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Explore the need for change in supply chain management for site operations and logistics in healthcare, and the benefits of building resiliency in the face of rising costs and changing healthcare landscape.
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Building ResiliencyThe Case for ChangeSupply Chain ManagementSite Operations and Logistics OverviewFebruary 17, 2017
What Does It Mean to Be Resilient? After going down three games to none against the Golden State Warriors, the Cleveland Cavaliers accomplished one of the greatest comebacks in modern era sports history. “I had to change. I had to change my game.” LeBron James
Advocate Health Care Background • Overview • $6.4 billion of revenue • 1.6 million unique patients • 865,000 value based lives • 35,000 associates • Physicians/Ambulatory • 1,400 employed + 400 APCs • Over 6,000 physicians • Over 450 sites of care • Hospitals (12) • 4 teaching • 2 children's • 1 critical access • 5 level 1 trauma centers • Post-acute • Home health, hospice, SNF and palliative care
The Beginning of the Change Journey The best time to plant a tree was ten years ago……….. The second best time is today.
Supply Chain Site Operations and Logistics Site Operations and Logistics has the operational responsibility for the management of $800M in annual medical supply expense across all Advocate point-of-care locations. Operating teams at all point-of-care facilities; All logistics, distribution and inventory management responsibilities; 265 FTEs; Annual Operating Budget: $42M; 24 / 7 / 365 Operating Schedule
Site Operations and Logistics - Leadership Leadership Taking people to places that they would not have otherwise gone on their own. Author Unknown Be Strategic Advisors to the Enterprise
Site Operations and Logistics – Guiding Principles Improve Patient Satisfaction / Outcome; Reduce Patient Risk Reduce Operating Expense Preserve Cash • Eliminate Expired Product by 2020 Patient Safety • Reduce OPEX by $36M Reduce Expense Preserve Cash • Reduce Inventory by $20M Operational Excellence Supply Chain Management has the responsibility for patient care.
It’s Time to Look Forward For many years healthcare has operated in a manner that is like driving a car through the rearview mirror….. But, times are changing.
Healthcare is Changing – Rising Costs McKinsey& Company evaluated the factors driving change in healthcare: Decline in government reimbursement; Changes in the commercial insurers; Rise of consumerism and patient payments; The healthcare network cost model is not sustainable without significant change.
Healthcare’s Burning Platform The most striking finding from McKinsey’s provider research is how drastically providers are expecting revenues to decline, and their resulting willingness to make dramatic changes in their operations: “We are facing 15-20% hard line reimbursement changes. We need to start making reductions in costs right now,” said one integrated delivery network (IDN) executive. Another reported: “Our organization’s leadership has said we need to be willing to change everything with the exception of our primary value proposition that the needs of the patient come first.”
Driving the Next Level of Supply Chain Savings While all costs are on the table, Supply Chainis universally considered one of the top priorities to contribute bottom line value. Healthcare Network Supply Chain
The Forces driving Change Problem Statement – Chief Nursing Officer: “We’ve got to reduce costs. I have been asked to eliminate 210nurses and I don’t have a clue as to how to do this” Solution Statement – Supply Chain Site Operations and Logistics: We need to change. There are many back-office and operational support costs we can eliminate without impacting patient care”
Out of Balance Responsibilities Materials Management General Stores Supplies Regulatory Performance Standards Physician Satisfaction Clinical Care / Patient Satisfaction General Stores Supply Management Physician Satisfaction Ordering, Buying, Logistics Materials Management Product Expirations Clinical Associates • Clinicians have been burdened with non-clinical responsibilities; • Distracting the quality of patient care; and • Resulting in unnecessary costs. 16
Alignment of Core Expertise Regulatory Performance Standards Physician Satisfaction Supply Chain Management All inventory management, distribution and logistics General Stores Supply Management Patient Satisfaction Physician Satisfaction Quality of Outcome Standards Product Expiration Clinical Care and Patient Satisfaction Supply Chain Management Clinical Associates Site Operations and Logistics has the responsibility now to manage the medical supply network life cycle – Logistics, Distribution, Replenishment. 17
Advocate Logistics Channels – Future State Vision Channel Optimization; Enterprise-wide Freight Management; Use of Logical Unit of Measure
Automated 2-Bin Inventory Management Each SKU is evaluated based on historic usage analytics and a PAR level established; Two identical bins are prepared, each with the equivalent PAR value; The bins are then organized according to patient usage type and placed into a standardized and systematic environment. A predictable demand signal is now in place.
Inventory Management Standardization • Inventory reduced by 40%; • Supply Expense reduced by over $8M; • Labor reduced by $4.3M
Automated Inventory Management * - Signifies Pilot Trial Candidate
Optimization through Real-Time Analytics
Site Operations and Logistics – Real Time Analytics Site Operations is focused on the development and advancement of real-time analytics: • Non-Conforming Product Index • Logistics Index • DemandTrack • Order Q • QSight
Managing Product Expirations 2014 Baseline $3M in Waste = 35 Nurses
Supply Chain Management Site Operations and Logistics
Supply Chain Management Site Operations and Logistics • Order Q Dataflow
Supply Chain Management Site Operations and Logistics • Order Q Components • Supply room data collection terminal • All-in-one touch PC; • RFID reader; • RFID tags affixed to bins • Order Q manager’s desktop console • Web-based dashboard; • Provides visibility and controls
