Building tomorrow's supply chain

at UMass Memorial Health Care

The health care industry is constantly changing. As more systems become digitized and connected, more ways to achieve value-based care become possible. Even when it comes to supply chain.

For UMass Memorial, change was especially urgent. How do you turn yesterday’s supply chain into today’s value driver?

See how we partnered with UMass Memorial to modernize their entire supply chain, saving $23.7 million in just three years.

UMass Memorial Health Care

  • Worcester, Massachusetts
  • 1,125 beds
  • 1,700 physicians on its active medical staff
  • 3,000 registered nurses
  • 13,000 employees

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When slow-but-steady change just isn’t enough

Being one of Massachusetts' top public hospitals comes with plenty of public scrutiny. So when UMass Memorial faced growing deficits, it was more than just a concern for administrators. The whole community was watching their every move.

From shrinking reimbursements, to daily regulatory changes, to rising labor costs, they confronted many challenges that are common across the industry. Understandably, staff was often too overwhelmed with the daily grind to take on farsighted efforts.

Change needed to start somewhere, and leadership quickly honed in on supply chain. Supply costs accounted for 35%-40% of the system's total operating expenses. Systems were outdated and siloed. Quick fixes were needed — but so was large-scale transformation. UMass Memorial's supply chain had to become a strategic value driver, and it couldn't happen soon enough.

We knew that with the right focus we could reduce costs and improve efficiency.
Therese DayChief Financial Officer

Transforming the supply chain top to bottom

Both Eric Dickson, president and CEO, and Sergio Melgar, executive vice president and chief financial officer, assumed their roles with a strong desire to go beyond day-to-day problem-solving, and to start creating tomorrow's supply chain system.

The way forward was unclear. Build up their supply chain capabilities internally? Or partner with an organization that could bring  a fresh approach? And if so, which one?

Ultimately, leadership decided a partner with expertise in implementation and accountability was the best way to go. On Jan. 1, 2016, UMass Memorial began a five-year engagement with Vizient® to manage its supply chain operations and help transform the department to achieve future success.

"Our leadership had the sincere desire to see this supply chain organization not just survive but rise to the role it was meant to play within UMass Memorial as a whole — as a strategic partner, a value driver and an efficient, best-in-class supply chain," said Melgar.

Vizient has a long history with UMass Memorial and was a logical starting point for consideration in the selection process.
Sergio MelgarExecutive Vice President and Chief Financial Officer

Going beyond tactical solutions

All Vizient engagements begin with an evaluation of the current supply chain operational strategy to ensure that it aligns with the health system's overall strategy.

"Many supply chain leaders overlook this critical step when building the supply chain improvement plan. If they overlook this critical step, they often mistake a set of initiatives or a tactical to-do list for a strategy. They are not the same," said Ed Bonetti, vice president of supply chain. "The strategy provides the foundation and the compass to guide your initiatives."

This crucial starting point ensured that both short- and long-term improvements would build toward the same sustainable goal.

Data you can count on

Unreliable data creates a ripple effect across your entire supply chain. Even your best efforts to manage costs may be for naught if you don't have true baselines to work from.

Approximately 95% of an average health system's purchase order (PO) lines are linked to product items managed in the item master file. In an ideal world, that item master data is unfailingly accurate. For UMass Memorial, their data was anything but. When the engagement began, it was found to be correct only 59% of the time, causing a major headache for supply chain staff.

The transformation team ensured that each item file contained the correct contract price, reducing PO-to-invoice errors. They also established a process for adding item file data to improve overall item file data integrity.

Within two years, item master data achieved 98% accuracy, saving $12.41 per inaccurate item record.

If you’re presenting financial information and/or engaging clinicians regarding product selection, your clinical comparisons must be clean and able to withstand scrutiny.
Ed BonettiVice President of Supply Chain

From old-fashioned to forward-thinking

Legacy systems can be hard to leave behind. Processes solidify around the systems staff are most used to — not the most advanced. Consider fax machines. How many are still in your average hospital? Even in 2016, only about half of UMass Memorial's purchasing transactions were automated. Roughly 46% of transactions were still done the old-fashioned way, through fax or phone call.

Not only did this drain staff members’ time, it also increased the chances for errors in every transaction.

Electronic data interchange (EDI) brings supply chain transactions into today’s world. The team implemented several Vizient solutions, including eCommerce Exchange and Transaction Management, both of which not only modernized UMass Memorial’s connections between providers and suppliers, but also helped to automate POs, PO acknowledgments and invoices. By June 2018, 82% of all purchases were automated.

The upshot? More reliable transactions, at much greater speed, saving approximately $3 per PO. Most important, staff can dedicate less time to faxing, and more time to adding value.

More accuracy, more opportunity

The use of the eCommerce Exchange platform has created other possibilities. For example, with Transaction Management, Vizient analysts can now work as an extension of the UMass Memorial purchasing department.

They have also helped standardize business practices, and coordinate the resolution of PO-to-invoice price discrepancies. This means UMass Memorial can conduct EDI with everyone, even smaller suppliers that are not EDI-capable. The savings add up to $8 per discrepant PO line.

Perhaps the most important statistic is total price accuracy — the match rate between PO and invoice. In March 2015, it was 68%. By June 2018, that number rose to an astounding 92%.

 

Achieving clinical-supply integration

Modernization is an essential step. But an even greater stride is rethinking the relationship between clinicians and supply chain operations.

Time was, supply chain staff made their decisions and clinicians made theirs — without much strategic coordination. But when they work together to weigh costs against outcomes, breakthroughs become possible. For example, if a $3 suture performs as well as an $8 suture, who benefits from choosing the more expensive option?

Physician leadership's commitment has been pivotal. Demetrius Litwin, MD, chair, department of surgery, led standardization efforts that ultimately delivered more than $3 million in contract savings for new operating room surgical towers, endomechanical devices and surgical products.

In the perioperative/heart and vascular areas, clinicians took part in product selection, evaluation and contracting. This ensured savings were realized, with no compromise on the quality of supplies. With Vizient guidance, UMass Memorial consolidated to two supplier contracts each for total joint and trauma products. The standardization team also supported a multiyear cardiology room upgrade project, making it possible to standardize vendors, equipment and technologies.

The perioperative team worked through the steps of the newly implemented value analysis process, resulting in both a substantial savings, and surgeons and clinicians who were extremely satisfied with the high-quality products we chose.
Demetrius Litwin, MDChair, Department of Surgery

A best-in-class supply chain

The transformation continues, but the results have already exceeded expectations. The projected savings of $23 million over five years were met, and surpassed, in just three.

UMass Memorial now has a fully embedded supply chain leader who operates at an enterprise level within the organization, driving change forward. Their supply chain, and their system as a whole, are better positioned for the major challenges facing health care. What looked daunting three years ago, now looks like a model for the industry.

 

 

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