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INSIDE THE CURRENT ISSUE

January 2011

2011 S.U.R.E. Awards

 
 This Month's Advertisers


 

SURE awardC-base plugging into supply chain operations

Three CEOs highlight bottom line contributions to front line performance

by Rick Dana Barlow

Refer hospital chief executives to the supply chain and these chief executives reach an inescapable conclusion: Regardless of economic recession CEOs shouldn’t ignore or overlook supply chain activities as an integral component of healthy operations and quality patient care.

In fact, a growing number of CEOs are pulling supply chain management from the back-office shadows of virtual obscurity and thrusting the department into the C-suite spotlight. But that can be a double-edged sword for those supply chain executives unprepared or ill-equipped for the boost. After all, added visibility and influence precedes accountability.

Healthcare Purchasing News launched its annual campaign in 2005 to identify and honor hospital and health system CEOs that "Support, Understand, Recognize and Empower" supply chain management with its SURE award. This year, HPN honors three with SURE recognition.

The 2011 SURE CEOs are Tom Sadvary, president and CEO, Scottsdale (AZ) Healthcare; Rulon Stacey, Ph.D., FACHE, president and CEO, Poudre Valley Health System, Fort Collins, CO; and Dan Wolterman, president and CEO, Memorial Hermann Healthcare System, Houston.

Back in 2007, Sadvary, a 24-year veteran of Scottsdale Healthcare, evaluated the organization’s supply chain operation and opted for structural and leadership upgrades that included an executive-level leader and a new group purchasing organization (GPO).

Sadvary worked to usher in a comprehensive quality performance improvement plan that directed value analysis teams to pursue a $12.5-million cost savings target. Further, Sadvary worked closely with the chief medical officer and medical staff to generate clinician support. Through all of their efforts, Scottsdale Healthcare implemented more than 370 cost savings initiatives in 2010 resulting in annualized cost savings of $13 million.

Stacey emerged at Poudre Valley during a tumultuous period for the organization. During a speech to accept the 2008 Malcolm Baldrige Award that Poudre Valley earned, Stacey recalled his organization’s condition in a YouTube-posted video: "Just over a decade ago, we were a small community hospital that no one had ever heard of. One in four employees was leaving every year, our physicians were becoming our competitors, and we had had five CEOs in just four years."

Using the Baldrige Award principles, Poudre Valley achieved what many thought was impossible, according to Stacey, which is successfully turning around the organization, setting up partnerships with physicians, streamlining supply chain operations and improving quality service. Along the way, Stacey has accumulated an impressive passel of healthcare industry awards, worked with the International Patient Safety Collaborative, was involved with the Laramie Project and spoke with charisma and passion on behalf of Poudre Valley and the parents of the late Matthew Shepard, a victim of hate-crime violence.

Wolterman joined Memorial Hermann as senior vice president of hospital operations in 1999 and was named president and CEO three years later. During his career to date, which spans more than 30 years, Wolterman has earned a bevy of healthcare industry awards but also remains actively involved with Memorial Hermann’s supply chain operations to the point that supply chain considers him "part of the team."

Under Wolterman’s watch, Memorial Hermann implemented a Procurement-to-Payment program with OB10 and American Express, various capped pricing programs and an internal vendor management program. The AMEX program generated $7 million in rebates in the last three years, according to Scottsdale Healthcare, the capped pricing programs delivered $20 million in implant savings in the last five years and the vendor management program "has created a safer and less annoying work environment for our patients, physicians and staff."

HPN’s wide-ranging interview explores how Scottsdale’s Sadvary, Poudre Valley’s Stacey and Memorial Hermann’s Wolterman connect to and work with supply chain operations, as well as strategies for attaining solid credibility and influence.


SADVARY
SADVARY UNPLUGGED

Unlikely source of inspiration: My source of inspiration is my informal conversations with our employees while making rounds. Their commitment to our patients, their jobs and Scottsdale Healthcare is truly inspirational.

Most creative thing you’ve ever done: Buying my wife five pounds of green beans (her favorite) at a farmers market for our fifth wedding anniversary.

What makes you laugh: Teasing family and close friends.

