From the start about a decade ago, the Atlanta-based integrated delivery network Piedmont Healthcare faced a Herculean task but didn’t really grasp it at the time.
Under the guidance of a new Vice President, the Supply Chain team sought to establish recognition as a “national leader in creating value for its organization,” according to its vision statement, where “clinicians and team members know that they have the resources and internal support they need.”
As the nation descended into an economic recession, the Supply Chain team members knew they had their work cut out for them to provide high-quality, standardized service to their four hospitals. Generally, as you develop and implement a performance improvement program you envision the time when you can sit back and watch the “machine” operate, making necessary tweaks here and there to compensate for unexpected developments.
Piedmont’s Supply Chain team, however, hasn’t taken the time to do that. Since 2012 and during its long road to recognition, Piedmont has nearly tripled in size, adding at least one acute care facility to its ranks annually for the last three years.
To paraphrase and adapt a segment of one of Robert Frost’s famous poems: In supply chain, success can be wonderful, stark and deep. But you still have miles to go before you sleep.
Piedmont’s Supply Chain embraced an intriguing ideal early on – one that included a single ERP system, a single item master, a single electronic medical record, a system-wide value analysis program that includes and coordinates clinicians and departments throughout the IDN and a “One Touch” customer service philosophy designed to “minimize inconveniences and ambiguities” through clear communications and managing expectations, and delivering standardized procedures and products. These were etched in place against a backdrop of absorbing new facilities that brought with them new staff members and attitudes, different habits and practices and each year yet another opportunity to test the resolve and resilience of their program.
The foundation to make that happen is built on trust and can take years to build based on outcomes that benefit others, namely the customers and the patients.
“It has taken years and a demonstration that Supply Chain, exists to serve the mission and the organization, not the other way around,” acknowledged Joe Colonna, Vice President, Supply Chain. “Yes, we have controls in place, but we explain why and work with the customer. Don’t be the DMV. Don’t put things in place just because they make Supply Chain’s life easier.”
Expectations and trust didn’t appear overnight, but they had to start sometime, reflecting off Supply Chain’s vision. Everything began with a simple question, Colonna recalled.
“Simply stated, we asked senior leadership, ‘What do you want from your Supply Chain?’” he said. “Savings is a given. What else do you want? The cool part is our Chief Administrative Officer at the time, Ed Lovern, wrote the core tenets, based on my question and then he and the team refined the messaging.”
Piedmont’s Supply Chain team values their customers and it shows – not just through performance improvement, operational efficiencies and expense reduction initiatives. They relish the daily “Thank You” and cover the walls with written notes of appreciation that provide evidence of their commitment and motivation to succeed for the caregivers and patients.
“We have earned [trust] by delivering results,” emphasized Alex Bonno, Executive Director, Operations. “We have great front-line staff and hospital supply chain leaders. We hire customer-focused individuals who care and who understand that there is ultimately a patient on the other end of everything that we do. We encourage this culture. Our primary mission is to make sure that the patients and the people who take care of the patients have what they need when they need it. We are not always perfect but we are very responsive and we work hard to build and keep the trust of the clinical community. Our hospital-based teams do more than just move boxes. For the most part, we have a seat at the table and are viewed as business partners and problem solvers. This ongoing, two-way relationship enables us to engage clinical help when completing projects like SKU standardization.”
For their resilience, resolve and return on investment, Healthcare Purchasing News chose Piedmont Healthcare Supply Chain team as the 2018 Supply Chain Department of the Year.
Peeling the onion
Clever marketers can use nuanced names and slick sloganeering to cover or gloss over a moribund program. Not Piedmont. Supply Chain developed the useful programs first before branding them with specific purposes in mind.
One Touch, which debuted in 2014, is but one example. Supply Chain designed it, by and large, to “manage the customer” more effectively and efficiently through what could be a complicated and frustrating process fraught with turf wars, silos, errors, duplication, cost overruns and backdoor buying.
