Supply Chain Organization

1. Supply Chain Organization Overview: Past, Present and Future Richard Bagley Director Strategic Sourcing

2. Intermountain Healthcare Overview Hospitals • Since 1975 • 22 hospitals (36% of Hospitals) • 2,790 licensed beds SelectHealth • Since 1983 • Health plans (23% of Utah Insurance) • 630,000 members • Since 1994 • 1,100 employed physicians • 150 clinics Medical Group • Based in SLC, UT • 34,000 employees • $4.5B revenues • $5B assets • AA+ Standard & Poor’s Aa1 Moody’s Clinical Programs • Since 1997 • 9 key service lines

3. What does the world look like in Supply Chain?

5. Critical Success Factors Supply chain became a strategic focus by senior leadership $3 Million initially investment and 25 new FTEs – skilled & talented Centralized buyers and reporting relationships of the warehouse Added couriers, travel services, publishing and central laundry Earned trust of stakeholders – management & clinicians Implemented effective strategies Deliver on commitments - Savings, value, efficiency & more “Skate to the puck” Our Supply Chain is One of the Industry’s Best • Notable Recognitions • Garter’s 4th Best Supply Chain in Healthcare • 2013 AHRMM Innovation Award • ECRI Healthcare Supply Chain Achievement Award • IntelliCentric’s 5-Rings Award

6. SCO’s Strategic Imperatives

7. 7 Things You Need to Know About the Healthcare Supply Chain • Logistics costs in healthcare are more than 10X the costs of the retail industry • The most expensive and high risk items often have the least control • Personal preference drives many product decisions • Healthcare outsources less than most other industries • Healthcare industry has the lowest level of trust between buyers and suppliers • Supply chain is still in the basement of many hospitals (literally) – even though non-labor expenses are approaching 50% of total costs • Data standards, transparency, traceability…oh my!

8. Our Operating Model Goods & Services P A T I E N T S SUPPLIER NETWORK SUPPLY CHAIN PROCESSES CLINICAL CARE NETWORK Source Buy Deliver

9. Source (Procurement) • Drive value up and cost down on $1.4B in spend • Facilitate governance to select best projects and manage prioritization of work • Facilitate the process to select best supplier(s) and products • Segment and manage suppliers we have sourced • Manage catalog of products/services/equipment • Manage category plans (spend analysis, opportunity assessment and calendar of events) • Manage supplier contracts (820 new agreements in 2013 with 5400+ active agreements)

10. Sourcing Governance Framework

11. Strategic Sourcing Methodology

12. Supplier Segmentation 10 Strategic Growth Strategic Impact Potential Maintain Exit 0 10 Supplier Performance

13. Buy (Purchasing) Manage the daily transactions to ensure right product/service/software/equipment is at the right price at the right location Support 22 hospitals and 186 clinics centrally with team of 30 buyers Buying team is centralized and co-located with Accounts Payable to work together Process 1.2M PO lines a year 3 way matching and moving towards perfect order (touchless)

14. Deliver (Logistics) • Ensure employees and clinicians have the products they need, when and where they need them • We do this by utilizing the best practices in warehousing, transportation, automated materials handling equipment, and inventory optimization. • This reduces variation and waste in our supply chain, and improves service to the end-users.

15. Logistics’ fundamental Role = Balance

16. Supply Chain Center Overview • Opened - October Q3 2012 – LEED Certified • 327,000 sqft – Distribution Center – and much, much more • 151k sqftWarehouse space (area of three football fields) • 111k sqftOffice and logistics management space • 65k sqft Ancillary Services space

17. What is the Supply Chain Center?So much more than a self-distribution center! • Receiving • Distribution • Cross-docking • Bulk Storage • Pick/Pack/Ship • Courier Services • Heavy Fleet Services • Equipment Logistics • Bulk Storage • Asset Recovery • Emergency Preparedness • Production Print Center • Design Services • Print Fulfillment • Imaging Equipment Services • Pharmacy Services • Retail Central Fill • Compounding • Unit Dose Packaging • Inventory Optimization • Bulk Buy Support • IS Asset Management Service • Computer Imaging • MFD Deployment • Asset Disposition Logistics Center Ancillary Services SCO Leadership & Administration • Everything Supply Chain co-located here at the SCC • Solutions, Sourcing, Contracting, Analytics, Systems, Purchasing, Accounts Payable, Logistics plus 12-15 programs • Professional and technology-enabled meeting spaces • Spaces designed to facilitate collaboration • Heath & Wellness Center (for use by all SCO employees) • Room for expansion

18. Why is this Significant? Demonstration that Intermountain senior leadership understands the critical importance of supply chain as a key corporate strategy Everything Supply Chain resides at our Supply Chain Center!

19. Supply Chain Center Objectives of Logistics Center Lower Unit Costs Lower Transportation Costs Streamlined Processes Productivity Gains Better Use of Hospital Space New Revenue from Third Parties Enables Product Standardization Enables Sustainability Streamlined Data Exchange Enhanced Responsiveness Improved Fill Rates Value-Added Ancillary Services Supports Standardization Deliver in Right Unit of Measure Single Shipment to Each Location One-Stop-Shop Customer Service Emergency Preparedness Reduce Product Variation Expiration Date Mgmt Improved Traceability Recall Management Enhanced Controls Mitigate Product Shortages Lower Cost Improve Service Reduce Risk

20. Legacy Distribution Model Hospital 1 Med/Surg Mfg. Med/Surg Dist. Hospital 2 Pharma Mfg. Pharma Dist. Lab Mfg. Lab Dist. Hospital 3 Radiology Dist. Film Mfg. Hospitals 4 - 23 Dietary Mfg. Dietary Dist. Clinics 1 - 150 Home Health Direct Manufacturers Example: Total Joints Retail Pharma Central Lab Surgical Center Central Office

21. SCC-Enabled Distribution Model Supply Chain Center Consolidated Transportation Logistics Center Hospital 1 Mfg. Direct Med/Surg Mfg. Hospital 2 Pharma Mfg. Hospital 3 Lab Mfg. Hospitals 4 - 23 Film Mfg. Clinics 1 - 150 Dietary Mfg. Home Health Linen Mfg. Retail Pharma Ancillary Services Pharmacy Central Lab Distributors IT Asset Management Surgical Center Production Print Equipment Services Central Office

22. Supply Chain Center Location….Location ….Location

23. The Supply Chain Center is More than a Warehouse It is also an Enabler of other Non-Logistics Benefits • Improved employee engagement and collaboration throughout the SCO • Consolidation of ancillary services, which leverage logistics platform • Value-generating direct relationships with suppliers • Improved transparency throughout value chain • Technology-enabled data synchronization and exchange • Process effectiveness and efficiency • Reduced Variation = Quality Improvement = Cost Improvement • Enables clinicians to focus more time on clinical care • Enables SCO to invest more time on other supply chains • Pharmacy • OR & Cath Lab • Environmental stewardship

24. Questions?