At The Ohio State University Medical Center, Administrative Director of Materiel Systems Rosalind Parkinson employs 46 staffers that do most of the heavy lifting but never want to or need to take a break.

One of the supply chain’s technological crown jewels at the 1,200-bed Columbus, OH-based academic facility is Parkinson’s team of 46 robots equipped with a laser-guided navigation system. The mechanical fleet of 800 carts uses nine dedicated elevators to service 54 material handling rooms throughout the medical center complex.

Designed by managers and staff from a multidisciplinary team spanning OSUMC departments of distribution, nutrition and dietetics, facilities services, pharmacy, central sterile supply, perioperative services and nursing, the Automated Transport System (ATS), moves heavy loads back and forth between ground floor service centers and patient care areas in four hospital towers. The ATS robots also are interfaced to three cart washers.

ATS, supplied by JBT Corp., deliver medical supplies and equipment, patient food trays, clean linen and surgical case carts. An interface between ATS and the OR scheduling system allows nurses to call for surgical case carts as they are needed, according to Parkinson. These prepared carts await automated “calls” in a holding station on the ground floor and are retrieved by robots that carry them to the OR core within 10 minutes of the call, she indicated. Robots also remove trash, regulated waste, soiled linen, empty food trays, and soiled instruments from patient care areas and move them to the trash docks and other service centers for disposal or re-processing.

Installed more than six years ago, the ATS robots have logged more than 1 million miles in moving product, running 24 hours a day and seven days a week, Parkinson crowed. “To keep the system operating smoothly we have a staff of six ATS experts monitoring the system around the clock,” she noted. “Two cost-benefit studies of system operation in 2006 and 2008 show savings of more than $1 million per year in reduced personnel expense spread across the operations of all departments using the system.”

The ATS robots have been nothing short of a boon to the materiel systems department, according to Parkinson. In fact, the robots now do about 17,000 drops (or item deliveries) per week in roughly a 10-minute timeframe, and 15,000 picks (soiled linen or tray retrievals) per week within six minutes.

Yet while a laser-guided robotics system may represent the epitome of technological prowess in supply chain services, it’s not the only tool in OSUMC’s arsenal against inefficiency.

The organization also streamlined its electronic requisitioning process with a hosted vendor catalog called eMarketplace, worked with the information technology department to deploy radiofrequency identification to track portable medical equipment, implemented GS1 Healthcare US’ Global Location Number (GLN) hierarchy with its prime distributor a year ahead of the December 2010 sunrise date, successfully manages relationships with physicians, senior administrators and suppliers and continually strives for excellence in operational performance via a customer and supplier outreach program.

For these accomplishments during the past 12 years, OSUMC earned a distinguished honorable mention in the closest competition to date for Healthcare Purchasing News’ 2010 Supply Chain Management Department of the Year. 

Automation inflation 

Parkinson’s team is dedicated to innovation, and its eMarketplace launched earlier this year is another example.

“Change is a constant in healthcare and our staff and leadership are dedicated to leveraging technology to create a nimble supply chain,” she noted.

OSUMC’s eMarketplace, a software product provided by Prodigo, allows requisitioners to “punch out” to vendor Web sites, hosted vendor catalogs and to the facility’s own internal item master catalog to initiate an order.

Using eMarketplace, the purchasing department determines which vendors and products will be put on the Web site to ensure that requisitioners are buying products at prices established through OSUMC contracts, according to Parkinson.

Buyers verify correct contract pricing, unit of measure, and item description. Once an end user has selected an item to order from eMarketplace, the requisition follows established departmental electronic workflow for requisition approval, she explained. After departmental approval, the requisition bypasses buyer approval, and the system automatically generates a purchase order (PO) and faxes it directly to the vendor. The completed transactions are then made available via interface to accounts payable to compare POs to invoices.

Since eMarketplace was implemented earlier this year, manually processed POs dropped 21 percent to 1,900 per month, or 15.9 percent of total POs, from 2,400 per month, which represented 21.3 percent of all POs.

Parkinson stressed that they anticipate further reductions in manual POs as they add hosted catalogs to the system, which “allows buyers to devote time to strategic initiatives rather than transations.”

OSUMC’s eMarketplace tool also reduced the number of match exceptions needing to be reviewed by Accounts Payable, Distribution and buyers, and allows Materiel Systems to minimize bill-only POs. In addition, eMarketplace helps Materiel Systems to keep its internal item master clean of unwanted or infrequently ordered items as they are now contained in the hosted catalogs. 

Further, Parkinson learned via a survey that the end users overwhelmingly approve in that 95 percent agreed that eMarketplace improved their ordering processes.

But eMarketplace is just one component of OSUMC’s materials management information system (MMIS) platform by Oracle’s PeopleSoft that helps them manage inventory, purchasing and electronic requisitioning, as well as links them to accounts payable and the general ledger.

