Partnering with IDNs

for Efficiency and

Innovation
Moderator
Patrick Carroll, President, Patrick E.
Carroll & Associates, Inc.
Panelists
David McCombs, VP ERP/Supply Chain
Operations, Bon Secours Health System
Tony Benedict, CPIM, CIO, Vice President
Supply Chain, Abrazo Healthcare
Raymond J. Seigfried, MA, Senior Vice
President Administration, Christiana
Care Health System

Healthcare Reform

Federal health care reform is the result of the

March 2010 enactment of the Patient
Protection and Affordable Care Act (PPACA) as
amended by the Health Care and Education
Reconciliation Act
These two laws are commonly referred to
together as PPACA, the Affordable Care Act
(ACA) or health care reform
Mandates become effective over several
years. While health care reform is now law,
many implementation details remain
unanswered and will be clarified by future
regulations and guidance

Reform Impact on
Providers

Insurance Coverage
Bundled Payments for Episodes of Care
Pay for Performance
Market Basket Updates
Expansion of Medicaid
Primary Care Funding
Disproportionate Care
Accountable Care Organizations

Hospital Acquired Infections

Preventable Readmissions
Device Taxes

The Response from IDNs

Changing decision-makers and

influencers

Physician consolidation and integration

IDN/Hospitals mergers and consolidations

Improve operational performance

Significant changes in the Care Model to

create value
Capital/Cash investments redirected
Elevate role, responsibility and
expectations of Supply Chain Management

The Healthcare Supply

Chain

Extremely heterogeneous marketplace

The playing field is not level
Advanced Supply Chain Executives
Focus on Value
Focus on partnerships with suppliers
Middle Level Supply Chain Executives
Focus on Cost
Preliminary discussion of partnerships
with suppliers
Lower Level Supply Chain Executives
Focus on Price
The supplier is tolerated

Value Based Competition

Bon Secours Health

System, Inc.
IDN Panel: Partnering with
Suppliers for Efficiency and
Innovation

Presentation Objectives
Review four major issues that will impact our future
Supply Chain model and relationship with Suppliers:
1.Physician Preference Item (PPI) procurement will move
from Contracts to more disciplined Formulary Models to
insure optimal clinical outcomes and cost predictability
2.Supply Chain Logistics and Value Optimization
Strategies must be integrated across the entire
continuum of care
3.Supply Chain must directly support optimizing the
Providers performance under Value Based Purchasing
models
4.Progress toward Global Data Synchronization is critical
for provider/supplier transaction efficiencies and data
transparency

Profile of Bon Secours Heath System

Good Help to those in Need

Key Trends for Bon Secours Health System

1. Continued movement to centralization and
standardization of all support functions
2. With EPIC installation nearing completion,
movement toward standardized care and
hard wired process/protocols in all locations
3. Aggressive participation in ACO and
population health risk

Medicare Shared Services

Plan
Covers all BSHSI Acute
Service markets in five states
57,000 beneficiaries as of
January 2013
Partnership with Aetna,
community and employed
Physicians, other acute nonBSHSI hospitals

Key Issues for BSHSI Supply Chain

Partnering with Suppliers for Efficiency and
Innovation

1. Physician Preference Item (PPI) procurement will move

from Contracts to more disciplined Formulary Models to
insure optimal clinical outcomes and cost predictability

Implant Formulary Definition:

The main function of the Implant Formulary is to specify specific implant products
that are approved for physician use within a facility . Implant products are grouped
into functionally equivalent classifications. Within the classification implant products
are authorized for use based on evaluation of efficacy, safety, patient outcomes and
cost-effectiveness.

Differences of a Formulary and Contract Model:

Formulary

Contract

Same terms, definitions and

provisions for change for all vendor
purchase agreements for formulary
items

Separate agreement for each vendor

with distinct terms , definitions ,
changes

All items classified into functionally

equivalent groupings; items
evaluated in context of benefits as
compared to equivalents

Each vendor item considered unique

and evaluated separately

Includes only authorized items that

meet evaluation criteria

Includes full or selected portion of

catalogue

All items must go through new

product classification and Clinical
Value Analysis

Fairly open process for addition

and conversion of new item versions

Ongoing review of utilization, cost

and outcomes at procedure and

Review of purchase volume as

compared to committed volumes

Implant Formulary Design example Spine hardware;

other PPI products include Total Joint, Biologics,
Cardiovascular products, Specialty Surgical devices

