A highly respected health care system—one with six hospitals, more than 100 patient care locations, and 15,000 employees—was concerned with the escalating costs of two physician preference items: spinal implants and total joints. System leaders wanted to focus on several key issues:
- Variability in product price structures
- Numerous suppliers and contracts with different terms for each
- Variability in physician practice and product selection
For these initiatives to succeed, the chief supply chain officer knew the system needed outside help. He had approached physicians many times about curbing costs and changing utilization, but knew there was no substitute for doctor-to-doctor discussions and solid comparison data to back up the system’s recommendations.
For higher quality data and a better process for collaborating with physicians, the health care system turned to Vizient. To get started, the system developed a synchronized vendor contract and item master repository that identified corresponding contract pricing structures based on industry benchmarks. Then, experts from Vizient worked with the system’s contract administrator to get the data into a more robust state, leading to better data for comparison.
The team used the improved data to compile a physician presentation that displayed cost and supply data by system, physician, procedure, product category and utilization. This allowed physicians to see how they compared to their peers, and the health care system to see where it stood in the marketplace.
Two senior consultants from Vizient presented the data to physicians. The chief supply chain officer notes that, for physicians, it’s not just the hard information itself that matters—it’s the delivery and packaging of that information. He feels that Vizient positioned the data in a way that the physicians couldn’t refute it. At the same time, they respected the delivery of it.
Only one surgeon remained unconvinced. Vizient consultants were able to break down the bias in his data, showing him in a positive, technical, and professional way how he could apply those principles differently, resulting in a better outcome. After that, the surgeon was ready to move forward.
Using the 5th percentile as a primary benchmark, the system connected physician input and utilization data with current cost-per-case components. They were then ready to negotiate with vendors using a price-leveling strategy. Vizient helped the supply chain team move to a new level of confidence and told vendors that, if they wanted to do business with the system, they needed to work with the 5th percentile level.
The chief supply officer feels that the vendors took the price-leveling mandate most seriously when they heard the numbers directly from the physicians. A physician spoke to vendors on the importance of compliance and meeting the price points, and most were compliant from that point on.
To date, the health care system has achieved $1.2 million in projected spine savings—more than double the goal established by Vizient—and $950,000 in projected total joint savings, which quickly approached the goal of $1 million. The health system also negotiated a total joint individual agreement, saving an additional $200,000 and bringing total joint savings to $1.1 million. The chief supply officer feels that Vizient’s process was integral to success, moving the health care system from pushing things at physicians to arming them with the data to work collaboratively and become true facilitators.
The health care system and Vizient continue to work together, now focusing on improvements to the trauma category.