“Conceptually, there is nothing that unique to the idea of providing good customer service, and there are lots of organizations doing it,” Colonna admitted. “‘One Touch’ was a concept that we felt the organization and team could rally around and gave us a common language.”
Of the six tenets that reflect the One Touch customer focus, Colonna identified which he thought were the easiest and hardest to carry out.
“[The] easiest [is] probably to manage the customer through the Supply Chain process,” he told HPN. “Our team is already very customer-focused. We just have to remember that we do this every day, but the customers do not.
The flip side involves tentacular decision-making.
“The hardest was when we decided to be the pivot point for all the other areas that may need to be included in the device/equipment/service review process,” Colonna admitted. “This sometimes leads to Supply Chain being perceived as holding something up when in reality we may be waiting on feedback. However, this is better than cutting a P.O. and then finding out I.T. needed to be included in the review after you already [had] bought something. In the past the customer was responsible to make sure all the areas were included, but they may not have the expertise or experience to know which departments to consult. [It’s] very frustrating for them.
“We try to keep the customer in the loop on where things are in the process and we try to be good facilitators and project managers with the other departments,” he continued. “I find that the underappreciated skill set for many contract and sourcing people is communication, facilitation and project management. I would say that today, that skill set represents 75 percent of the job.”
Some might bristle at the thought of “managing” the customer versus “servicing” the customer. Certainly, Greg Milton, Director, Project Management, recognizes that but asserts that misses the point.
“‘Manage the customer’ relates to the management of their expectations,” Milton said. “In most instances in life, disappointment is directly traceable to unmet expectations. We believe that honest, proactive setting of expectations is the best way to manage a customer’s experience. In this sense, it is synonymous with customer service. The foundation of customer service is setting clear and achievable goals with accurate wait time and proactive communication when any of those factors change.
Piedmont’s Supply Chain maintains a self-help list that it uses to set operational parameters, performance improvement and customer service, titled “7 Steps to Tighter Controls.” Essentially, the “7 Steps” establishes Supply Chain as the gatekeeper for products and services entering the organization, expectations for resource review and accountability for non-compliance.
Piedmont Healthcare’s 7 Steps to Tighter Controls
- Devices should not be brought into any Piedmont facility without proper approvals from Supply Chain and proper documentation.
- No physician may bring a representative or a device into a Piedmont facility without proper documentation and Supply Chain approvals.
- No product will be purchased by Piedmont Healthcare without proper Documentation and Supply Chain approval. Any device that is used without such documentation and approvals shall be considered free goods.
- Any representative that brings a non-approved device into a Piedmont Healthcare facility, may be subject to being banned from all Piedmont Healthcare facilities as well as the potential of the company they represent being banned from Piedmont Healthcare.
- Service Line leaders should be held accountable to the entire impact that their divisions have on the organization. (Example: many divisions impact surgery budgets).
- Tighter controls must be in place at both the corporate and facility level to restrict orders for items that are not currently on contracts.
- Post implementation reviews for the impact of new devices to include assessment of total cost and ROI.
Source: Piedmont Healthcare
Actually, it’s more orderly than scarily draconian, with the C-suite’s buy-in and blessing, according to Colonna.
“We vetted this concept with senior leaders at the all levels and then rolled it out to the directors and managers at all sites,” he said. “With that feedback we tweaked it some. This was also a joint venture with legal and compliance. All of our vendors and their representatives sign off on their understanding as well. At the initial role out, we did get some gnashing of teeth, but honestly, many of our customers understand that this protects them, their physicians and patients. In fact, some leaders like to invoke ‘Joe Colonna’s 7 Steps’ to manage bad representative behavior.”
Unfortunately, not all suppliers and sales representatives toe the line and can fall short.
“We do have tools that help us identify potential red flags,” he said. “However, given limited resources, in many cases, we rely on the customers to tell us if there are issues. We do have the ability to lock a representative out of our vendor management systems and have done so on a few occasions.”