Implication of Formulary on BSHSI Vendor

Relationships
Approved Formulary Vendors Strategic Partner
relationship
Continuous update of all purchase transaction data
and priority Accounts Payable and SPS customer
service response
Collaborative efforts to streamline transactions,
reduce vendor inventory and minimize SGA expense
Collaborative clinical outcome studies
Vendor Access Level 1 to approved clinical areas
Direct Participation in periodic Clinician new
product reviews, CVA process

Non-Formulary Vendors Exception-based

relationship
Per case exception approval of all product
used
No access to utilization data, clinical
outcome data or collaborative studies
Vendor Access Level 3 restricted access,
appointment only
No direct participation in Clinician product
reviews, CVA process

2. Supply Chain Logistics and Value

Optimization Strategies must be integrated
across the entire continuum of care
Hospital

Community-Based Care

Acute
Care

Free
-Standing ED
Ambulatory
Procedure Center
IP Rehab

Retail
Physician
Pharmacy Practice Sites

Urgent
Care
Center

Home

Wellness and
Fitness Center

Diagnostic/
Imaging Center

Acuit

Post
Acut
e
Care

SNF
OP
Rehab

Home
Care

Areas of Focus for Healthcare Continuum Supply

Chain Integration
Key Activities for Integration:
1.Tracking utilization, cost and correlated outcomes of key supply
products across the continuum
2.Focus on cost/utilization management of products/equipment that
follow patient and support the patient through the continuum

Issues

Multiple and non-integrated product distribution processes

Need for Standardization of products across continuum
Expansion of Formularies to covered population
Elimination of waste, duplication in care transition
Pricing models/cost predictability item, bundled, per acute
episode of care, per patient across continuum
Logistical support, distribution, procurement, patient-level
customer service
Clinical Value Analysis New technology assessment,
outcomes
Equipment Total Cost of Ownership, inventory
management

3. Supply Chain must directly support optimizing the

Providers performance under Value Based Purchasing
models
Core Measures = 10%
HCAHPS = 25%

Efficiency = 25%

Outcomes = 40%

17

Impact of VBP Measures on Supply Chain

1.

2.

3.
4.

HCAHPS 25%

Unacceptable for patient to experience changes of

direct supplies during care transitions ( trach,
lines/ports, Ortho soft goods, etc.)
Core Measures 10%

Supply Chain logistics must support 100%

compliance to care process protocols (timeliness
of intervention, supply packs, etc.)
Outcomes 40%

Only products that have evidenced-based support

for optimal clinical outcome will be utilized
Efficiency 25% ( cost per beneficiary)

Cost measured from pre-acute, acute and 30 day

post acute time period

Requires suppliers to directly assist with utilization

management and support predictive capped cost
per episode of care

4. Progress toward Global Data Synchronization

is critical for provider/supplier transaction
efficiencies and data transparency

Key Data standards and benefits:

A. GLN: Global Locator Number

The GS1 Identification Key used to identify physical locations or

legal entities.
Requires conversion from provider/supplier unique ship to
identifiers and required crosswalks to standardized GLN
Critical to insure right item gets to right location and minimize any
transaction or accounting errors

B. GTIN: Global Trade Item Number

an standardized identifier for trade items developed by GS1

requires conversion from unique provider/supplier item identifiers
Critical to support tracking/analysis across many transactional and
clinical databases as well as to support transaction efficiencies
( barcode/RFID data capture, etc.)

BSHSI Global Data Synchronization Plan and Status

A.

GLN Implementation Plan

1.
2.

Status:

A.

Complete internal ERP build and test of GLN for all BSHSI
locations FY 2013, complete
Implement GLN with major BSHSI suppliers and Distributors
FY 2014

Limited Suppliers ready to transact

Distributors maintaining legacy ship to
General lack of urgency

GTIN Implementation Plan

1.
2.

Implement as first priority the FDA UDI for Class III High Risk
items, including implement process changes in all phases of
business transactions and device documentation
Identify high-value categories of products for next phase of
Implementation

Status: In early stages of assessment

Challenge of supporting multiple processes as GTIN
adoption progresses

Partnering with
IDNs for
Efficiency and
Innovation
Tony Benedict, CPIM, CBPP
CIO, Vice President Supply Chain
Tenet/Abrazo Healthcare

Biography
2010-Present - Tenet/Abrazo Healthcare, CIO, VP
Supply Chain
2010-Present Association of BPM Professionals,
(abpmp.org), President, Director, Board of
Directors
2003-2010 Association of BPM Professionals,
VP Relationships, Director, Board of Directors
2006-2010 Tata Consultancy Services, Senior
Manager, Strategy & Operations Management
Consulting/Outsourcing
1997-2006 Intel Corporation, Supply Chain
Management, Technology Manufacturing Group
1988-1997 GlaxoSmithKline, Medical Center
Sales
22

