding bachelor’s degrees from 31 to 61 percent and actively recruited "seasoned individuals" with deep supply chain experience, from both inside and outside of the industry.

UPMC also developed a value analysis team led by clinicians who had transitioned from hospitals to the supply chain management department. In DeLuca’s words, they are able to "walk the walk and talk the talk from a clinical perspective." He explains that they understand the supply chain team’s agenda and can help other clinicians understand how their day-to-day decisions have a financial impact on the enterprise.

"In other industries, it’s easier to say we are using supplier A because it meets this specific criteria from a cost and quality perspective, but in healthcare, if Dr. A wants to use a specific product and Dr. B wants to use something else, it becomes much more complicated," said DeLuca. "So you have to have a great value analysis team that works with your physicians to help them understand the decisions that are being made by supply chain."

The second key element of the program was the implementation of new technologies to facilitate automation, increase data accuracy and visibility, and improve workflow efficiency. UPMC complemented its own technology for e-requisitioning with technology solutions from GHX to create a fully automated procurement process.

According to DeLuca, electronic data interchange (EDI) became a requirement for automation because "you can’t have a touchless order if a buyer has to pick up a phone or send a fax." By migrating its direct EDI connections to the GHX Exchange, UPMC significantly increased its number of electronic trading partners from 35 to 132 vendors.

Leveraging the UPMC eMarketplace requisitioning solution and the GHX My Exchange Order Center to monitor and proactively address discrepancies, UPMC was able to fully automate orders for on-contract products where the pricing had been verified. Requisitions are converted to purchase orders and sent electronically to vendors, who in turn respond with electronic acknowledgements and invoices. Forty percent of UPMC orders are what they refer to as "Lights Out" orders, which take 33 percent less time to process.