Best and worst advice someone ever gave you: The best advice was from my Dad who told me to get into the best college since ‘money was no object.’ I reminded him that we had no money, and he responded, ‘That’s correct – so money is no object – take out a loan and get the best education you can get.’

Must-have accessory: My iPod.

Surprising background fact: My Dad was a Russian orthodox priest. I did not exactly fit the mold of preacher’s kid.

One question you get asked the most by supply chain managers: How to effectively work with physicians to give them the tools they need to do their work, yet save money through product standardization. Also, how do you get on the same page with physicians?

Favorite object you keep in your office: Photo of my wife and our son Chris at one week of age with an IV in his head. My son was in a neonatal ICU and this was the first time my wife was allowed to take him out of the incubator and hold him. That picture helps to keep me grounded.

Best decision made by someone other than you in your organization: My predecessor’s decision to buy property in the mid-1990s that is now the site of our Thompson Peak hospital.

Advice to successor after you retire: Relationships. Both within and outside the organization is key to your credibility and success. In addition, strategy and culture are important but culture always trumps. Work and life balance is vital.

 Tom Sadvary, president and CEO,
 Scottsdale (AZ) Healthcare

Supply Chain Management:
Mike Hildebrandt, associate vice president, supply chain

HPN: What motivates your interest in supply chain management?

SADVARY: My motivation comes from making it possible for our hospital system to acquire and implement leading edge technology and resources allowing us to successfully achieve our bottom-line savings and top-line revenue goals. Equally important to me is that our employees have the means and opportunity to uphold our mission, consistently practice our values and uphold our vision and commitment to our patients.

How hands-on should a CEO be in a supply chain that should be led by an effective and efficient supply chain management executive?

I believe a CEO needs to be extremely hands-on. Three years ago, I evaluated the supply chain operation at Scottsdale Healthcare and determined that it would be beneficial to upgrade the organizational structure and leadership. I created a new position called Associate Vice President (AVP) of supply chain and undertook a national recruiting search to identify an experienced and effective supply chain leader.

This position reflected the new visibility and focuses of supply chain and demonstrated that the AVP of Supply Chain is an important member of the senior management team at Scottsdale Healthcare. During the past year, I empowered the supply chain team to look at ways to reduce supply costs while improving quality outcomes. To achieve those goals and objectives, the supply chain team coordinated the selection of a new group purchasing organization (GPO).

A very extensive request for proposal (RFP) process followed. The hospital’s entire senior management team participated in GPO interviews, financial comparisons and grid scoring to determine the new GPO.

What prompted you to evaluate Scottsdale Healthcare’s supply chain operation three years ago and make improvements?

Based upon a key consultant report, it was determined that reorganizing and upgrading the supply chain operation would enable Scottsdale Healthcare to improve its internal operations, supply performance and collaboration with key physicians and clinicians. The timing of the supply chain upgrading also coincided with the opening of a new hospital and the beginning of a new era of healthcare reform.

What are some of the characteristics of an effective supply chain leader?

I would say characteristics such as fiscally responsible, creative thinker, efficient, motivator, team player and good communicator to name a few.

How can a supply chain manager influence you?

A supply chain manager can influence you by providing recommendations, industry knowledge and strategic planning direction for supply chain initiatives.

What would you say to a CEO of an organization that outsources many of supply chain management’s functions to third parties, such as consulting firms, distributors and GPOs?

Empower your supply chain team to look at ways to reduce supply costs while improving quality outcomes. To achieve those goals and objectives, your supply chain team should coordinate the selection of a GPO. In Scottsdale Healthcare’s case, this proved to be very successful with more than 370 cost savings initiatives in 2010 resulting in annualized cost savings of $13 million.

How can consulting firms, distributors and GPOs contribute to the performance of your internal supply chain management expertise without overshadowing the department or usurping control?

It is critical that supply chain leaders develop collaborative and strategic relationships and partnerships with GPOs, distributors, consultants and other key supplier partners. These organizations bring a wealth of knowledge, experience and proven results to the table.

What would you like supply chain managers to understand about the complexity of your job?

You have to get all involved for your plan to be successful. This plan included establishment of new value analysis committees and teams with broad representation from clinicians, physicians, administration, supply chain, finance, surgery, cardiology, nursing, laboratory, radiology, pharmacy, suppliers and support services.

