Making Supply Chain’s business case for generating revenue

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While it may not be prudent or logical for Supply Chain departments to pursue revenue-generating business ventures if they don’t have their expense management operations under reasonable control, those progressive teams demonstrating innovation and quality service to clinical customers should pursue available opportunities, experts agree. They share how to shape financial and operational pitches below.


“When introducing new ideas, I find it invaluable to remove emotion from the discussion with factual data and demonstrated practice. At FMOLHS, our Supply Chain team is involved with many pilot programs where we test new ideas in a smaller environment, in order to validate the concept, and also establish baseline metrics that are measurable.

“Historically, Supply Chain teams had little credibility in offering new business techniques, especially those focused on revenue seeking organizations. But as more and more Supply Chain leaders have transitioned from other industries, we’re finding the methods used in manufacturing, retail and grocery can apply to healthcare — even outside the supply chain world.

“Understanding current process, data interoperability and total cost of ownership of a particular function serves as our key for presenting a new business case. Using a LEAN approach to identify waste and redundancy helps support the need for change. Using performance metrics to support a new approach has allowed us to sell an idea and initiate a pilot program that will test its effectiveness. Once the pilot either proved successful, or identifies the need for improvement, further steps in operationalizing become nothing more than action items on a project plan.”

William Mosser, Vice President Materials Management, FMOL Health System and LogisticsOne


“Supply Chain Management made the business case for revenue-generating opportunities through our ability to close operational budget gaps while still focusing on the mission of Mayo Clinic. We selected opportunities that have the ability to transform healthcare supply chain management and better control costs. These activities were also a natural derivative of the work already being done, and therefore not a significant distraction. We focused on a few large initiatives and ensured we had discipline and methodology behind out process. We were also well-networked and understood the needs of other healthcare organizations.”

Stephanie Matejka, Senior Director, New Business Development, Mayo Clinic


“You have to first lay the groundwork. We had 10 years of history behind us in both building and implementing business cases. We learned a few key lessons:

  • Discuss quality, outcomes and operational impacts first
  • Talk about risks and rewards in all of the areas
  • Provide likely ranges for the plan, such as timelines and financial results, not just providing a singular date or return
  • Use a solid financial model that looks at a full business cycle, not just one or two years, and focuses on hard benefits, not soft
  • Test your business case on a few internal and, if possible, external advisors that you can trust to provide objective feedback
  • Realize that building a business case is an iterative process, you will adjust it several times along the way.”

Greg Meier, Vice President, Finance, ROi


“First off, we kept in mind that key phrase from the practice of medicine: Do no harm. Before launching into any commercialization effort, we made sure our work wouldn’t come at the expense of UPMC and its core mission. After that, we asked if we could truly create value for other health systems, what the costs of building a commercial hardened solution would be, whether we could market on a national basis, and how these costs would ultimately add value to the enterprise. That’s what we’ve done with Prodigo and Pensiamo — we’ve hardened their offerings so that they will work in any environment. And then we’ve leveraged our reputation for excellence to market these solutions nationally.”

Robert A. DeMichiei, Executive Vice President and Chief Financial Officer, UPMC


“Through a collaboration with Finance, Tax, Legal, Physician leaders and Supply Chain a detailed feasibility study was conducted by Cleveland Clinic to determine the viability and creation of an LLC. Following the feasibility study, a business plan ensued to provide a structure and financial outlook to the business proposition considered. Financial metrics and organizational shells were modeled to provide leadership a complete and detailed review of the business venture being proposed.

“Much as a case needed to be built within Cleveland Clinic, the same had to happen within Vizient. Once both parties agreed that there could be a case for taking Excelerate to market, there was a significant amount of collaboration to build out the model and gain approval from our respective leadership teams.

“Numerous presentations to a variety of select leaders in both organizations ensued with the culmination of a final presentation to each company’s c-suite executives. Once the business case was evaluated, vetted and approved by both leadership teams, sub-teams began working on executing the first phases of the business plan.”

Simrit Sandhu, Executive Director, Supply Chain Operations, Cleveland Clinic


“The Supply Chain leader has to remove his institutional executive hat and don his tenacious entrepreneur hat to develop a business case with solid evidence of the market potential and five-year revenue forecast with acceptable ROI. Not only does this change of perspective need to occur with the new venture team, but the individuals must also be prepared to place their internal credibility and external reputation on the line to develop this new business opportunity.

“At Pensiamo, we are fortunate to be part of UPMC because not all health systems have the vision, resources or ability to launch commercial ventures. UPMC harnesses the strength of its clinical, technical, business, and capital resources to develop, test, and deploy healthcare products and services that improve the lives of patients across the globe and reduce costs. Through UPMC Enterprises, the commercialization and innovation arm of UPMC, we have access to an impressive team with expertise in healthcare investing that’s second to none.”

Jim Szilagy, President and CEO, Pensiamo, and former Chief Supply Chain Officer, UPMC


1 COMMENT

  1. Rick, I would like to say that Pharmacy has been part of generating revenue for many years. Back in the 1970-1990’s, before DRGs, Pharmacy was a Top 3 Revenue Center for hospitals and health-systems. With the advent of DRG’s in the mid-late 1990’s, it became and expense center on the inpatient side, but remained a revenue center outpatient (we knew by payer what we were reimbursed for every dose of a drug and participated in payer contract negotiations). We hired 2 financial coordinators for a growing oncology program and one for our outpatient clinic. The two oncology FC’s returned over 8 times their salary and benefits based on drug replacement and assisted in Medicaid enrollment. Also, the clinic FC helped decrease a $1M lose identified by pharmacy, in lost clinic revenue and also made sure patients enrolled in state Medicaid Plan and had prescription coverage also, to be used at our retail pharmacy. The hospital CDM is required to be set up with appropriate Revenue Codes, Billing increments, UB-40 codes, according to CMS and in order to get reimbursed.

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