Aim for the STARS
Supply Chain sought what was BEST for Piedmont clinicians, encouraging them to GO BIG and reach for the STARS. Back in fiscal 2014, Supply Chain launched the “Better Efficiency through Strategic Transformation” (BEST) initiative, which encompassed a number of savings-driven projects the department developed and led, according to Milton. BEST generated $7 million in implemented savings that year, which included product cost and staffing reductions, he noted. Word spread quickly around the organization, motivating individual departments to “bombard” Supply Chain with a list of more than 150 project requests that ranged in value from $2,000 to more than $100,000 with little consideration on prioritizing, Milton added.
Based on demand and trust developed with clinicians, Supply Chain then launched GO BIG to tackle a number of projects perceived to yield “the largest value propositions for the work required,” Milton said. “By the time we rolled out GO BIG we had already established a history of success and built trust with the organization and physicians.”
STARS, which stands for “Strategic Transformation and Resource Stewardship” and emerged later the same year as GO BIG, represented Piedmont’s first system-wide approach to controlling costs, requiring executive-level support for leverage to succeed on an ongoing and large scale, Milton indicated. Supply Chain worked with the consulting firm Novia to launch the program.
Headquarters: Atlanta, GA
11 hospitals and medical centers
- Piedmont Atlanta; Atlanta, Georgia
- Piedmont Fayette; Fayetteville, Georgia
- Piedmont Mountainside; Jasper, Georgia
- Piedmont Newnan; Newnan, Georgia
- Piedmont Henry; Stockbridge, Georgia
- Piedmont Newton; Covington, Georgia
- Piedmont Athens Regional; Athens, Georgia
- Piedmont Rockdale; Conyers, Georgia
- Piedmont Columbus Regional – Midtown; Columbus, Georgia
- Piedmont Columbus Regional – Northside; Columbus, Georgia
- Piedmont Walton; Monroe, Georgia
- 24 Urgent Care facilities
- 28 QuickCare (retail) clinics
- 535 Physician Practice locations
- 13 Emergency Care locations
Total net revenue
- President and CEO – Kevin Brown
- Executive Vice President – Mike Mandl
- CFO – Michael McAnder
Supply Chain Management
System Vice President, Supply Chain: Joe Colonna
Joined organization: 2008
Previous position: Principal, Appleseed Healthcare, a supply chain and leadership consultancy
Started supply chain career: 1985, U.S. Air Force, Medical Logistics Specialist
Managers (at Piedmont): Vice President, Supply Chain with five direct reports, plus Vizient relationship as the “sixth man.”
Employees/FTEs (at Piedmont): 18,978 for Piedmont, 228 FTEs for Supply Chain
Conduit to CEO: Vice President, Supply Chain, reports to COO who reports to CEO.
Annual purchasing volume:
(FY2017 vs. FY2018):
FY17 – $355,167,254 • FY18 – $407,688,236 (Note: This includes medical supplies and other supplies; does not include pharmaceuticals).
FY17 – $127,408,797 • FY18 – $141,293,477
Annual purchase order volume (FY2017 vs. FY2018):
FY17 – $605,679,069 • FY18 – $700,360,482
Percentage of purchase orders transmitted electronically: 45 percent PO lines
Purchasing, Sourcing/Contracting, Site/hospital operations, Centralized Distribution Center, Logistics (run own trucks for deliveries), Mail Services, Print Services, Project Management (for Value Analysis/STARS), Biomed, Diagnostic Imaging, Equipment Distribution, Merger and Acquisitions, System Management (Vendor file, item file, contracts, locations, EDI, recalls); analytics (STARS, Allocations, Rebates, BPCI),
physician practices support
Purchasing and contract management: Centralized
Total annual operating expenses: (FY2017 vs. FY2018):
FY17 – $2,397,585,362 • FY18 – $2,656,195,100
Source: Piedmont Healthcare, June 2018
STARS incorporates a detailed executive and committee framework and a value analysis structure that cost justifies investment in the process, despite questions about a perceived lack of efficiency or leanness. For example, Supply Chain supports six Non-Labor STARS teams that represent commodities, clinician-preference and physician-preference items. To ensure product/service conversion quality, Piedmont follows a seven-phase, 137-step process. But that’s largely by design.
