Functional breadth, depth justifies C-suite positioning

by Rick Dana Barlow

From clinical, financial and operational perspectives, the supply chain in healthcare definitely is worth watching.

Outside of healthcare, supply chain operations consistently earn a near-the-top slot on C-suite agendas. To key executives of companies that manufacture products and/or services, supply chain is a leading priority.

Arguably, the same logic should apply in healthcare. Without an effective supply chain, surgeons, doctors, nurses, technicians and other clinicians would be hard-pressed to access the tools they need at relatively reasonable costs to provide care to patients.

So this year, Healthcare Purchasing News decided to expand its exclusive annual celebrations of supply chain operations beyond the three renowned titles we bestow: The HPN Supply Chain Department of the Year Award in the late summer, the HPN Sterile Processing and Distribution Department of the Year Award in late spring and the HPN supply chain-focused CEO S.U.R.E. awards in January.

We wanted to shine a spotlight, albeit briefly, on those organizations achieving noteworthy, if not remarkable, self-reported results, by highlighting some of their accomplishments and goals in an easy-to-read, educational and entertaining format.

To fill the general pool of qualified candidates we pored over the nominations we received during the last several years for our key annual awards (yes, we retain them on file), looking for gems, nuggets and sparks of innovation and inspiration. We surveyed group purchasing organizations and prominent consulting firms with their pulses on sizable segments of the industry. We also scanned the Internet, anticipating that a bit of online archeological digging would unearth a treasure trove of choices.

Based on reader input, interviews, reporting and research, we sifted and strained through the possibilities from that extensive pool, culling the list to an Elite 18.

The barometer for making the inaugural list of HPN’s Supply Chain Operations Worth Watching? What makes a supply chain op worth watching is cost-cutting, efficiency-driven, clinically motivated and patient-centric concepts, ideas, activities and outcomes. While these categories may seem rather cut-and-dry statistically, we used anecdotal, unscientific and completely subjective methods to choose organizations, motivated by self-reported innovative thinking and work.

Admittedly, we want this list to be controversial, fodder for 21st Century office watercooler discussions – online message boards and e-mail chatter, certainly and notably HPN’s.

We’ve populated this year’s list with a number of the so-called "usual suspects" that justifiably generate scores of publicity based on their accomplishments. By the same token, we also included some because of their potential for greatness, stardom and success. Undeniably, some of those widely acknowledged usual suspects may be conspicuously absent from this tally, and not for the lack of accomplishments but for limited real estate. Rest assured, they most likely will generate their well-deserved recognition in upcoming lists.

If your organization didn’t "make the list" this year, be sure to let us know, gently and tactfully, of course, and start planning to state your case to make the 2012 compilation.

Without further adieu, check out the inaugural list in alphabetical order by name for highlights on what they’re doing and why they matter, paying close attention to some common themes.

Led by a young transplant from New York City where he seasoned his supply chain management and leadership skills, Broward Health implemented a fundamental and pervasive turnaround of its own supply chain operations more quickly than typical for a public county system. After slashing inventory and operational costs through centralized and automated contracting, purchasing and distribution, as well as value analysis, Broward Health refashioned its supply chain group into an integrated, self-supporting corporate resources team, and plugged into clinical partnerships. They even used their expertise to provide on-the-ground supply chain and clinical support in earthquake-stricken Haiti.

Dana-Farber Cancer Institute, Boston

Noteworthy for its clinical specialization and laboratory research, Dana-Farber placed supply chain spending under the microscope and in a relatively short period of time brought considerable discipline to clinically driven decisions on products and services. Dana-Farber centralized procurement and organized sterile processing to support clinicians and researchers more effectively and efficiently, collaborated with strategic suppliers across all areas – administrative, clinical and research – to improve internal operations while maintaining a fluid supply flow, initiated low-unit-of-measure and stockless supply programs, as well as automated supply cabinets for more accurate charge-backs and established communications and customer-centric service between internal departments.

Fletcher Allen Healthcare, Burlington, VT

This tech-savvy top-flight organization in the Northeast has its supply chain and pharmacy overseen by one person who spearheaded the realignment of internal and external logistics operations. Fletcher Allen maintains an on-site service center to handle purchasing, printing, inventory, linen and a variety of other services. Supply chain uses bar coding and hand-held computer terminals for PAR levels, and generated millions of hard-dollar savings by working with surgeons in cardiology, orthopedics, interventional radiology and trauma areas to manage inventory and replenishment. The Supply Chain Informatics team reports and analyzes consumption patterns for such areas as surgical services to keep everyone on track. And Fletcher Allen was one of the crisis management pioneers that quickly prepared for H1N1 in advance of vendor allocation procedures, managing the process before government instructions to ensure continuity of supply and stay ahead of demand.

Froedtert Health, Milwaukee

Fortified with administrative, financial and political support from a C-suite that clearly understands the value of an effective supply chain, Froedtert engineered the integration of academic and community hospitals in various locations into a network with a single centralized corporate management structure. Froedtert tapped a pharmacy director to lead its corporate supply chain, which includes pharmacy, and implemented a centralized value analysis program with established targets and reliably in-depth reporting.

