Supply Chain Best Practices Presented to Society for Arkansas Healthcare

1. Supply Chain Best Practices Presented to Society for Arkansas Healthcare Purchasing and Materials Management Fall Conference October 18th, 2013

2. DEFINITION What is a Best Practice?

3. SUPPLY CHAIN MENTALITY • Current Practice: • Manage Materials • Best Practice: • Manage the Supply Chain continuum • Materials, expenses and resources • Rationale: • Establish strategic direction • Build effective overall controls

4. SUPPLY CHAIN INCLUDES • Internal process from need to disposal • External process from manufacture to payment • Includes product selection and use • Includes services as well as products • Includes labor to effect the whole process

5. BECOMING MORE STRATEGIC SUPPLY CHAIN PERSPECTIVE • Manage Expenses (Dollars and People) • Work with Supply Chain Partners • Make Total Cost Decisions • Create Internal Alliances • Integrate Policies and Procedures • Focus on Interdepartmental Teams & Process Flow • Start with the basics and develop a plan

6. DON’T FORGET THE BASICS • Current Practice: • Allowing routine operations to be on cruise control and run themselves • Best Practice: • Making sure that the nuts and bolts are being checked on a regular basis • Rationale: • Little problems can become big issues • Customers have long memories

7. DON’T FORGET THE BASICS • View your operations through the customer: • Visit others in their own departments • Review par locations quarterly • Tour your own warehouse • Walk in your employees shoes • Monitor key indicators such as: stock outs & pickup requests

8. SUPPORTING ALL ENTITIES • Current Practice: • Materials supports hospital • Best Practice: • Supply Chain supports all entities like LTC, ASC, Satellite locations, Home Care etc. • Rationale: • Adds value to all • Process & product standardization

9. TRACKING HOSPITAL INDICATORS • Current Practice: • Inconsistent supply cost tracking • Best Practice: • Supply Chain tracks and reports organization-wide • Rationale: • Supply Chain takes the lead • Will show trends that can be addressed

10. SOME COMMON MEASURES • Supply Cost/Net Rev • Supply Cost/Total Cost • Supply Cost per Adj Adm • Supply Cost per APD • Supply cost per case • Inventory turnover • Inventory accuracy • Invoice discrepancies • Fill rates • Case cart accuracy

11. SERVICES THROUGH Supply Chain • Current Practice: • Materials purchases supplies but services purchased directly by depts • Best Practice: • All services go through supply chain • Rationale: • Provides missing scrutiny • Establish competition • Significant savings possibilities

12. SOME OFTEN NEGLECTED SERVICES • Transcription • Banking services • Insurance • Landscaping • Cleaning services (outside buildings) • Dialysis • Mobile imaging services • Parking

13. ESTABLISH HOSP CONTRACTUAL TERMS • Current Practice: • Company submits contract with their terms and conditions • Best Practice: • Establish Hospital specific Ts & Cs • Becomes basis for all bids and RFPs • Rationale: • Hospital takes controlof the process • Results in more favorable framework

14. ESTABLISH HOSP CONTRACTUAL TERMS • Gain leverage by presenting your terms first • Establish control from the start • Eliminate undesirable clauses • Create consistency in all contracts • Reduce the overall contract time process • Avoid potential legal involvement and fees

15. Reduce/Eliminate Pat Care Equip Losses • Current Practice: • Equipment dispatched to floors or units maintain own equipment • Limited or No tracking controls • Best Practice: • Establish and centralize control • Involve Clinicians in process • Rationale: • Decrease losses / Decrease rentals • Replacement cost avoidance

16. Reduce/Eliminate Pat Care Equip Losses • Establish formal policy & procedures • Control and account for all equipment • Utilize RFID / Bar Code Tracking • Include regular BioMed check-ups • Evaluate 3rd Party Providers L

17. INTEGRATED CASE CARTS • Current Practice: • Fragmented and error prone • Best Practice: • Integrate with MM • Utilize available technology • Rationale: • Inventory & Labor savings • “Right” people performing tasks • Reduction in errors

18. INTEGRATED CASE CARTS • Outcomes: • Preference cards more accurate • Minimal errors in case items • Minimal RN time • Consistent stock replenishment • Automated patient billing • Accurate patient billing • Data for standardization/update

19. INTEGRATED CASE CARTS • Savings: • RN time (pulling, ordering, maintaining preference cards) • Materials time (restocking) •  Supply cost (less waste) •  Inventory cost •  Case cost (standardization) • Revenue

20. LIMIT CLINICIAN INVOLVEMENT • Current Practice: • Nurses spend too much time on supply activities • Best Practice: • Re-establish clear supply chain control over floor stock supply areas • Rationale: • Increase nursing patient care time and materials management credibility

21. Limit Clinician Involvement in Supplies • Establish regular communication with clinicians • Match expectations with realities • Publish formal schedule for restocking areas • Arrange products in treatment groups • Locate high use products closer to user • Increase visibility of staff and self • Communicate some more M

