Mayo Clinic Supply Chain Management Performance Consulting Team

1. Mayo Clinic Supply Chain Management Performance Consulting Team Presented by: Carmel Porter, Senior Analyst Supply Chain Management Performance Consulting

2. Mayo Clinic: Group Practices in Rochester, Florida, and Arizonaand the Mayo Clinic Health System FLORIDA ROCHESTER ARIZONA

3. Mayo ClinicOrganizational and Cultural Factors • Mayo is a physician led organization. There is a clinical voice in decisions. • Physician/administrators/allied health are on salary (no bonuses on production or financial performance). • Financial targets are developed by physician and administrative leaders. • There is a strong alignment of mission and goals including financial performance and supply expense management.

4. Mayo ClinicOrganizational and Cultural Factors Mayo’s Mission • To inspire hope and contribute to health and well-being by providing the best care to every patient through integrated clinical practice, education and research. Mayo’s Primary Value • The needs of the patient come first.

5. Mayo ClinicSupply Chain Management Sourcing & Contracting Inventory Management Contract Administration Customer Service Procurement Disbursements Logistics • Communication • Opportunity Identification • Issue Resolution • Product Recall • Value Analysis • Dept. Resources • Testing / Trials • Best Practice • New Technologies • Sourcing • Team Co-Lead • RFP / RFQ • Negotiations • Approvals • Issue Resolution • Filing • Analysis • Rebate Collection • Ongoing Management • Accounts Payable • Reimbursements • Travel Management. • Storage • Inventory • Picking • Staging • Shipping • Receiving • Stocking • Replenishment • Requisitioning • Procurement Transactions How is the supply chain organized? Product Standardization & Utilization SCM Performance Consulting • We provide consultative integration between all Supply Chain operations to offer a consolidated solution for our customers. • We develop and maintain financial reporting tools and metrics to assess customer supply and service expense performance and confirm progress toward set goals. • We initiate and facilitate operational process improvements to control supply and service expense and increase the value of services delivered to Mayo patients. Supply Chain Management Enterprise Responsibility Site Based Supply Chain Operations Responsibility

6. Mayo Clinic Supply Chain Management Performance Consulting Team History • Formed 10 years ago as Materials Management Financial Analysis • Address identified need for better supply & service management • Since formation, customer support as well as breadth of roles and responsibilities has expanded

7. Performance Consulting Team Guiding Principles Mission Mayo Supply Chain Performance Consulting develops and implements strategies to drive improvements in Supply Expense Management. The Performance Consulting Team will provide coordination and delivery of Mayo Supply Chain solutions in order to attain specific and measurable quality and cost outcomes for our customers. Vision Provide world class supply chain analysis and consultative support for all aspects of the supply chain process, by focusing on analytics, auditable controls, and optimization through the utilization of an integrated support team. Purpose Performance Consulting is the process by which we can work with Physicians, Administrative Leadership and others to identify and achieve performance excellence linked to the expense reduction goals of Mayo.

8. Performance Consulting TeamObjectives • Commit to consistent and active participation to enable enterprise-wide collaboration, decision-making, implementation and compliance • Establish a framework to share best practices, process improvements, patient safety, compliance and risk reduction • Optimize the standardization of products/devices and develop the creation of a supply formulary for departments across the enterprise • Reduce the acquisition cost of products and devices and increase overall value • Assess, monitor and manage variation among clinicians on a cost/case or procedural basis

9. Performance Consulting TeamObjectives • Provide Support of Mayo Clinic contracting philosophy and process - Monitor on/off contract spend and correct to ensure compliance - Analysis and support -make versus buy decisions • Manage assessment and availability of new products/devices • Manage and analyze non-labor spend versus plan or budget

10. Performance Consulting Role and Continuum of Services Inventory Technology Measurements Customer Service Performance Consulting Clinical Practice Patient Care Supply Chain Analytical Support Process Standardization Utilization Expense Management • Supply Chain Consultation / Customer Integration • Metrics Development • Analytical Support • Project Management

11. Performance Consulting Services: Supply Chain Consultation / Customer Integration • Act as liaison to high-spend specialty practice areas • Assist with contract communications and optimization • Perform analysis to support specific supply & service management initiatives • Develop dashboards and reports • Provide analytical and facilitation support to Supply & Technology Teams and Specialty Councils • Educate on Supply Chain Policies and Procedures