Led by a former pharmacy director with extensive project management experience, along with a dedicated team of professionals from inside healthcare and outside, including from the retail and rollercoaster markets, Geisinger totally revamped its supply chain operation by centralizing contracting and purchasing, implementing a new enterprise resource planning (ERP) system module, cleaned up its item master, developed partnerships with clinicians and other departments and picked up the torch for supply data standards adoption and implementation.

Geisinger launched multidisciplinary, physician-led clinical use evaluation (CUE) teams for several key service lines that make clinically relevant product and equipment decisions with an emphasis on efficiency, standardization and cost savings. Geisinger’s supply chain team also cemented a partnership with a for-profit clinical engineering company owned by the health system to oversee major building projects within the organization and employed the use of supply robots in pharmacy and supply chain services to help deliver products and equipment to the nursing units in the main hospital.

Striving to find new ways to remove costs, Geisinger developed a model called P.I.P.E., which stands for Process Innovation, Perfect Execution, and helps them improve contract negotiations, remove unjustified product variation and get supplies closer to the point of care. Geisinger also has started to incorporate tools like simulation modeling that allows them to test new logistics pathways prior to changing them in real time to prevent disruptions to current operations.

Greenville (SC) Health System

Having an award-winning CEO with an extensive supply chain background certainly offers its pluses and minuses. On the positive side, supply chain more easily gains C-suite access, influence and support from one who spent time in the trenches. But like Spider-Man’s oft-quoted mantra, "with great power comes great responsibility," emerges the specter of accountability. With a supply chain leader in charge of the whole enchilada, you’d better have your act together in supply chain but much is expected of you. And Greenville’s decorated supply chain team doesn’t disappoint and actually delivers. While vigorously embracing such high-tech options as carousels for distribution and radiofrequency identification for tracking purposes Greenville’s supply chain team doesn’t use them as crutches to bolster a house of cards or silver bullet solutions to plug holes but rather key strategies to propel already successful fundamental operations to the next level.

Lancaster (PA) General Health

With supply costs exceeding 22 percent of overall operating expenses during a tumultuous economic period, Lancaster General incorporated value analysis strategies and tactics to repair and overhaul the system, switching its passive and reactive status to one with department-based authority and credibility to work with and support doctors and surgeons. Within the last three years, the organization has booked tens of millions of dollars in cost savings, inventory reductions and increased charge capture as a result. And you can trace the groundbreaking needlestick safety movement and resulting federal regulations and product modifications designed to save lives to influential crusading efforts here.

LeeSar, Fort Myers, FL

To populate a Supply Chain Operations Worth Watching list you’d be hard-pressed to leave out two prominent organizations. This is one of them.

As one of the pioneers in first-generation self-contracting and self-distribution operations back in the late 1990s, LeeSar Regional Services Center and sister company Cooperative Services of Florida, since has evolved beyond mere contracting, purchasing and distribution for an ever-expanding group of hospitals and other healthcare facilities. It has launched and grown successful revenue-generating businesses specializing in custom pack assembly and sterile processing services, developed a sophisticated temperature-controlled records storage area and a pharmacy repackaging facility among others, and served as an incubator of skills and talent throughout Central Florida’s bustling healthcare region.

Mayo Clinic, Rochester, MN

Since the healthcare reform years of the mid-1990s it’s become fashionable for supply chain to pursue working with physicians and surgeons. Some revel in it; others despise or fear it. Some do it rather well; others continue to amble for early and demonstrable success. But the supply chain team at Mayo Clinic never had the choice to fly under the radar undetected or decision to outsource responsibilities to a GPO. In fact, in such a clinically controlled environment with one of the few successful and world-renowned physician-hospital business models in existence today, supply chain operations achieves a delicate balance between physician preference, clinical outcomes and bottom-line respectability. Mayo Clinic’s extensive supply chain team remains on the forefront of economic buying, IT use, supply data standards adoption and implementation and incorporating strategies from other industries, such as retailing’s category management. Mayo Clinic may push limits in clinical outcomes and patient care delivery but it also redefines the limits of supply chain’s increasing influence with clinicians and C-suite executives.

McLeod Health, Florence, SC

Start with a supply chain leader who has a background in horticulture, real estate and theme park development and project management and add a procurement director with customer relations expertise from a prominent nationally recognized retailer, a heap of C-suite empowerment and support and you’ll produce a blueprint for business-class supply chain improvement that lets clinicians practice medicine and not poke around for products. McLeod Health implemented this recipe precisely, shamelessly acknowledging and addressing failures to create overshadowing successes from lean processes to reduce operating costs.