We implemented team charters and process flow charts to ensure that all of the value analysis teams were working simultaneously.

I also worked closely with the medical staff and chief medical officer to ensure that physicians would be supportive of our many cost savings initiatives.

What is the most innovative thing supply chain management has accomplished that exceeded your expectations?

The supply chain team at Scottsdale Healthcare partnered closely with the quality improvement department to implement innovative process improvement projects to reduce medical supply waste, to solicit employee cost savings feedback, and to redesign the logistical flow of supplies to the nursing units.

How do you motivate doctors and nurses to work together with supply chain management so that revenue generation, expense reduction and high-quality patient care are not disrupted?

We implemented team charters and process flow charts to ensure that all of the value analysis teams were working simultaneously. We also formed new value analysis committees and teams with broad representation from clinicians, physicians, administration, supply chain, finance, surgery, cardiology, nursing, laboratory, radiology, pharmacy, suppliers and support services.

How valuable is supply chain management during a recession?

The goal of a supply chain team is to look at ways to reduce supply costs while improving quality outcomes. This is invaluable particularly during a recession.

What’s one lesson you learned or piece of career advice you’d like to share with supply chain managers to be successful?

Empower others and be a hands-on leader.

Within the last few years, a lot of heated debate and discussion has surfaced about the need for product data standards. What can you do as a CEO to reinforce the value of product data standards and position your organization as a key driver?

Continue to keep supply performance a key initiative and driver in the overall hospital strategic plan. Communicate with staff on a consistent basis when targets are achieved. Keep all key stake holders informed.

How can supply chain management transform the way healthcare can and should be delivered?

It can and should reduce supply costs while improving quality outcomes and patient satisfaction.


STACEY
STACEY UNPLUGGED 

Unlikely source of inspiration: My wife, Linda.  She is dedicated to people and teaches me to value every person.

Most creative thing you’ve ever done: I built a cedar-lined chest from scratch out of a stack of raw walnut when I was engaged to my wife. Not sure I would have the patience to do that now.

What makes you laugh: [Comedian] Brian Regan. He is a funny man!

Best and worst advice someone ever gave you: I have four daughters. As they grew up I taught them three words to live by: Men are pigs. Seems like good advice from a father to his daughters. 

Must-have accessory: My iPod...upon which I have created the best collection of music ever assembled by human kind!

Surprising background fact: My daughter is an opera singer and was performing for our volunteers one year. She called me up out of the audience to sing, and someone videoed it and put it on YouTube. Grim.

One question you get asked the most by supply chain managers: To be honest...I don’t even think there is one. Is that bad?

Favorite object you keep in your office: My football and picture signed by former [Brigham Young University] head coach LaVell Edwards. Go Cougars. [BYU renamed its Cougar Stadium after Edwards.]

Best decision made by someone other than you in your organization: No way I can pinpoint that to just one. I would say that 15 years ago the Board of Directors of our organization made a very hard call to discontinue their status as a district hospital. They quit taking tax money and became a 501(c)3 tax-exempt organization. I believe that in the long term, hospitals with publicly elected Boards cannot succeed. Elected boards simply cannot work running a hospital. There are too many moving parts and too many people run for elections with personal agendas. That Board made a courageous decision, and it has altered for the better patient care in Northern Colorado ever since.

Advice to successor after you retire: Change the lobby, paint the halls, move the CEO office...do anything you have to in order to make sure everyone knows I’m gone and you are in charge now.

 Rulon Stacey, Ph.D., FACHE,
 president and CEO, Poudre Valley
 Health System, Fort Collins, CO

Supply Chain Management:
Laure Tuka, director, materials management

HPN: What motivates your interest in supply chain management?

STACEY: Cost is always the easiest answer to this question, and that remains important. But low cost is only one component. The true driving force should be in creating a strategy that allows an organization to improve quality. Having the least expensive supplies at the expense of the patient is of no value. A good program minimizes one and maximizes the other.

How hands-on should a CEO be in a supply chain that should be led by an effective and efficient supply chain management executive?