12. Integrated Team Coordination • Direct support of high-spend specialty practice departments and non-labor services: • Surgery Information Technology • Radiology Capital Equipment Service and • CV Maintenance • GI Purchased Services • Lab • Team covers approximately 51% of Patient Care supply and service spend

13. Integrated Processes • Clinical Practice Committee • Specialty Councils • Manage To Reimbursement Councils • Supply and Technology Teams • Standardized Analytics • Contract Management • Inventory Management

14. Integrated Structures

15. Committee Participation New Product / Technology Committees • Financial analysis comparing products & equipment • Contract review of current & new • Case cost impact • SCM consultation on best business opportunity Department / Finance Committees • Presentation of metrics • Strategies around supply expense • Coordination of finance and department activities Operational Supply Committees • Coordination of operational activities • Inventory management best practices • Hot topic forum

16. Supply and Technology Teams • Physician Led • Manages new technology and supplies • Standardization of current supplies • Supports product conversions • Supports the Enterprise Value Analysis Process • Membership includes: • Supply Chain Management • Procedural Areas • Sourcing & Contracting • Revenue Cycle • Finance

17. Supply and Technology Team Guidelines • Must reduce net episode of care costs • Must replace an existing product • Must improve patient care by a measurable degree • Must fill a critical need for which there is no substitute • Validation of claims • Saves time • Reduces LOS • Data driven

18. New Product / Technology CommitteesProcess Flow Example - Surgery

19. Specialty Councils Support • DLMP • Specialty Council Support: Laboratory Medicine Specialty Council • Subgroup: Enterprise Laboratory Medicine Supply Chain Leadership Team (LMSLT) • Surgery • Specialty Council Support: Enterprise Surgical and Procedural Committee • Subgroup: Surgical/Supply Chain Sub-Committee • Radiology • Specialty Council Support: Enterprise Radiology Specialty Council • Subgroup: Enterprise Radiology Equipment Supplies & Contracts Subcommittee (ESCS) • CV • Specialty Council Support: CV Specialty Council • Subgroup: Enterprise CV Supply and Equipment Subcommittee • GI • Specialty Council Support: GI Specialty Council • Subgroup: Enterprise GI Supply and Technology Team (GISTT)

20. Specialty Council Support Enterprise Supply Dashboard (Sample)

21. Specialty Council Support – Work Plan • SCMPC coordinates regular updates of projects by Specialty. • Work Plan includes: • Initiative Name • Status • Impacted Sites • Primary Department • Initiative Type (contracting, utilization, etc.) • Key Contacts

22. Managing to Reimbursement Examples

23. MTR

24. Performance Consulting Services:Metrics Development • SCMPC provides customers with actionable financial metrics relating to supply expense and inventory management.

25. Collaborating on Strategy Dashboards Operating Unit Trends Opportunity Analysis Operations Departmental Management Executive Leadership

26. Performance ConsultingMonitoring Stage Metrics All data contained in the following exhibits is for presentation purposes only and is not an indicator of actual financial or operational performance.

27. Enterprise Supply Expense • Compares monthly and year to date supply expense on a year to year basis • Used to identify significant changes in supply expense requiring more detailed investigation

28. Supply Expense Per Volume • Looks at supply expense per volume or as a percentage of revenue • Used to determine if supply expense is in proportion to volume and/or revenue

29. Supplies as a % of Controllable Spending • Looks at percentage of direct expense made up by supply expense • Used to identify significant changes in direct expense due to supplies

30. Supplies and Services by Category

31. Performance ConsultingDrill Down Metrics All data contained in the following exhibits is for presentation purposes only and is not an indicator of actual financial or operational performance.

32. Supply Expense by Department SCMPC supports the Department of Medicine, Radiology, Surgery and Lab across the three sites, which comprises 51% of patient care supply expense

33. Departmental Trending Supply Expense by Department Other Relevant Supply Ratios • Net Medical Service Revenue (NMSR) • Patient Care Supplies as a % of NMSR • Gross Medical Service Revenue (GMSR) • Patient Care Supplies as a % of GMSR • Total Operating Expense (TOE) • Patient Cares Supplies as a % of TOE

34. Performance ConsultingOperational Metrics All data contained in the following exhibits is for presentation purposes only and is not an indicator of actual financial or operational performance.

