AHRMM Update WSHMMA, April 2014

1. AHRMM UpdateWSHMMA, April 2014

2. Agenda • CQO: The Next Phase • Educational Offerings • Resources • Career Planning • Industry Initiatives and Advocacy • Comments, Questions, Feedback

3. CQO: a recap In 2013, AHRMM launched the CQO Movement, a new way of approaching supply chain. Under the CQO movement, the supply chain can no longer focus exclusively on price, but rather the combination of product cost, the quality of care delivered, and the reimbursement outcomes to support healthcare’s new value-based models. 3

4. CQO: a new way of decision-making… Cost:expenditures as they relate to supplies, services, and other areas in supply chain control Quality: patient-centered care aimed at achieving the best possible clinical outcomes Outcomes: financial reimbursement driven by outstanding clinician care at the appropriate cost 4

5. …has become healthcare’s new “buzzword” 5

6. So is CQO the most important supply chain issue? No. CQO teaches us that “supply chain issues” no longer exist. In the new world of healthcare, supply chain ties to: • Patient care • Profit margins • Quality control CQO isn’t a supply chain issue. It’s a healthcare issue.

7. CQO Methodology

8. CQO Methodologies, Stages 1 & 2

9. CQO Methodologies, Stages 3 & 4

10. CQO Methodologies, Stage 5

11. New Metrics CQO requires new metrics to transition from cost-based measurement to value-based measurement… “Supply cost” per limited revenue categories are too narrow. 11

12. CQO Metrics: Managing to Value Value Determines Reimbursement, e.g., Value-based Purchasing Score Core Measures (70%) HCAHPS (30%) Your VBP Performance Score Core Measures becoming more supply dependent • Pressure ulcers stages III and IV • Vascular catheter-associated infections • Catheter-associated urinary tract infects 12

13. When Supply Chain Owns the CQO Intersection: Case Study 1

14. CQO Asks: How Do We Reduce Needlestick Injuries in Healthcare? • >800,000/yr in US • Risk of blood borne pathogens • Education only means of addressing

15. CQO Asks: How Do We Reduce Needlestick Injuries in Healthcare? • New syringes with improved safety mechanisms

16. CQO Asks: What is Unique About its Clinical Performance to Justify its Cost?

17. Safety Syringes • 1 Needlestick injury/6,000 injections • Average cost of testing/treatment after injury equals $3,000 • Additional costs of treatment can add up to hundreds of thousands

18. Case Costs: Conventional Safety Syringes SUPPLY CHAIN INTERVENTION: DECREASE SAFETY SYRINGE PRICE BY 15% Note: * Negotiate minimum reduction of $3,500 mesh per unit cost

19. Case Costs: New vs. Conventional Safety Syringes SUPPLY CHAIN INTERVENTION: CONVERT TO IMPROVED SAFETY SYRINGES Note: * Negotiate minimum reduction of $3,500 mesh per unit cost

20. Case Costs: Conventional vs. New Safety Syringes SUPPLY CHAIN INTERVENTION: OBTAIN PERFORMANCE GUARANTEE Note: * Negotiate minimum reduction of $3,500 mesh per unit cost

21. Substantiating Evidence Tuma SJ, Sepkowitz KA. Efficacy of safety-engineered device implementation in the prevention of percutaneous injuries: a review of published studies. Clin Infect Dis 2006;42:1159–1170. Elder A, Paterson C. Sharps injuries in UK health care: a review of injury rates, viral transmission and potential efficacy of safety devices. Occup Med (Lond) 2006;56:566–574. Adams D, Elliott TSJ. Impact of safety needle devices on occupationally acquired needlestick injuries a four-year prospective study. J Hosp Infect 2006;64:50–55. Whitby M, McLaws ML, Slater K. Needlestick injuries in a major teaching hospital: the worthwhile effect of hospital-wide replacement of conventional hollow-bore needles. Am J Infect Control 2008;36:180–186. Jagger J, Perry J, Gomaa A, Kornblatt Phillips E. The impact of US policies to protect healthcare workers from bloodborne pathogens: the critical role of safety-engineered devices. J Infect Public Health 2008;1:62–67. Lamontagne F, Abiteboul D, Lolom I, et al. Role of safety-engineered devices in preventing needlestick injuries in 32 French hospitals. Infect Control Hosp Epidemiol 2007;28:18:23.

22. When Supply Chain Owns the CQO Intersection:DES rate reduction to national average 22

23. Physician Data

24. Example: DES Rate Reduction to National Average

25. Example: DES Rate Reduction to National Average • Assumptions • Simulated data is risk adjusted • Procedure is PCI • MS DRG is 247 • Average stent rates per physician over 6 months • National stent average per PCI is 1.54 (Medicare 2012) • Cost per DES is $1,450 • Fully loaded room cost per hour = $1,500 • Average case time = 1 hour

26. DES rate reduction to National Average STAGE I – Current State - Stakeholders • Direct stakeholders – Interventional Cardiologists • Indirect stakeholders – Inventory Control Staff, Chairman of Medicine, Risk Management • $1450 cost of DES stent • $962,075 excess spend on stents based on variance against national average • Costs greater when other factors considered, e.g., cardiac cath pack, manifold, staffing, fluoroscopy, documentation system, contrast, and medications

27. DES rate reduction to National Average STAGE II – Current State - Cost • Cost of adverse event – readmission for chest pain within 30 days • Opportunity cost – reduction in case time based on $1500/hrcath lab rate STAGE III – Current State – Outcomes • Same DRG reimbursement using fewer hospital resources, decreased number of stents, and increased case load • Direct impact – increased case volume with same capacity at reimbursement rate $11,836 for MS DRG 247 • Indirect impact – cancellation rates