I think that an effective CEO should find the right supply chain management executive and then stay out of their way. If the supply chain executive is involved in the strategy discussions of the organization, they will know the right direction to take and will be in a better position to lead that part of the organization.

What are some of the characteristics of an effective supply chain leader?

I don’t know that the characteristics of an effective supply chain leader are different than those of any other leader. I think the tools of effective leadership work for any part of the organization. A supply chain leader might need some additional understanding of the specific operational issues of that position, but the leadership characteristics should work in nursing or accounting or operations.

How can a supply chain manager influence you?

The best influence is by taking the responsibilities of the job and acting on those. I believe that my job as CEO is to find the right person to fill the supply chain executive position, and then have that person act as the CEO of the supply chain service. They should have the capability to run that organization as the supply chain CEO, and let me know what I need to. The real influence comes from taking the responsibility of that area so that I feel comfortable that things are being handled well.

What would you say to a CEO of an organization that outsources many of supply chain management’s functions to third parties, such as consulting firms, distributors and GPOs?

Tough to say without knowing the organization and their need. For our organization we need the influence of having that person be a part of our team and be there to develop the personal relationships needed to make something like the supply chain functions work. I think this is very much a person-to-person function, which has been helpful to us. However, I suppose that some organizations might have different needs.

How can consulting firms, distributors and GPOs contribute to the performance of your internal supply chain management expertise without overshadowing the department or usurping control?

Our organization has specific internal goals and strategies. We are unique in the services we provide, the people who provide those services and the market we serve. My goal is that before a consultant or distributor or anyone comes in they understand who we are and have a conscious discussion about how they can help us succeed. The successful consultant will understand the need to get to know us and how they can help us be successful. Don’t just try to find a way to get us to buy the service they happen to be selling.

What would you like supply chain managers to understand about the complexity of your job?

The most important thing is for supply chain managers and others in the organization to know that I don’t know as much about their job as they do. I’m trying to coordinate many different functions, many of which I don’t know everything about. I would like them to know that they are in their position because they are the experts, and hopefully they will feel comfortable running their department. I hope that they are able to understand the overall mission of the organization and the role that they play in moving toward that mission, but they also understand the need for them to take the lead and make the decisions necessary for that part of the organization to run well.

What is the most innovative thing supply chain management has accomplished that exceeded your expectations?

Earlier I talked about the need for consultants and others to come into an organization understanding what they can do to help my organization succeed. An effective supply chain executive can also help in that function by creating a process that makes sure every consultant and vendor that comes into the organization has the same standards that we do, and is fully aware of our vision, mission and values, and understands what they – the consultant – must do in order to support our mission.

How do you motivate doctors and nurses to work together with supply chain management so that revenue generation, expense reduction and high-quality patient care are not disrupted?

Doctor and nurses and administrators and accountants and other professions are all alike. They will all work toward the right goal if they are given the right information. So transparency of information will do more to create motivation than anything else. If doctors know the costs, they don’t need someone else to motivate them to make the right decision. Conversely, if administrators know the quality outcomes, they won’t push for an inferior product that will jeopardize patient safety. Transparency is a great key.

How valuable is supply chain management during a recession?

Very. Costs are going to be increasingly important to manage...but without sacrificing quality. I believe that we are heading into an environment that will pay us for our performance, and supply chain executives will have to be more mindful of the combination of both cost and quality than ever before.

What’s one lesson you learned or piece of career advice you’d like to share with supply chain managers to be successful?

It’s easier to make nice people smart than it is to make smart people nice. Find the right people and grow them and teach them what they should know. The organization will be better off because of the focus toward an improved culture.

Within the last few years, a lot of heated debate and discussion has surfaced about the need for product data standards. What can you do as a CEO to reinforce the value of product data standards and position your organization as a key driver?

CMS is investing $300 million in 2011 to develop and ensure data standards across the country. This is not really an option in the future. We will all have to be better at meeting better standards in the near future.

Poudre Valley earned the prestigious Baldrige Award in 2008, so how would you apply the award’s quality criteria specifically to supply chain management operations?