“There is no single best process,” Milton noted. There are multiple paths to achieve an outcome, each with their own pros and cons. Piedmont is seeking to provide a level of visibility and inclusivity that requires the input of several groups in the evaluation of new product requests and STARS initiatives. A more top-down approach requires fewer voices. Although we have achieved much in the past 10 years, we are still growing and evolving into the healthcare system that we will become. I am sure that we will continue to change in our attempts to find the right mix of top-down decision making and inclusiveness.”
GO BIG recorded more than $12 million in savings that year; since fiscal 2014, Supply Chain’s STARS Non-Labor projects have recorded more than $67 million in savings from more than 300 initiatives through fiscal 2017, he continued. Within the last few months, Supply Chain helped save more than $2.4 million in the cardiac rhythm management area alone.
Medical supply costs per case mix adjusted admission (a key Piedmont measurement tool) are $1 cheaper today than they were in fiscal 2015, according to Milton. Against a 4.5 percent inflation rate, Piedmont clocks in at -0.1 percent, he calculated. Further, Piedmont reduced the compound annual growth rate for pharmaceuticals to 3.2 percent at a time when baseline inflation for these costs topped 6 percent annually, he added.
Piedmont’s Pharmacy STARS team achieved an average of $2 million to $3 million in cost savings each year, Milton noted. “Some of these have been direct price reductions for the exact same drug in the current form in which we buy it,” he said. “Some of these changes have involved moving from premix solutions to solutions that we mix on our own. In the cases where process change is involved, buy-in is needed from our pharmacy and therapeutics committee as well as our nursing leadership. As we all know, costs in the drug world continue to increase. New patents for drugs with better results are developed. Generic drugs sometimes find themselves being produced by a single manufacturer who, in a free market, decides to increase the cost by a factor of 100. The costs savings efforts – real green-dollar reductions in acquisition costs – have limited the impacts of the cost increases in areas beyond a single health system’s or even GPO’s control.”
STARS extends beyond Supply Chain to encompass a variety of areas and specialties, from hospital to revenue cycle effectiveness to physician enterprise to corporate services to clinical variation and quality to integration (of acquired facilities), Milton highlighted. Since inception, STARS generated approximately $215 million in combined cost reduction and revenue enhancement results through fiscal 2017, according to Milton. “Without these impacts, Piedmont would have been at near break-even operating margins over the past few years. The organization’s willingness to embrace all of the STARS programs and the fact that our highest levels of leadership continue to lead these programs is directly attributable to the success,” he continued.
“The STARS and One Touch cultures have brought a large degree of consistency to the ways in which we operate and in how we relate to standardization,” Milton said. “It has provided a needed boost to the health system’s efforts to transition from a holding company to a true system. We are probably at the half-way point in this evolution and much of the change can be seen in how the organization has embraced and continues to embrace the STARS program.”
Supply Chain is on track to implement more than $16 million in cost savings in fiscal 2018 and another $6 million in fiscal 2019, Milton added.
Along parallel lines, Supply Chain participates on Piedmont’s Quality, Safety and Service committee, aligned with Infection Prevention and improvement consultants, that oversees products and services that can impact healthcare-acquired infections and inpatient-hospital quality measures. Supply Chain works closely with Piedmont physicians in product evaluations, expense management and I.T. support. Supply Chain also brought biomedical engineering operations in-house that helped its diagnostic imaging program save more than $7 million and avoid another more than $12 million in costs. (See www.hpnonline.com/supply-chain-stamp-quality-physician-business/ and www.hpnonline.com/piedmont-basks-biomed-glory-glow/.)