The New Tenet

Healthcare

Tenet Healthcare

Service Line Feeders to Care Delivery

Settings
Wellness/Prevention
Acute Care
Post Acute Care
Ambulatory
Continuum of Care

Primary Care
Cardiovascular

Drive Volume

Oncology
Women Services
Neurosciences
Orthopaedics
Bariatric / Sleep
Psych

25

Care & Service Delivery Sites

Tenet/Vanguard Integration
Challenges

Tenet
49 hospitals
GPO MedAssets
Similar VAT
structure/processes
Supply Chain outsourced,
not regionalized
High C-Suite
Accountability
Geographical regions

Vanguard
28 hospitals
GPO Premier (just
switched from HPG 1/13)
Similar VAT
structure/processes
Supply Chain insourced
and regionalized
Low C-Suite Accountability
Market based fiefdoms

Imperative to drive $200+ million of cost out of new organization

What is best way to structure Supply Chain in the new Tenet?
There are best practices in each organization, plan is to merge best, drop
worst
GPO will play role in commodities, PPI strategy going forward?

26

Healthcare Reform
Challenges
Tsunami of Baby Boomers beginning transition

to Medicare
Cost of Healthcare increasing 2x faster than
inflation
Fee for Service model is obsolete
Implications of declining reimbursement on case
cost and profitability
Medicare provider payments will face a cut of 2%/yr
over nine years (2013-2021).

How to bend the cost curve to remain profitable

Supply base (PPI) stuck in dollar/margin/market
share growth paradigm

27

Bending the Cost Curve

Several opportunities in combination
exist to bend the cost curve:
Reduce acquisition costs
Bundled Payments
Disease management/Care
Reliability
Medical homes

28

IT Market Dynamics
Leading Software Supplier Market Share (2000 2010)
67.5%

2000

2010
50.2%

10%

EMR Vendors

20%

29.6%
Enterprise Software

30%

38.2%

Source: Dorenfest Institute & HIMSS Analytics Database (2011)

HIMSS, The Clinical Systems Hospital IT Market, 1998 2005 (2006)
Scott Weiss, The Enterprise Software Massacre (2011)

29

EMR Vendors

40%

Enterprise Software

50%

Risk Platform Future State

Comprehensive portfolio of discrete, integrated assets

Acquire Customers /
Manage Business

Aggregate Data Identify Opportunities

Biometric

Precision
Marketing

Utilization

Deliver Care

Analyze
Populations

Lab

Physicians

Pharmacy
Claims

Communicatio
ns

Medical
Claims

Extended Clinical
Team

Quality

Remote
Monitoring

Cost Reduction

Mitigate Risks
PHR

Experience

Avoidable
Events
Sustain Health

Social
Footprint

Demonstrate Outcomes

Extended Care
Team

Registry

Clinical Gaps
Scheduling

Revenue Cycle

CRM

Employer

Manage
Conditions &
Events

EMR

HIE

Enable Multi-Modal &

Multi-Site Interactions
Web

Email

Mail

30

Text/Mobile

Internal
Referrals

Social
Communities

CCD

Telephonic

External
Referrals

IVR

Risk Management

Face-toFace

Home Care

Individualized Longitudinal Analytics

Performance / Payment = Value Creation / Value Demonstration

Illustrative Care Episode

(2)

Allowed
Dollars
Paid

Surveillance/
Risk mitigation

Acute
Phase

Post
Acute
Phase

Risk mitigation

Additional acute
phases may be
avoided or
delayed

Longitudinal
analytics

Cost Prediction Analytics

And this model chasing historical claims data is all wrong
Medical and Pharmacy Costs

Quarters before and After High Cost Event Diabetics with Heart Failure Event

Months before and After High Cost Event

33

The Healthcare Supply

Chain

The future is a volume based game for

supplies, the intention of ACA is to
commoditize healthcare

Suppliers need to think long term and

redefine what partner means to IDNs
and themselves

Suppliers need to design for safety,

predictable outcomes and cost, not just
margin

Christiana Care
Health System
Wilmington, Delaware

Raymond Seigfried
Senior Vice President
Administration

Paradigm Change

The current system is not a health care

system; it is a sickness and disability-care
system. Getting rid of illness, what we dont
want, is not the same as maintaining
wellness, what we do want.
Russell Ackoff 2003

Value formula that sustained

volume and profit

Value
=

Produc
t
Quality

Price

New World Value Formula

Value
=

Patie
nt

Innovation that supports health

1. Adds value
2. Improves quality of care
3. Improves quality of life