Our supply chain department was very involved in our Baldrige Award. They were involved in the process of developing leadership standards, applying standards to all of our vendors, ensuring that we used no vendors who did not meet our standards, and much more. The Baldrige award is about creating a process to make the organization better. Supply chain is such a major portion of what the organization does, that they can drive the organization toward excellence if they will work to focus on process improvement. We have been fortunate that our supply chain department has been willing to participate and often take the lead for the entire organization.

How can supply chain management transform the way healthcare can and should be delivered?

So much of what we do is governed by supply chain management. If a supply chain management executive understands processes and how to improve processes, they can literally transform the organization. They impact every area of the entire organization. An executive who creates good process improvement initiatives in the supply chain management area will impact for the better every department in your organization.


WOLTERMAN

 Dan Wolterman, president and CEO,
 Memorial Hermann Healthcare
 System, Houston

Supply Chain Management:
Dan Humphrey, system executive, supply chain services

HPN: What motivates your interest in
supply chain management?

WOLTERMAN: Since supply expenses are the second largest expense in a healthcare organization, it is critical to have strong leadership and focus in this area.

How hands-on should a CEO be in a supply chain that should be led by an effective and efficient supply chain management executive?

With effective leadership within the supply chain, a CEO only needs to provide support and assist in addressing any implementation roadblocks that might arise.

What are some of the characteristics of an effective supply chain leader?

He or she should be able to build a strong support staff, influence other leaders in the organization, be able to converse and negotiate with medical staff and other clinicians, and have an excellent understanding of financials.

How can a supply chain manager influence you?

With interesting and unique ideas, with a good strategic plan for the future, and especially with proven results.

What would you say to a CEO of an organization that outsources many of supply chain management’s functions to third parties, such as consulting firms, distributors and GPOs?

Each of the third parties plays an important role in supply chain operational success. However, savvy internal leadership is necessary to mold all parties into a functioning operational unit.

How can consulting firms, distributors and GPOs contribute to the performance of your internal supply chain management expertise without overshadowing the department or usurping control?

A strong leader should be able to manage competing interests, keeping the healthcare organization’s best interests aligned with all parties. A good leader understands that ultimately they will only be as successful as the individuals on their team.

What would you like supply chain managers to understand about the complexity of your job?

The many competing interests for my time. Community leaders, board members, physician leadership and facility leadership teams, to name a few.

What is the most innovative thing supply chain management has accomplished that exceeded your expectations?

Our procurement-to-pay (P2P) program with American Express.

How do you motivate doctors and nurses to work together with supply chain management so that revenue generation, expense reduction and high-quality patient care are not disrupted?

It’s important to help clinicians understand that maintaining supply expenses at the lowest possible level can save jobs and allow investment in new technologies. With healthcare reform, a low-cost structure and an excellent supply chain program will be required.

How valuable is supply chain management during a recession?

Critical. A well-functioning supply chain can find additional ways to pull costs out of transactions and execute robust negotiations with the vendor community.

What’s one lesson you learned or piece of career advice you’d like to share with supply chain managers to be successful?

Have integrity. Nothing is more important.

Within the last few years, a lot of heated debate and discussion has surfaced about the need for product data standards. What can you do as a CEO to reinforce the value of product data standards and position your organization as a key driver?

Support my supply chain leaders as they work with counterparts across the healthcare industry to push and lead the supplier community to adopt standards that are commonplace in other industries. These standards will allow greater transparency into the vendor community’s pricing models.

How effective are the town hall meetings you’ve implemented that review supply chain management’s key performance indicators and their impact on the hospital’s performance?

Providing regular updates of supply chain successes and the overall organization’s performance related to supply expense control is vitally important, as is holding leadership teams accountable for supply expense performance.

Your predecessor Dan Wilford was very SURE about Dan Humphrey and his supply chain management operation, so how has he influenced you?

Dan Humphrey has been with Memorial Hermann a number of years and has provided stability in the supply chain. He has recruited excellent managers to add to his team and together they have created an environment of supply chain success over a number of years. This team never seems to rest on its laurels, but continues a relentless search for supply chain improvement and cost control.

How can supply chain management transform the way healthcare can and should be delivered?

An effective supply chain will be one that merges the needs of the organization with the needs of the clinicians. As there are many areas within a healthcare organization that require collaboration, success in the supply chain can pave the way towards other aligned interests.

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