Bill Stankiewicz Copy Scope 2010  R Oi Company Model
Upcoming SlideShare
Loading in...5
×
 

Bill Stankiewicz Copy Scope 2010 R Oi Company Model

on

  • 496 views

Scope conference 2010 in Florida, Bill Stankiewicz attended.

Scope conference 2010 in Florida, Bill Stankiewicz attended.
www.shipperswarehouse.com

Statistics

Views

Total Views
496
Views on SlideShare
496
Embed Views
0

Actions

Likes
0
Downloads
11
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Bill Stankiewicz Copy Scope 2010  R Oi Company Model Bill Stankiewicz Copy Scope 2010 R Oi Company Model Presentation Transcript

  • Integration As A Better Model April 2010 John Black, VP of Supply Chain Greg Goddard, Director of Operations 1 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Agenda  Mercy Overview  Issues Facing Providers  Understanding the Issues  ROi Model – An Approach to Solutions  Keys to Vendor Compliance – Less is More  Opportunities and Solutions – Our Approach to Integration  Staying Ahead – Where do We Go From Here?  National Recognition 2 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Mercy Overview Profile Member Facilities 26 acute care hospitals 3 heart hospitals 1 rehab hospital Operating Revenue $3.9 Billion Co-workers 36,900 Medical Staff 4,650 (incl. 1,235 integrated physicians) Uncompensated Care $208.0 million Beds 4,379 licensed beds (3,638 acute) 8h Largest Catholic health system in U.S. 27th Largest health system in U.S. Information current for Fiscal Year 2009, ending June 2009 3 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Mercy Overview ROi Structure Performance Consulting  Clinical Support Service  Patient Care Services  Operational Support Services Facilities •Corporate Office – St. Louis •Consolidated Services Center – Springfield, MO Group Purchasing  Supply and Pharmaceutical Contracting Co-workers 300 FTEs from varied clinical and  Capital Equipment Contracting business disciplines  Contract Compliance Monitoring  Rebate Management  Pricing Administration  Member Services MISSION: to improve clinical, operational and financial performance of our customers through a clinically integrated supply chain. Supply Chain Management  Consolidated Services Center  Inventory Management FOCUS & DIRECTION:  Pharmaceutical Repackaging ▶ Leverage Infrastructure – Reduce Costs, Increase Service  Custom Procedure Tray Manufacturing  Purchasing ▶ Reduce Variation – Product Selection/Use and Process  Customer Service ▶ Improve Value – Improve Revenue and Reduce Cost  Transportation Management  Print Operations 4 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Mercy Overview Value of the Whole > the Sum of its Components ROi’s Mission: Drive Value to Members Through Supply Chain Components… Consulting:  Alignment w/ clinicians  Process Improvement  Data Analysis Group Purchasing: Supply Chain GPO:  Item File Management (Service) (Cost Control)  Price Control  Physician & Commodity Contracting Supply Chain:  Distribution operations Performance  MMIS  Pharmacy Repackaging. Consulting: (Clinical Integration) Together…  Improved Clinical Alignment, Abilities and Outcomes  Lower Costs, Better Control  Improved Service & Information 5 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Mercy Overview Top 10 Facts About ROi …  Most visited Provider Based Supply Chain model in the U.S.  8th largest GPO in the U.S. – 1,500 members  ROi has the 2nd highest compliance and $/bed penetration in the U.S.  Top 10 volume Medical distributor in the U.S.  ROi is the first provider-based organization to build and operate an FDA registered custom pack manufacturing operation  CSC repackages 4.4 million unit dose pharmaceuticals per year  Supply Chain defects 75% better than industry average (5σ quality)  99% fill rate (next day, first time fill) – best in industry 6 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Agenda  Mercy Overview  Issues Facing Providers  Understanding the Issues  ROi Model – An Approach to Solutions  Keys to Vendor Compliance – Less is More  Opportunities and Solutions – Our Approach to Integration  Staying Ahead – Where do We Go From Here?  