Since 2016, Piedmont has acquired five hospitals and more than 80 physician practices, as well as added new service lines in pediatrics and trauma. Further, Kevin Brown, Piedmont’s president and CEO, was quoted in local newspapers as saying within the past five years, Piedmont has “gone from 300 front doors to 600 front doors,” increased the number of primary-care clinics to 70 from 46, urgent care centers to 21 from two and added 28 retail clinics at Atlanta-area Walgreens locations.
During the next five years through 2023, Piedmont plans further construction, renovation and expansion that will add hundreds of beds, along with operating rooms, cath labs, electrophysiology labs and larger emergency rooms across the enterprise.
Such a rapid growth can overwhelm any organization even with the best-laid plans in place. But Piedmont’s Supply Chain takes it in stride.
“We are still in the midst of integrating these hospitals into our program,” Milton said. “Three of the five hospitals participate in STARS with two scheduled to join later this year. The STARS program, our PeopleSoft systems (ERP), and Epic (EMR) are rolled out to every hospital incorporated into the health system, typically – but not always – in that order. We are in various phases of this roll-out with our most recent acquisitions. The ideal has become part of Supply Chain’s ongoing efforts within the organization. It would be naïve for us to say that we have achieved the ideal. It represents a journey that promises to continue its evolution as new technologies and data mining capabilities make themselves apparent and as we continue to master existing ones.” (See IT sidebar at www.hpnonline.com/striving-for-single-source-of-truth/.)
Piedmont’s expansion to 11 hospitals this year from four in 2012 really tested the mettle of Supply Chain’s centralized distribution center as it has booked more than a 200 percent growth in the number of contracts, vendors and items, brought in by these facilities. SKUs reached their zenith in fiscal 2015 at 4,822, but this past February they plunged to 3,455, well below the fiscal 2013 total of 4,463 carried in the distribution center.
“Historically, hospital acquisitions for Piedmont have resulted in SKU proliferation,” Bonno said. “We will continue to face this challenge as we continue to grow. We have seen the most significant standardization and savings activities driven through our STARS process.”
But Bonno admits more dramatic changes may loom large.
“We are quickly approaching the limits of our existing distribution center,” he admitted. “We are actively making changes to increase our immediate capacity and investigating various alternatives to modify our distribution model to support the increasing demand and growing geographical footprint. We also have recently reinstated productivity metrics so there are now clearer indicators for when we need to add resources to the front line in order to support the organic growth and expanding services provided by Supply Chain Services.”
Bonno highlights other ways they are driving product standardization and SKU reduction activities in the distribution center.
“While these are not always sexy large dollar savings contributors, they do provide operational efficiencies and service level improvements by eliminating redundant SKUs, freeing up space, and consolidating demand,” he noted. “We approached our distribution center SKU standardization effort as a Supply Chain Operations team project. We formed several teams comprised of hospital site leaders and members of our distribution center staff. We created a project objective, developed a baseline, created a scorecard to measure results, and met regularly to drive accountability across the teams and to update progress.
“We identified opportunities for standardization by analyzing utilization across our hospitals,” Bonno continued. “We focused on slow-moving items and those items that were being issued from the distribution center to only one or two specific facilities. We also used UNSPSC product categories to link similar products together to help identify alternatives. Because of the culture of stewardship and standardization that the STARs program helped to create within Piedmont, and because of the existing relationships that the supply chain hospital teams have built at their facilities, we were able to successfully work with the clinical end users to review alternatives, drive standardization and eliminate SKUs in the distribution center.
“We have challenged the overarching philosophy for stocking items in the distribution center,” he added. “This has resulted in both items being added to and items being removed from the distribution center channel. We want to ensure that bringing something through the distribution center is actually adding value for the organization and not just creating additional product touch points and waste through unnecessary inventory.”
There is more to the story: