Building tomorrow's supply chain

The healthcare 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 management.

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 program, saving $23.7 million in just three years.

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 Systems were outdated and siloed.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 program had to become a strategic value driver, and it couldn't happen soon enough.

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.

Unreliable data creates a ripple effect across your entire healthcare supply program. 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 management 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.

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.