National Recognition 7 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Issues Facing Providers Facing the “perfect storm”… Economic Rising costs of recession medical errors Exploding Growing bad Operating costs technology costs debt from increase uninsured and under-insured Capital constraints Elective services reduction Pension funding concerns Growing labor Revenues costs and RN Pension funding shortages decline concerns Lost investment portfolio State and Growing supply Federal budget costs cuts 8 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Issues Facing Providers Current Trends - Supply Expense Operating Expenses Labor…………... 48% •Labor – materials related 35% Materials………. 29% •Materials – all consumables 30.7% Overhead……... 23% •Overhead – space, systems, 30% 25% 21.2% 20% 15% 10.0% 10% 6.8% 6.7% 5.9% 5% 0% Hospital Physician Prescriptions Program Research Nursing Care / Clinical Drugs Admin Structures Home Services and Care Equipment SOURCE: CMS, office of the Actuary, National Health Statistics Group. Note: Breakdown of the top 80% of $2.3 trillion US healthcare spend in 2008 9 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Issues Facing Providers Current Trends - Supply Expense SUPPLY CHAIN SUPPLY Tech COST The Provision of Care RELEVANCE Disposable 64 Slice High Critical 2010 CT 2000 1990 1980 Reusable X-Ray Low Incidental 1970 Touch Tech Based Based Care Care Supply cost are growing at almost twice the rate of labor*… *Source: Solucient, “Supply Costs for U.S. Hospitals Show Substantial Three-Year Rise,” Healthcare Financial Management, August 2005; Advisory Board Growth Database; Clinical Advisory Board interviews. 10 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Issues Facing Providers Current Trends - Supply Expense Supply Cost Trending Study:  SMI led program  5 Respected IDN participated  Complete supply spend focus July 2009  One question… “Could Supply Cost Ever Exceed Labor?” “B” “D” 2010 2020 2030 2040 2050 “A” “C” “E” ANSWER: Yes – now what do we do… 11 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Issues Facing Providers Moving the Supply Chain Forward  Unsustainability – Cost/complexity of traditional models is not sustainable. Only two essential parties are critical: makers and users.  Homogenization - The lines of GPO’s, Distributor, and Provider Supply Chains will increasingly blur. GPO’s and Distributors will create creative counter measures to abate erosion of market control  Leadership – Providers are not leading. Providers will increase the recruitment of supply chain experts from outside the healthcare industry to infuse new talent.  Marketing beats Science - The rapid growth of technology development will cause spending on supplies and technology to exceed the Providers ability to objectively evaluate and cut cost.  Corporatization - Integrated Providers will begin to adopt a more corporate structure and mentality of management to drive out variation in business and clinical practice.  Profitability Linkage - Successful providers will integrate and link usage and reimbursement data for better decision making.  Integration Candor - Successful providers will increase their candid physicians conversations on their role in cost and quality.  Non-Traditional Integration – Industry/Payors will increase understanding and involvement in the costs and quality of care.  Moving into the Neighborhood – New technology will enable more quality care in the home environment and erode the traditional acute setting. 12 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Agenda  Mercy Overview  Issues Facing Providers  Understanding the Issues  ROi Model – An Approach to Solutions  Keys to Vendor Compliance – Less is More  Opportunities and Solutions – Our Approach to Integration  Staying Ahead – Where do We Go From Here?  National Recognition 13 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Understanding the Issues Challenges with the Traditional Healthcare Supply Chain Model Traditional Healthcare Supply Chain Challenges Manufacturer  Cost of Distribution  Rising Cost of Supplies GPO  Input on Contract Process  Value Customers Based on Size and Distance  Lack of Consistent Service Distributor  Controlled by Outsiders Hospital Dock  Physician Collaboration  Service Levels  Product Selection  Data Management  Silo Management  Limited Best Practice Sharing Patient Use  Too Complicated 14 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Understanding the Issues Why Did We Change the Model? (The Traditional Model) Med/Surg Mfg. Med/Surg Dist. Mercy Hospital ISSUE: Complexity Pharma Dist. Pharma Mfg. Mercy Clinics