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         Clinical intelligence for supply chain leadership



January 2012

People & Opinions

Worth Repeating

"With the EHR we had a virtual record to utilize; we were able to pull records and get patients on the proper regimen to continue their care. Paper records had been strewn all over, some as far as 100 miles away. Through our automated supply chain system, we were able to rebuild inventory and track patient supply needs by pulling the most recent electronic requisitions. This just illustrates the value of technology in quickly restoring operations as absolutely critical."

Scott Nelson, vice president,
unified supply chain, ROi

"Antimicrobial PICCs and CVCs are a significant step forward in the effort to eliminate CRBSIs. Despite a category 1A recommendation from the CDC for reducing CRBSI if maximal sterile barrier precautions haven’t helped a facility reach its goal, these catheters comprise just a small percentage of the millions of CVCs sold each year in the U.S. To make further progress in infection control and saving lives, healthcare providers, government agencies, and device- and drug-manufacturing companies need to continue to work together to develop and drive the adoption of evidence-based technologies."

Dan Sirota, vice president and global leader, Interventional Radiology and Critical Care divisions, Cook Medical Inc.

"Over the last 5 to 7 years integrated hybrid rooms have become more common. Integration is defined as a room in which all the different equipment is designed to work together in harmony with each another – and with the staff; thus providing better patient care and more efficiency in those rooms. Hybrid is defined as a room serving both diagnostic and surgical functions in the same location."

Jeff Dunkley, director of design,
BERCHTOLD Corporation

"You can’t believe how many facilities I visit that aren’t focused on quality assurance and consistently doing what’s right each and every time. I often hear from seasoned technicians who say ‘the way we have always done things has worked, so why change now?’ In reality, the way things have always been done is not working; otherwise, I would not be there."

Angela Lewellyn, CRCST,
Advantage Support Services Inc.

This Month's Advertisers

Bringing retail strategy to healthcare supply chain

Category management not just for successful retailers

by Joseph Dudas and Terri Nelson

Once a popular topic in the early 1980s, service line management currently remains a topic of interest within the healthcare provider community.

In the past, service lines were primarily seen as a marketing strategy to combat the emerging trend in inter-hospital competition. However, service-line strategy (also known as centers of excellence) is not being viewed as just a marketing function this time around. This time senior managers seem to realize that the concept not only holds great financial promise, but also offers potential for gaining a competitive edge through integrating their practices as well as forming strategic partnerships (such as accountable care organizations and affiliations).

Service lines are sure to challenge as well as overlap supply chain needs, and this is where the beauty of category management comes in. Through category management, processes such as clinical quality value analysis (CQVA) can be utilized to support the unique needs of multiple service lines while coordinating a discrete solution set across its supply chain functions. At the Mayo Clinic, for example, 30 to 40 Specialty Councils have been formed where physician leaders come together to standardize and optimize practice standards. These same councils are looking for the Mayo Clinic Supply Chain to interact with and support each council with both flexibility and agility.

To meet this challenge the Mayo Clinic Supply Chain Management Division has created integrated teams that review transactional data looking for opportunities to address price, utilization and new technology opportunities as well as leverage best practices, such as CQVA. Category management’s philosophy also reinforces that Supply Chain Management develop partnerships with suppliers as well as other healthcare providers. This allows for new levels of collaboration and the power of teamwork.

"Without our strategy of category management we would not be able to scale to the required customization that is needed to support the complex needs of our existing practice, affiliations or UMCSC (a 36-member purchasing network)," said Jim Francis, our Supply Chain Management Division leader. "Looking at the business of supply chain management as 6 to 7 business segments allows us to apply best practices while dividing and conquering the unique needs. One size does not fit all, and we would not want to throw away a good business solution just because it does not work for a given category."

Managed chaos, more complexity

In retail, category management was created as an integrated approach to marketing. Like the physician, the professional marketer had always challenged the supply chain. It was not until these functions were integrated that retailers were able to scale to the likes of Best Buy, Target, Walgreen and Walmart. Marketing focuses on their four Ps: Products, Placement, Price and Promotion. Likewise, when I joined the Mayo Clinic Supply Chain Management Division close to seven years ago, I was told that supply chain all boils down to delivering four Rights: Right product, Right place, Right time and Right price.

At the Mayo Clinic, several years ago we began noticing significant gaps between what supply chain stakeholders wanted and what our supply chain could deliver. Even though we tried to customize, we often got at least one of the four Rights wrong. This is when we started talking about the concepts of category management and the need for a more strategic approach.

When we benchmarked ourselves against successful retailers, we quickly noticed that they had mastered, through the grouping of their products into categories, a strategy for mass customization while still holding firm to appropriate standardization.