28. DES rate reduction to National Average STAGE IV – Current State – Quality • Review of practice guidelines: --ACCF, AHA, SCAI Practice Guidelines --2011 Guidelines for PCI: Executive Summary • Review patient satisfaction data incl. HCAHPS • Quality indicator – FDA approved product • Quality indicator – monitor 30 day post PCI mortality rate from state registry • Stage V - X as per methodology • Evaluation – stents used/patient/MD

29. CQO Principles • Supply chain contributes greatly to patient care. • Supply chain is a critical part of hospital management strategy. • Under the “new healthcare,” supply chain performance requires new metrics. • All hospital stakeholders need to be educated about the role of supply chain in daily care delivery. 29

30. Lots of people are talking “CQO.” What’s next? • Vanderbilt University Medical Center • Scottsdale Healthcare • Wellmont Health System • Ochsner Health System • University of Virginia Health System Read more in Supply Chain Strategies and Solutions 30

31. CQO requires outreach. CQO requires supply chain leaders to build new and different types of relationships with: • Clinicians • Finance/reimbursement teams • Medical leadership • Manufacturers • Distributors • GPOs

32. Monday, August 4 AHRMM will host the 1st Industry Engagement Group to pull together all of the supply chain touch points to address CQO.

33. The Future of Healthcare is Now.The Future of Healthcare is CQO. Supply chain is perfectly positioned at the intersection of cost, quality, and outcomes to take the lead on responding to the demands of health reform. Join the CQO movement and help transform healthcare. 33

34. Educational Offerings

35. Education: Live Webinars Upcoming live webinars include: • May 1Detecting Product Equivalency to Drive Lower PPI • June 19 Harnessing Data Normalization to Drive Product Savings • August 21 Understand How Predictive Tools Help Expedite Value Analysis • October 16Controlling Costly Physician Preference Items

36. Education: On Demand Webinars Recently recorded webinars include: • WHY, WHAT, and HOW of Strategic Planning (3 part series) • Managing Supply Chain in Healthcare Reform • Decoding Supply Chain Analytics for Improved Cost, Quality, and Outcomes • Suppliers – Partners or Pariahs? • Capital Equipment Procurement, Contracting, and Management • CMRP Examination Overview • Knowing When to Outsource – Making Purchased Services Work for You • A Value-Analysis Perspective on Infection Prevention and Control: The Role of Contaminated Hands, Environmental Surfaces, and Skin in Transmission

37. Education: Online Courses Online Courses • Embracing the Cost, Quality, and Outcomes Movement – the Future of Healthcare Supply Chain • Supply Chain: Owning the Intersection of Cost Quality, and Outcomes • Patient Protection and Affordable Care Act – Goals and Components, Provider Reimbursement, and Health System Changes • Application of Six Sigma to Inventory Management • Challenges and Opportunities in Healthcare Provider Adoption of GS1 Standards • Clinical Department Supply Management • Creating and Sustaining a Lean-Cost Conscious Culture • Giving Powerful Presentations • Healthcare Supply Chain Considerations in Emergency Management • MMIS Systems Evaluation Selection More available at www.ahrmm.org/learning_center

38. Education: Highlights • Leading a Systematic and Integrated Change Initiative • In this environment of continuous change it’s critical to know how to not only manage change, but lead it. • Change Management 101: Preparing to Be a Change Agent • Change Management 201: How to Be a Change Agent • The Why, What, and How of Strategic Planning • Demonstrate how you and your department can contribute to the hospital’s bottom line with a well thought out and expertly implemented strategic plan. • Strategic Planning 101: Why is a Strategic Plan Important • Strategic Planning 201: How to Develop a Strategic Plan • Strategic Planning 301: Implementing a Strategic Plan

39. Education: Face to Face AHRMM Annual Conference & Exhibition • Interactive educational sessions led by industry leaders • Largest exhibition of its kind • Face-to-face networking opportunities with peers, vendors, and association leaders

40. Resources AHRMM provides print and electronic resources and tools to the membership to keep members informed and engaged in the CQO Movement.

41. Resources News and information • Magazine and Special Reports • Supply Chain Strategies & Solutions - Bi-monthly member magazine • AHRMM eNews - Weekly e-newsletter with latest on the industry and association Publications • Numerous publications specific to the healthcare supply chain both published by AHRMM and other standards from the industry Online Resources • Complimentary access to online resources such as CQO Headquarters, RFP Library, Lexicon, Sustainability Roadmap, Knowledge Center, etc. Networking Resources • ListServs, social networking platforms, mentor program, and affiliated chapters provide an opportunity for members to connect with their peers.

42. Career Planning Tools

43. Career Planning Tools • Career Center • Open position listings, resume posting, apply online, recruit for a position • AHRMM Mentor Program • Connect with seasoned veterans in the field to address issues, solve problems, and plan your career path • Career Advancement Guide • Career milestones, education, experience, tools, and skill-sets • Compensation Survey • Current industry trends and demographics

44. Career Planning Tools: Development • Certified Materials & Resource Professional (CMRP) Certification • Nationally Recognized • Established and managed by AHA Certification Center (AHA-CC) • Independent body affiliated with the AHA • Convenient and Affordable • Two-hour exam • Available online at your local H&R Block location • Administrations available at the AHRMM Annual Conference • Study and review materials available through AHRMM

45. Champion Industry Initiatives

46. Industry Initiatives • Hospital Environmental Sustainability • Collaboration with ASHE and AHE • Sustainability roadmap – an implementation guide for performance improvement measures to save organizations money, improve facility environmental performance, and respond to community concerns. • www.sustainabilityroadmap.org • UDI and Industry Data Standards • AHA Engagement

47. A Diamond for You Congratulations on your achievements!

48. Questions & Answers