maximizing cost savings through effective process, system, and contract management
TRANSCRIPT
Maximizing Cost Savings Through Effective Process, System, and Contract Management
Melissa Amell
Director, MMIS and Value Analysis
Brian Mikel
Director, Materials Management
Saint Thomas Health Services
Nashville, TN
Overview
Saint Thomas Health Services Background
Organization Structure
Materials Management Information
Systems (MMIS) Background
Value Analysis Background
Relationship and System Management
Saint Thomas Health Services (STHS) System Structure
St. Thomas Health Services 4 hospitals in middle Tennessee
$200 Million supply budget
Over $1 Billion annual revenue
Baptist Hospital 600 beds
6,500 babies delivered each year
Largest total-joint hospital in the area
Official healthcare provider for the Tennessee Titans and Nashville Predators
St. Thomas Hospital 571 beds
One of the top five cardiac programs in the nation
More than 245 heart transplants
52,000 open heart procedures performed
Middle Tennessee Medical Center 286 beds
30 different medical specialties
Over 55,000 patients visit the ED
2,500 babies delivered each year
Saint Thomas Health Services (STHS) System Structure
Saint Thomas Health Services (STHS) System Structure
Hickman Hospital
Critical Access Hospital
Senior Care program
Local home health program
Nursing home
STHS Previous State
System-level value analysis teams did not exist
Each facility operated independently
Separate materials management systems
Limited corporate sponsorship
Limited accountability for cost savings and
contract compliance
Previous Value Analysis Team (VAT) Structure
Prior to development of current structure, VAT
program made little progress
Prior structures allowed for little interaction between
hospitals
Limited Clinical Representation
Representation in the past restricted the ability to
“standardize” across all hospitals
Supply Chain Structure
Vice PresidentLogistics Services
& Support
Purchasing DirectorMMIS / Value
Analysis DirectorMaterials Director
Operations Manager(3)
(one per hospital)
Supervisor(5)
MaterialsManagement Team
Lead(7)
MaterialsManagement
Specialist(52)
Mailroom Supervisor(1)
Mail Clerk(4)
Purchasing Agent(2)
Buyer(8)
Value AnalysisAssistant
Senior SupplyAnalyst
(3)
Supply Analyst(3)
Food & Nutrition(Contractor
Bio-Med(Contractor)
EnvironmentalServices
(Contractor)
Materials Management Information System (MMIS) Structure
S u p p ly A n a lystIte m M a s te r
A p p rova l P ro ce ss
S e n io r S u p p lyA n a lyst
S u rg e ry Ite m s
S u p p ly A n a lystV e n do r M a s te r
Ite m /C o ntra c t R e se a rch
S e n io r S u p p lyA n a lyst
C o n tra c t M a na g e m e nt
S u p p ly A n a lystIte m M a s te r
P ro d uc t C o n vers io ns
S e n io r S u p p lyA n a lyst
Ite m M a s te rP ro d uc t C o n vers io ns
V a lu e A n a lys isA ss is ta n t
D ire c to rM M IS
& V a lu e A na lys is
V ice P re sid e n tL o g is tics S e rv ices
& S u p po rt
MMIS Structure
Responsible for maintaining these master files:
Item
Vendor (AP and PO)
Location
Vendor item
Contracts
Approval Process and
Requesters
MMIS
Through the establishment of MMIS:
Data is standardized and accessible
Item, vendor, and contract master files are only accessed/maintained by the MMIS group (changes are logged in audit trails)
Contract pricing is evaluated (audited) against actual purchases
Contracts and/or purchasing patterns are modified as discrepancies are identified
Value Analysis Team (VAT) Structure
C a rd io -V a scu la rE .P .