Complexity of product Lab Mfg. Lab Dist. Other Hospitals and information flow Film Mfg. Radiology Dist. Other Clinics within the traditional healthcare supply chain. Dietary Mfg. Dietary Dist. Retail Pharmacy Linen Mfg. Linen Service Home Health Retail Mass Merc. Other??? ISSUE: Geographical Match More than 90% of Mercy’s volume is OUTSIDE of the traditional distributors hub distribution service area 15 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Understanding the Issues Big Bang or Intelligent Design? (The Traditional Model) INTERMEDIARIES MANUFACTURER GPO PROVIDERS Admin Shareback Admin Fees Admin Fees DISTRIBUTORS Distribution Fees Tracing Fees Bulk Discounts Channel Fees Rebates  Manufacturers pay GPO’s administration fees based on Mercy’s purchases.  GPO’s share back a portion of administration fees to Mercy.  Mercy pays distributors a fee for warehousing and distribution of products.  Manufacturers pay Providers rebates based on GPO contract compliance. 16 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Understanding the Issues The Anatomy of Supply Cost: The Traditional Model Company Company Company Company A B C D Transport Profit ………………………………………………………….……. Transport Cost ……………………………………………..……………… Distribution Profit ………………….…………………….. Sales Tracing Fees ……………………….……………. Distribution Cost ………………………………………... GPO Admin Fees …………………………….. Total Mfg. Profit …………….. Delivered Cost Mfg. Cost ………………. 17 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Agenda  Mercy Overview  Issues Facing Providers  Understanding the Issues  ROi Model – An Approach to Solutions  Keys to Vendor Compliance – Less is More  Opportunities and Solutions – Our Approach to Integration  Staying Ahead – Where do We Go From Here?  National Recognition 18 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • ROi Model – An Approach to Solutions The Anatomy of Supply Cost: The ROi Model ROi Model Expense Revenue Net Impact Traditional Transport Profit …………………. Transport Cost ………………….……………… Distribution Profit …………….. Distribution Cost ……………………………… Sales Tracing Fees ………………………..………………………... GPO Admin Fees ……………………………..……………………... Total Mfg. Profit …………………………….………….. Delivered Cost Mfg. Cost ………………………………….………. Delivered cost of supplies over and above manufacturer COG and profit ranges from 14 – 28% 19 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • ROi Model – An Approach to Solutions Simplicity is Better: The ROi Model MANUFACTURER GPO Admin Fees Rebates DISTRIBUTION Tracing Fees Bulk Discounts  Eliminated non-essential supply chain entities (GPO & Distributors)  Captured traditional fees to fund Mercy’s Supply Chain infrastructure while increasing rebates to SSUs  Increased control and accountability for service and pricing  Established closer link to Manufacturers 20 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • ROi Model – An Approach to Solutions Traditional Model Med/Surg Mfg. Med/Surg Dist. Mercy Hospital ISSUE: Complexity Pharma Dist. Pharma Mfg. Mercy Clinics Complexity of product Lab Mfg. Lab Dist. Other Hospitals and information flow Film Mfg. Radiology Dist. Other Clinics within the traditional healthcare supply chain. Dietary Mfg. Dietary Dist. Retail Pharmacy Linen Mfg. Linen Service Home Health Retail Mass Merc. Other??? ISSUE: Geographical Match More than 90% of Mercy’s volume is OUTSIDE of the traditional distributors hub distribution service area 21 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • ROi Model – An Approach to Solutions ROi Model Pharma Mfg. Pharma Dist. Mercy Hospital SOLUTION: Complexity Med/Surg Mfg. Mercy Clinics Storage location capable of handling all healthcare Lab Mfg. Storage & Distribution products in a Film Mfg. consolidated fashion. Dietary Mfg. Linen Mfg. SOLUTION: Geographical Match Central distribution point - More than 86% of Mercy’s volume is INSIDE of the ROi distribution service area 22 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Agenda  Mercy Overview  Issues Facing Providers  Understanding the Issues  ROi Model – An Approach to Solutions  Keys to Vendor Compliance – Less is More  Opportunities and Solutions – Our Approach to Integration  Staying Ahead – Where do We Go From Here?  