35. Item number Utilization and Contract Compliance • Looks at percentage of supply dollars tied to a contract or using a Mayo item number • Used to identify contracting opportunities

36. Contract Compliance by Vendor • Shows vendor spend on and off contract • Used to identify potential contract compliance issues

37. Physician Variation/Standardization • Case Cost Analysis • Identify standardization opportunities between physicians, procedures, and sites • Efficiencies in case costs and item utilization • Benchmark against other Mayo sites All data contained above is for presentation purposes only and is not an indicator of actual performance.

38. Physician Variation/ Standardization • Item Expense Analysis • Identify deviations between physicians • Support compliance with existing contracts • Actionable items for practice / physicians All data contained above is for presentation purposes only and is not an indicator of actual performance.

39. Example of Customer Opportunity Analysis(Reprocessing) All data contained above is for presentation purposes only and is not an indicator of actual performance.

40. Performance Consulting Services:Analytical Support Customized Solutions and Tools for: Inventory Policies, Procedures, & Controls Process Flows Customer New Product and Technology Committees Application of Economic Order Quantity (EOQ) Lease vs. Buy Analysis Opportunity Analysis for Supplies & Services (i.e. Reprocessing, Sequestering, Service Agreements Analysis) Vendor Managed Inventory & Sequestering Product Management (i.e. product utilization and standardization)

41. Tool Development Principles • Reusable – build once, use multiple times • Automated – minimize manual effort • Targeted – built to serve a specific purpose • Simple – maximize clarity and ease of use • Actionable – provides direction, not just information • Standard – propagate enterprise wide

42. Performance Consulting Toolbox Expense Management • Expense Target Support Model • Department Dashboard • Lab Expense Reduction Resources Budgeting and Forecasting • Top Level Executive Reporting Package • Where’s the Money? • Supplies and Services Budget Impact Forecast Model • SCM Staffing Level Analysis • SCM Expense Forecast Model • Value/Initiative Tracking Inventory Optimization • Velocity Evaluation Tool (iVET) • Stocking Level Optimization Tool (iSLOT) Supply/Service Data Mining & Analysis • AP Database • Office Supplies Database • Supply Chain Analytics Tools Standardization/Utilization of Supplies • “Best Value” Product Matrix • Supply & Equipment Redistribution Website • Contract Optimization Summary Internal Controls • Segregation of Duties Matrix • Inventory Reserve

43. Operational Support – Inventory Management • SCMPC has developed and continues to develop a variety of tools to assist their customers with successful inventory management in order to reduce and avoid: • Excess inventory • Increased carrying costs • Insufficient inventory/stock outs • Obsolete inventory • Wasted inventory • Inaccurate supply on hand • Inventory adjustments

44. Operational Support – Inventory Management SCMPC tools for successful inventory management include, but are not limited to: Use of available inventory systems – manual or automated Development of inventory management policies and procedures Inventory analysis including optimal inventory level setting via use of the Economic Re-order quantity (EOQ) technique Metric to control and maintain optimal levels

45. Inventory Metrics Compares inventory value over time Increasing trends may indicate excess inventory or inventory with no usage Decreasing trends may indicate improved inventory turns

46. Inventory Metrics Compares inventory value of owned and consigned products over time • Used to monitor proper mix of inventory types

47. Inventory Metrics Inventory turnover rate compares amount of inventory on hand with amount used Higher inventory turns are usually preferred Decreasing trends should be investigated

48. Inventory Metrics Shows stagnant inventory Used to identify opportunities to remove unused inventory

49. Performance Consulting Services:Project Management Customer Driven • Capital Budgeting / Coordination • Specials Reduction & Conversions • Reprocessing • Savings & Standardization Opportunities • Enterprise coordination • Waste reduction opportunities • Inventory management opportunities • Equipment lease vs. buy analysis • Service agreement analysis and consultation • Sequestering reagents • New Technology Installation Efforts

50. Performance Consulting Services:Project Management Supply Chain Driven • Product Categorization • Par-Ex implementation / optimization • Value stream mapping – Contract cradle to grave • Customer focused contract compliance • Product usage analysis • Custom initiatives (i.e. freight, moving analysis, etc.)