Memorial Hermann Healthcare System, Houston, TX

For the last decade, Memorial Hermann’s supply chain operation has maintained a formal and informal connection to the C-suite that has generated considerable benefits for the system, including booking roughly half of the more than $50 million in non-labor expense savings in the first year of a two-year goal, as well as increasing charge capture and collecting millions in net revenue increases, due in part to an automated and optimized supply chain operation. In fact, if the supply chain leader needs to meet with a chief executive with a day’s notice for even only 15 minutes, they figure out a way to fit him into the schedule. Buttressing that support is a consolidated, centralized corporate supply chain office with dedicated professional project managers that eliminated the costly "mini-supply chains" established before it.

Mercy/Resource Optimization and Innovation, Chesterfield, MO

To populate a Supply Chain Operations Worth Watching list you’d be hard-pressed to leave out two prominent organizations. This is the other one.

If you’re looking for a poster child on how to work with your GPO to learn how to function as your own GPO and then venture out on your own without tacitly tarnishing that or any GPO while promoting the benefits of group purchasing, self-contracting and self-distribution as mutually exclusive functions, then look no further than Mercy’s Resource Optimization and Innovation (ROi) group. Not only does ROi have its hands on the pulse of its healthcare facility members in terms of supply chain excellence, but it has developed revenue-generating and financially sustaining enterprises to balance its focus on system-wide expense management and efficient operations. While this only represents part of why it’s worth watching this organization, witness its dedicated, focused and rapid response to the destruction of one of its hospitals in tornado-stricken Joplin, MO (read more in the January 2012 edition of HPN) as but one anecdote that demonstrates its customer focus and service delivery.

Mountain States Health Alliance, Johnson City, TN

The newly stitched together patchwork quilt of smaller not-for-profit and formerly investor-owned hospitals quickly found a way to reinvent itself by centralizing purchasing and contracting under a corporate materials management operation. Mountain States also established a comprehensive vendor relations and recalls sub-department that relied on internally developed information technology tools, implemented centralized but customized-by-work-unit electronic requisitioning, used videoconferencing to strengthen its pervasive value analysis process as well as encourage vendor participation and developed a comprehensive preparedness plan for crisis management.

The Ohio State University Medical Center, Columbus, OH

Ohio State’s academic and singular name belies the forward-thinking, tech-savvy strategic mindedness of a supply chain organization servicing multiple facilities. At the foundation of this operation worth watching are keen minds using robotics, electronics and automation to streamline product and people motion to enhance service. And Ohio State’s one of the more vocal proponents of supply data standards, clean item masters linked to chargemasters and other revenue cycle hardware and software, and "virtual" marketplaces and supply networks that rely on the Internet to organize and optimize purchasing habits and patterns.

Orlando (FL) Health

Deep in the neighborhood of the East Coast Disney empire, which even healthcare regards as the pinnacle of high-quality customer service, Orlando Health certainly must feel immense pressure to perform as a progressive organization. And it delivers, with supply chain playing a leading role. While a number of capable and high-profile supply chain leaders have left their influence and marks over the years, Orlando Health today operates successful self-contracting and self-distribution programs, optimized its use of critical automation and information technologies, improved its value analysis processes and integrated supply chain with the pharmacy.

Piedmont Health, Atlanta

Supply chain operations at Piedmont underwent a dramatic transformation during the last few years, moving from a department that had to be used to one that is actively recruited to participate in strategic planning. To achieve such a turnaround, Piedmont reorganized its contracting and value analysis processes to be more customer-centric and customer-driven with system-wide adoption of product choices. In fact, its physician-driven contract processes boosted clinical participation and support of hard-core physician preference item contracting initiatives to the point that in some cases physicians manage their own activities to meet contract terms. This has helped them generate more than $25 million in cost reductions for supplies and purchased services during the last two years alone and fuels improvements to its self-distribution model. Supply chain also has taken more of a leadership role in construction project equipment acquisition and planning and is overseeing maintenance and repair of diagnostic imaging equipment internally as part of a revamped biomedical engineering service.

University of Pittsburgh (PA) Medical Center

If there’s a new high-tech device in your organization, be it for clinical, IT or even supply chain use, chances are good that it either debuted here first, started in research and development here first or even was conceived as an idea here first. From low-unit-of-measure distribution to online electronic commerce to computerized surgical suites, UPMC commercializes its medical and technological expertise by nurturing new companies, developing strategic business relationships with some of the world’s leading multinational corporations and even expanding into a wide array of international markets. With nearly $2 billion in annual spending across 20 hospitals and 500 physician offices, respected business and technical acumen, UPMC represents a different breed of supply chain operations, one that is clinically and financially intertwined between patient and corporation.

WellStar Health System, Marietta, GA

WellStar may have earned HPN’s 2011 Supply Chain Department of the Year award (see August 2011 edition) but what continues to propel the organization beyond its laurels is its ongoing commitment to cost reduction and revenue generation. In fact, WellStar is one of those organizations that embodies what the 21st Century healthcare supply chain should be in emulating other industries. They’re slashing costs out of reimbursement necessity and motivated efficiency, fusing clinical executives to supply chain decisions and ramping up supply chain IT capabilities, but also carving out revenue-generating businesses, such as product distribution, laundry and pack-and-tray assembly.