The MMIS also forms the hub for several ancillary system interfaces, including AtPar for PAR cart ordering of just-in-time (JIT) supplies to 300 locations; Omnicell cabinets for point-of-use chargeable items; Qsight for expensive and time-sensitive supply orders in the operating rooms and cath labs; Owens & Minor’s Surgitrack system for items contained in surgical case carts; Ariba for requests-for-proposals (RFPs) and contract management, including bidding and standardized strategic sourcing practices; and GHX for electronic data interchange (EDI). 

Match game ’05 

Since 2005, all POs generated through the order entry system moves via interface to the AP module so that a line-item match exception process can take place daily, according to Parkinson. The system generates weekly reports that are shared via e-mail between Materiel Systems and its clinical and financial colleagues.

Before Materiel Systems implemented this match exception process OSUMC averaged 800 voucher exceptions greater than 30 days old. After the new system was enacted, voucher exceptions greater than 30 days old plunged to 47, which continues on average to date, Parkinson indicated.

“With our ability to strategically manage match exceptions, we have eliminated the payment of late payment fees to vendors resulting in a cost avoidance of greater than $100,000 per year,” she added.

Parkinson’s purchasing team manages approximately 150,000 POs per year, which translates into more than $500 million in expenses. Last year, more than 78 percent of those orders were dispatched to suppliers via EDI. Advanced shipping notices and invoices are returned via the same route making for a “lights out” procurement system for an ever growing number of orders, she added.

Last February, OSUMC’s distribution department worked with IT to install a medical-grade network and implement RFID tags from Ekahau to track the whereabouts of more than 1,500 IV pumps and numerous other portable medical equipment devices throughout the main hospital complex.

Before the RFID installation, medical equipment was often misplaced and sometimes even ended up in the trash, she acknowledged. “Since implementation of RFID, we have lost not one of these devices amounting to a cost avoidance of more than $50,000 so far this year,” she added. “Lost equipment is not only costly, but very frustrating to clinicians who depend on immediate access to equipment they order. RFID also allows us to effectively maintain our routine schedules of preventative maintenance for our portable medical equipment.”

Spreading the wealth of tech 

With centralized control over a standardized process, OSUMC’s Materiel Systems team relies on an automated decentralized collaboration with end users to manage their own departmental inventories in a JIT low-unit-of-measure format.

Parkinson’s team facilitates communication between 90 supply coordinators via electronics and bimonthly meetings. They created a “supply coordinator” Web site in SharePoint that provides a common platform for all users to share documents, links, frequently asked questions, product changes and best practices, while building relationships, broadening supply chain education and gathering ideas for continuous improvement opportunities.

Through OSUMC’s JIT program for medical supplies with prime distributor Owens & Minor, the organization’s six hospitals spanning more than 300 supply locations has enabled them to reduce supply inventory to $220,000 from $1.28 million in 1997, which has slashed storeroom occupation by less than half its previous footprint. In fact, the former order fulfillment center now functions as an emergency back-up supply area, according to Parkinson.

Eight years ago, OSUMC inked an activity-based costing agreement with Owens & Minor that compensates the distributor for services related to efficient ordering practices.

Through its membership in University HealthSystem Consortium and Novation, OSUMC accesses 663 of 881 group purchasing contracts for commodity items so that its senior buyers can focus on working with clinicians on physician-preference items, Parkinson noted. On average, OSUMC receives more than $1 million annually in rebates from suppliers for GPO program participation, she added.

OSUMC also formed its own integrated delivery network (IDN) in 1995 for its facilities as well as seven non-OSUMC hospitals. Since 2001, the Ohio State Health Network generated contractual savings of nearly $11.9 million to those seven facilities.

In 1999, OSUMC implemented JIT replenishment for linen, developing PAR carts for linen SKUs for supply technicians in each patient care unit. Previously, they purchased laundry services and rented linen from a commercial laundry that restocked patient care units each night with exchange carts.

Supply techs started ordering via EDI using hand-held computers that in the first year yielded a 25 percent drop in laundry expense, according to Parkinson.

Team OSU-MC 

Parkinson enthuses that beside technology, teamwork fuels supply chain success throughout OSUMC, as well as the university.

“High expectations and teamwork have combined to keep The Ohio State University Medical Center on an upward trajectory toward achieving its goal of sustainable supply chain improvements,” she stated.

“We have formed many different teams over the years to get the results we need,” she continued. “Some teams work within the Purchasing and Distribution departments. Larger projects require multi-disciplinary teams that include Purchasing and Distribution as well as Finance, Information Technology, clinical departments, and other departments within the larger university. Still larger projects include … representatives of outside organizations including our GPO, distributors and prime vendors. While teamwork takes on many forms, one consistent theme is how we provide benefit to our patient population at OSUMC.”