22. ESTABLISH EXPIRATION REVIEW • Current Practice: • Products pulled when expired • Best Practice: • Manage proactively by schedule • Rotate and shift near date to higher use department • Rationale: • Improves patient safety • Build effective overall controls • Creates formal tracking process

23. OPTIMIZE PAR INVENTORIES • Current Practice: • Pars set and rarely reviewed • Increases additions by user dept. • Best Practice: • Frequent reviews and adjustments based on usage data • Rationale: • Clinicians have what they really need • Pars easier to maintain L

24. Establish Linen/Textile Guidelines • Current Practice: • No Formal Linen Controls • Best Practice: • Establish controls that monitor and educate the use of linens and textiles • Rationale: • Improves outcomes • Build effective overall controls

25. Establish Textile Guidelines • Establish formal policy • Set quality standards • Create data driven PAR levels • Develop linen change policy • Control / educate linen usage • Control use and dispensing of scrubs M

26. CHALLENGING PRICE CHANGES • Current Practice: • Most price change notifications are accepted • Best Practice: • Challenge virtually all • Require rationale/reasons • Rationale: • Many price increases can be eliminated or reduced if you just question

27. ASSET RECOVERY PROGRAM • Current Practice: • Stuff Piles Up • Best Practice: • Implement a program to properly manage excess equipment & supplies • Involve all key departments • Rationale: • Become a proactive environmental steward

28. ASSET RECOVERY PROGRAM Supply Chain is in the best position to be the custodian: • Policy needs to be in place and supported by all • Assets must be taken off books • Reuse, sell, recycle, dispose • Supplies are often needed by charitable ventures • One hospital’s junk is someone else’s treasure

29. ESTABLISH STRATEGIC SOURCING • Current Practice: • Issue a RFP or rely on GPO pricing • Best Practice: • Key products and services are sourced directly with suppliers • Rationale: • Negotiate from a position of strength • Market knowledge • Physician support • Commitment brings best pricing

30. STRATEGIC SOURCING PROGRAM Traditional Contracting Analyze Spend Analyze Category Analyze Market Develop Strategy Manage Negotiations Award & Contract Implement Strategy Strategic Sourcing

31. STRATEGIC SOURCING PROGRAM • Physicians are able to use their preferred items thus they are more likely to be on your side • Many supplier tactics are neutralized • Negotiations are driven by facts and data • Establish target pricing based on information and commitment • Contracts eliminate middlemen and rebates P

32. ESTABLISH VALUE ANALYSIS • Current Practice: • Little review of new purchases • No review or existing products • Best Practice: • Establish Formal Value Analysis • Rationale: • Reduces product variation • Identifies hidden savings • Establishes a savings culture

33. Step 5 Implementation Step 4 Select Best Option Step 3 Identify Alternatives POLICIES Education Step 2 Assess Practices Step 1 Define Need Facilitation Policies and Procedures VALUE ANALYSIS THE STEPS

34. FIVE STEPS OF VALUE ANALYSIS Step 5 Implement Choice Step 4 Choose Best Alternative Step 3 Identify & Assess Alternatives Step 2 Assess Current Practices Step 1 Define Need

35. Step 1 Define Need VALUE ANALYSIS TOOLS & TECHNIQUES • Asking Probing & Open Ended Questions

36. Needs versus Wants • Name the product, service, or procedure • Identify the functional elements • Determine specifications & requirements • Assess the necessity of what is being considered • What is the real reason for the request

37. VALUE ANALYSIS TOOLS & TECHNIQUES Step 2 Assess Current Practices Step 1

38. Identify what is currently in use • Determine benefits of current use • What are disadvantages • Estimate cost impact of current use • Differentiate necessary and unnecessary features • Assess the cost effectiveness of current practice

39. VALUE ANALYSIS TOOLS & TECHNIQUES Step 3 Identify & Assess Alternatives Step 2 Step 1

40. Identify and Assess Alternatives • Alternative ways to meet the need • Employ creative thinking • How do others meet the need • Conduct trials of products or services • Track the impact of alternatives versus current practice

41. VALUE ANALYSIS TOOLS & TECHNIQUES Step 4 Choose Best Alternative Step 3 Step 2 Step 1

42. Identify and Assess Alternatives • Evaluate the benefits, cost and disadvantages of alternatives • Which alternative meets the need and yields the most financial benefit • No negative impact on quality

43. Implementation and Monitoring • Value Analysis Worksheet & Action Plan • Communication to all affected areas • Utilize Clinical Champion • Involvement and commitment of Team • Documentation to track Savings • Quantification and monitoring of results

44. KNOW WHAT CAN GO WRONG BARRIERS AND PITFALLS • Lack of understanding and acceptance • Lack of support • The process is static • Resistance to change surfaces • Process perceived as not concerned with quality • Physicians not involved

45. Supply Chain Best Practices QUESTIONS???