A simple example can demonstrate the power of category management. If you have five categories and five business functions each with two options, then that is a combination of 50 unique strategies that are possible (5 times 5 times 2). Each function offering just two options can create a very wide range of solutions that the customer sees in aggregate as 50 unique options. Executed in silos you have chaos. However, when executed in a coordinated manner, the entire enterprise can work together to execute very sophisticated strategies with a high level of standardization and synchronization.

Think of it as "managed chaos." We felt that through category management we could offer customers of our $2 billion supply chain a higher level of service if we thought and acted strategically as an integrated team but held to standardization in a very different way.

Where to start?

We decided to begin with Clinical Quality Value Analysis (CQVA), which turned out being a great place to start your migration to category management as it required categorization of our product lines and forced us to think like a Category Manager. It is a scientific approach to purchasing and will require some customization as it is applied to significantly different categories.

CQVA is a systemic decision–making approach to product management that is facilitated by supply chain management and incorporates clinicians into the process. It is very much related and in support of the basic concepts of category management.

There are six basic steps:

1. Categorization –
How should we group products into categories?

2. Business Intelligence –
What information (both clinical and financial) will drive decision making?

3. Initiative Identification –
Which product categories should we review first?

4. Recommendation/Approval –
What format and process will be used to force an objective and scientific decision?

5. Implementation –
How should we communicate, convert and drive standardization?

6. Compliance –
Can we measure success and expected results?

With the assistance of our medical/surgical product distributor and group purchasing organization (GPO) we developed a product classification system with major classes that are further divided into minor product categories (which is what Mayo now considers a book of business for contracting purposes).

For example:

• Major Class – Anesthesia

• Minor Product Categories - Anesthesia circuits, Anesthesia Trays, ET tubes, etc.

Seventy-two major classes with 317 minor product categories were identified and labeled within the item master file. We further divided the minor product categories between clinical commodity and physician preference products. We defined clinical commodities as products that are interchangeable with equivalent products that warrant clinical validation due to intended use (examples include needles and syringes, ostomy supplies and general wound care products). This is where we would focus first.

Development of a review and approval structure was established with the formation of the Mayo Clinic Commodity Committee (MCCC) to serve as an enterprise-wide value analysis committee to identify, approve and execute product standardizations and cost reduction opportunities for commodity medical/surgical supplies and processes. Membership includes clinical leadership, supply chain management (clinical value analysis contracting, informatics) and GPO representatives.

To maximize clinical staff input, five product review teams (PRT) were launched (Medical, Surgical, Respiratory/Anesthesia, Wound/Ostomy/Orthopedic and General). Each was charged with reviewing, recommending and implementing product standardization and conversions. At the start of each PRT’s product category review, information is obtained that includes financial data (cost and volume) and clinical data (effectiveness, safety and service).

It is critical to have tools to monitor both from a process as well as a strategy perspective. Following are a few critical success factors that we utilize:

• Process metrics –
tracking the time from the start of a review to the recommendation and from approval to conversion of products.

• Strategy metrics –
decreasing the number of vendors and stock-keeping units (SKUs), decrease cost and increase in price savings.

When it comes to implementation, you cannot manage what you cannot measure and therefore you must measure and track compliance. Mayo Clinic facilities have 90 days after the approval of a product category to convert product. Each approved product receives a "formulary flag" that is attached to product information on the item master. This identifies that the product has been approved by the MCCC. Compliance reports determine the percentage of compliance for the entire organization and each individual facility which the PRTs monitor closely.

Results achieved so far

Consistent with the concept of category management, CQVA is the framework for organizing and synchronizing product focused teams across the supply chain. By focusing on specific categories the team is not overwhelmed and can adjust the process to fit the needs of each unique category.

The benefits include:

• Taking product category decisions from subjective to objective

• Providing a formal, customized, collaborative approach to reduce and manage expenses

• Involving interdisciplinary teams that are able to optimization across business functions

• Ensuring optimal benefits and clinical staff participation

• Processing that is supported by documentation which maintains and /or improves quality and customer satisfaction

The results directly associated with our Clinical Commodity CQVA program have been significant with direct savings of over $7 million, as well as a SKU reduction of close to 40 percent. With only 10 percent of our item master categorized as a Clinical Commodity we feel we are only scratching the surface as we learn how to apply the similar techniques to other categories.

Joseph M. Dudas serves as vice chair of category management at the Mayo Clinic where he is responsible for all strategic sourcing, contract administration and informatics.

Terri Nelson serves as manager of Mayo’s clinical quality value analysis (CQVA) program.