In short, teamwork drives customer service, as illustrated in OSUMC’s Supply Chain Operational Path to Excellence (SCOPE), which Parkinsons launched in January as a pilot project to evaluate the supply chain in five diverse departments, including respiratory therapy, central sterile supply and three intensive care units.

A cross-functional team oversees the SCOPE initiative, comprising senior leadership, unit managers and directors from each of the pilot departments as well as members from Quality, Purchasing, Distribution and Management Engineering.

SCOPE’s first success story emerged in respiratory therapy, which is required to manage an increasing volume of equipment and supplies for 1,000 beds in space designed to support only 700. Through SCOPE, respiratory therapy was able to meet its goals to improve staff satisfaction, achieve a 25 percent reduction in inventory, and reduce time wasted hunting and gathering supplies, according to Parkinson, improving service without space expansion. 

SCOPE also identified an opportunity to improve the charge capture process, both at the code assignment level and at the department level, Parkinson noted. The team uncovered significant variation in the new product request process, naming conventions, and ongoing maintenance for charge codes. As a result, the supply chain and revenue management teams now work together to explore and implement better sharing of information between the two departments. “We anticipate an increase in gross revenue which will translate directly to the hospitals’ bottom line,” she added.

OSUMC Materiel Systems also collaborates with The Ohio State University’s own purchasing department, which adds approximately $280 million in annual purchasing volume to OSUMC’s approximately $575 million total.

Amid a host of sourcing projects that included IT hardware, cylinder gases, food distribution, furniture, maintenance (MRO) supplies, travel, laboratory supplies, small parcel delivery, and office supplies, the two departments together generated more than $80 million in cost savings in fiscal year 2009, according to Parkinson. Some of the strategic sourcing efficiencies were achieved through Ariba’s contract management software, which enabled the two departments to develop a standardized methodology, as well as conduct its first reverse auction for hotel accommodations in March that netted approximately $100,000 in savings on a combined $1.5 million expense.

In addition to OSUMC ordering and replenishing with key vendors using EDI through eMarketplace it’s also managing the payables process through the use of electronic funds transfer (EFT) with its top seven prime vendors. And it’s developing a procure-to-pay process with additional suppliers to reduce costs and inefficiencies from procurement and AP, according to Parkinson.

Owens & Minor posts a dashboard of key metrics on a weekly and monthly basis for key directors and managers, too. They include the fill rate and picking error index, along with match exceptions, payment delays and item file match percentage. OSUMC currently is working with its top 10 direct suppliers to establish similar key performance indicators, she added.

OSUMC also uses its MMIS and contract management module to monitor and report on supplier diversity and green initiatives. Currently, OSU has a goal to spend approximately 11 percent of “eligible spend dollars” with minority suppliers in Ohio, Parkinson noted. The university also converted 100 percent of copy paper to 30 percent post-consumer product recycled paper, and EDI has reduced paper use across the board.

To monitor clinical product strategic sourcing and purchasing, Materiel Systems participates in an executive steering committee along with physicians, business unit leaders and senior administrators to track a variety of key performance indicators, including drug, supply and service expenses per CMI adjusted admissions.

Source: OSUMC Financial Systems, July 2009-February 2010 

In fact, during the last two years, the non-labor cost reduction effort has generated more than $49 million in cost savings for the medical center to aid in its long-range financial plan in preparation for a $1 billion capital building expansion to the existing infrastructure, Parkinson noted. 

Finally, after implementing GS1 Healthcare US’ GLN, Materiel Systems and IT departments formed a steering committee to integrate GS1 standards with bedside tracking systems and the electronic medical record. The efforts include Omnicell and Carestream Health’s Pyxis unit for bedside systems and EPIC for the EMR. They plan to integrate unique product identification in all files and interfaces between business and clinical systems that reach into all patient care areas including ORs and diagnostic labs, she stated.

Parkinson praised OSUMC’s leadership for understanding and funding the infrastructure and technology to support her department needs to effectively and efficiently operate. “

“This kind of commitment is key to supply chain improvements in every hospital,” she said. “Investment in sourcing and procurement requires strategic understanding of information technology features that eliminates manual data entry between departments and outside entities along the supply chain. Without continuous improvement in technology, potential process savings are onerous and visibility into the supply spend next to impossible. Investment in materials handling space and equipment reduces reliance on people to move heavy and soiled materials. Safety conditions for the workforce improve.

“A marriage of materials handling and information technology will determine the future of distribution both in and outside of hospitals,” she added. “At OSUMC we are fortunate to serve under leadership that understands this direction and supports staff development initiatives to optimize capital outlays.”