S u rg ica l S e rv ices M e d ica l/S u rg ica l M e d ica l Im a g ing a nd C a th . L ab
S u p p ort S erv ices P h a rm a cy L ab
D ire c to rM M IS
& V a lu e A na lys is
V ice P re sid e n tL o g is tics S e rv ices
& S u p po rt
Value Analysis Team (VAT) Structural Importance
Current structure promotes system standardization
Multi-disciplinary participation
Clinical representation is key to selection/implementation success
VAT priorities supported by senior leadership (i.e., system CEO, COO, CFO)
Appoint key clinical leaders and ask leaders to select operational representatives (clinicians are required for success)
VAT Purpose
Reduce non-wage expenses while providing quality products and services
Create a structure that supports product and service utilization
Standardize vendors, products and services
Manage new products and technology
Identify and convert to best practices and protocols
VAT Objectives
Provide a strong, system-wide VAT framework
Increase management, employee and physician awareness, while increasing participation and accountability for decision making and management of non-wage costs
Communicate product utilization guidelines
VAT Objectives
Communicate system-wide policies and procedures
Assure timely, consistent processes for vendor selection, product introduction, trial/evaluation activities, and conversion
Monitor and measure product and service utilization
Document and track savings
VAT Meeting Structure
Meetings are facilitated by the MMIS/VAT Director, and initiatives/topics are updated via the assigned task leader
Each VAT meets monthly or as determined necessary by the group (e.g., bi-monthly)
Meeting minutes are recorded, published, and reviewed by team members
Initiatives/topics identified during meetings are assigned to hospital representatives
VAT Meeting Structure
New initiatives are added/discussed as required
Contract expiration
Corporate direction
GPO decisions
Clinical preference (physician/nursing)
Product effectiveness/quality
Conversion timing, buy-outs, and obstacles
Safety
VAT Meeting Structure
Executive Sponsorship/ Leadership from the C-Suite
Future agenda items include updating the team on initiatives/topic progress
Meetings are scheduled for 2 hours
MMIS/VAT Director reassigns tasks as required and follows-up with contracted vendors
VAT Process
Identify opportunity
Discuss product requirements
Identify vendors
Conduct cost comparison
Evaluate/select products
Convert
Document savings
Cross Reference Cost Analysis
Facility Facility ID# LocationCurrent
DistributorCurrent
Manufacturer DescriptionMFG
Product #Conversion
Factor Packaging UOMAnnual Usage
Current Cost
Extended Cost
Current Items
ManufacturerLawson Number Description
MFG Product
#Conversion
Factor Packaging UOM Price Each Cost Savings
Annual Savings
Proposed Items
Standardization
Standardization examples
Orthopedic implants (3 vendors) over $1 million savings on $15 million spend
CRM/CRT products (2 vendors) $859,000 savings
Spinal implants (3 vendors) $400,000 savings
Cochlear implants (2 vendors) $291,000 savings
Peripheral Products (2 vendors) $462,000 savings
Standardization
Limited vendor benefits include cost savings and reduced O.R. time (e.g., setup)
General medical supplies – 90 percent contract compliance – single distributor
Moving to direct shipments where appropriate
Current direct conversion will result in $60,000 annual savings (one vendor)
Savings Documentation
A project sheet is maintained by the MMIS/VAT Director for each team (templates can be sent upon request)
After conversion, savings are tracked for 12 months
Potential opportunities are listed
Realized savings are reported quarterly to VAT and system leadership
VAT Project Sheet
ProjectNat'l / Local
Team Leader
Launch Date
End Date Projected
Annual Savings
Projected FY07 Savings
Impact
Projected FY08
Savings Impact
Qtr 1 FY07 Savings
Qtr 2 FY07 Savings
Qtr 3 FY07 Savings
Qtr 4 FY07 Savings
Total YTD FY07 Savings
Drug Eluting Stents-Price Reduction N Cline Jul-06 Jun-07 504,710$ 504,710$ 23,125$ 22,070$ 25,320$ 16,100$ 86,615$ Baptist Hospital 2,325$ 2,185$ 4,350$ 725$ St. Thomas Hospital 20,800$ 19,885$ 20,970$ 15,375$ Middle Tennessee Medical Center -$ -$ -$ -$ Closure Devices N Cline Jul-06 Jun-07 236,420$ 236,420$ 13,890$ 12,619$ 2,100$ 500$ 29,109$ Baptist Hospital 46,800$ 46,800$ 2,000$ 1,000$ 1,500$ 500$ St. Thomas Hospital 117,300$ 117,300$ 600$ 600$ -$ -$ Middle Tennessee Medical Center 27,610$ 27,610$ -$ -$ -$ -$ Baptist Hospital 630$ 630$ 270$ -$ -$ -$ St. Thomas Hospital 44,080$ 44,080$ 11,020$ 11,019$ 600$ -$ Middle Tennessee Medical Center -$ -$ -$ -$ Ablation Catheters (per AH doc) N 4,123$ 4,123$ -$ -$ -$ -$ -$ Baptist Hospital -$ -$ -$ -$ St.Thomas Hospital -$ -$ -$ -$ Middle Tennessee Medical Center -$ -$ -$ -$
Pacemakers and Defib's L Cline Jul-06 Jun-07 900,000$ 900,000$ 242,889$ 162,467$ 245,269$ 250,266$ 900,891$ Baptist Hospital 117,577$ 62,343$ 59,823$ 71,193$ MTMC 670$ 1,080$ 2,757$ 7,699$ St. Thomas Hospital 124,642$ 99,044$ 182,689$ 171,374$
Heart Failure Devices L Cline Jul-06 Jun-07 450,000$ 450,000$ 81,000$ 89,000$ 39,000$ 35,000$ 244,000$ Baptist Hospital 28,000$ 33,000$ 30,000$ 23,500$ St. Thomas Hospital 53,000$ 56,000$ 9,000$ 11,500$ Coronary Stent Pricing L Cline 200,000$ 200,000$ -$ -$ -$ -$ -$ Baptist Hospital -$ -$ -$ -$ St. Thomas Hospital -$ -$ -$ -$ MTMC -$ -$ -$ -$
Cardiac Grand Total 2,295,253$ 2,295,253$ -$ 360,904$ 286,156$ 311,689$ 301,866$ 1,260,615$
VAT Success
Annual Savings:
FY2005 - $12.8 million
FY2006 - $10.15 million
FY2007 - $14.5 million
FY2008 (Projected) - $11.2 million
VAT Success
FY07 (by VAT):
Cardiac - $1.260 Million
General Medical - $1.552 Million
Pharmacy - $2.310 Million
Surgery - $1.841 Million
Lab - $430,736
Support Services - $6.979 Million
Imaging - $213,455
Managing Relationships
MMIS works with the vendor community and inventory managers to insure
Proper cross-referencing
Adherence to contracts
Coordination of buy-outs
MMIS maintains conversion schedules and communicates timeline/manages project plans
MMIS team reminds inventory managers when conversions have not been completed
Managing Relationships
Hospital leadership must support VAT decisions (even if physicians disagree)
C-suite involvement from system president to department managers
Physician liaison required
Vice President of Logistics for STHS
Meets with physicians
Coordinates initiatives with senior leaders
Participates on each VAT
Works through issues between vendors, VAT, and physicians
Contract Management
Centralized contract management provides tools for pricing resolution
Purchasing agents can research confirmations against contract pricing, but cannot update contract prices
Properly maintained contracts are compared to actual purchase orders to determine pricing discrepancies
Centralized maintenance provides the ability to examine contract compliance with each vendor
System Requirements
Systems must be able to support centrally managed contracts, masters, audit trails, and security
System security restricts access within master files, contracts, and other functions
Restrict accounts payable and purchasing from master file maintenance
System Requirements
STHS allows access to the MMIS group (8 associates)
Purchasing/AP associates must also submit requests for new items/vendors
Contract start/end dates and related pricing must be maintained
Keys To Success
Establish policies and procedures for system processes (MMIS and customers)
Restrict access to systems and master files
Make effective use of audit trails
Obtain organizational leadership support
Ensure research is performed on each vendor, item, and contract addition (reduce duplicates)
Vendor Master Form
Vendor Master Form
Vendor Master Form
Vendor Master Form
Item Master Form
Item Master Form
Item Master Form
Item Master Form
Contact Information
Melissa Amell
(615) 222-3030
Brian Mikel
(615) 222-6864