National Recognition 23 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Keys to Vendor Compliance – Less is More Vendor Compliance Begins with Clinical Collaboration Gain consensus Reduce variability Promote standardization Facilitation Create value Decision Making Produce sustainable change Sustainability Measure and report results Provide enterprise leadership 24 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Keys to Vendor Compliance – Less is More Horizontal Integration Service Line representatives will have responsibilities for communicating in two distinct directions:  Vertically within their other SSU to other disciplines, other departments, etc.  Horizontally across Mercy to their representative “peer” and eventually to other/future ROi members Future SPR STL OKC FTSM ROG HOTS KS Members Across the Across the Facilities Facilities 25 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Keys to Vendor Compliance – Less is More The Results Contract Utilization Trend 100% Current 90% (85.9%) 80% 70% ROi Aligned 60% Begins Contract Utilization 50% (37.8%) 40% 30% 20% 10% 0% 2004 2007 2009 Aligned for Vendor and Customer Value 26 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Keys to Vendor Compliance – Less is More The Results Number of Contracts 600 500 ACTION: 557 400  38% reduction in number of 300 405 contracts 200  194% increase in annual 100 spend under contract 0 2002 2008 REACTION: Annual Contract Spend  Partner means Partner $500  Easier to manage $400 $470  Focused attention Million $300  Simplicity and Growth yields alignment of expectations: $200  Improved Pricing for ROi $100 $160  Improved Share for Vendors $0 2002 2008 27 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Keys to Vendor Compliance – Less is More Before: Variation in SKU’s  7,745 pharmaceutical items utilized  529 used in all SSU’s 3500 3000 2500 2000 1500 1000 500 0 1 SSU 2 SSU 3 SSU 4 SSU 5 SSU 6 SSU 7 SSU 1 SSU 2 SSU 3 SSU 4 SSU 5 SSU 6 SSU 7 SSU Number of Items 3028 1719 958 632 480 399 529 % of Items Common 39.1% 22.2% 12.4% 8.2% 6.2% 5.2% 6.8% 28 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Keys to Vendor Compliance – Less is More After: Variation in SKU’s  3,500 pharmaceutical items utilized  1,700 used in all SSU’s 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Before After Before After Number of items 7,745 3,500 Number of items in common across all SSU's 529 1,700 29 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Keys to Vendor Compliance – Less is More The Results – Enterprise Formulary Objective: SKU Reduction  Create a system-wide formulary for 8,000 pharmaceutical products to reduce variation and 7,000 yield clinical, operational, and financial benefit 6,000 for Mercy 5,000 GOAL 4,000 3,500 Goals: 3,000  65% reduction in SKU’s by end of year 2 2,000  Reduce cost by $2 million by end of Year 1 & an 1,000 additional $1 million by end of year 2 0  Enterprise adoption of therapeutic interchange 2007 2008 2009 + in 3 categories in year 1 COST Reduction $4.0 Key Attributes: $3.5 GOAL  Corporately Supported (Sr. Leadership) $3.00 $3.0  Integrated Governance – DOP, Physicians, ROi $2.5  Physician Led Millions $2.0  Evidence based – White Papers $1.5  Objective - Metrics Driven $1.0  Sustainability built into process $0.5 $0 2007 2008 2009 + 30 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Keys to Vendor Compliance – Less is More How We Do It! ROi Guiding Principles  Involvement of Stakeholders…  Creation of Value…  Keep Our Word… Simple to Understand… …Highly Effective When Done Well 31 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Agenda  Mercy Overview  Issues Facing Providers  Understanding the Issues  ROi Model – An Approach to Solutions  Keys to Vendor Compliance – Less is More  Opportunities and Solutions – Our Approach to Integration  Staying Ahead – Where do We Go From Here?  National Recognition 32 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Our Approach to Integration Our approach to every opportunity… MAKE BUY PARTNER Key Questions: ▶ Are current commercial offerings aligned with our needs? ▶ Can we justify the expense of the commercial offering? ▶ Is the need strategic to our business? ▶ Can commercial offerings be modified to deliver expected results? ▶ Do we have the scale to justify an internally developed offering? ▶ Do we have the time to deliver an exceptional internal offering? ▶ Can we resource an internal offering to exceed commercial standards? 33 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Opportunity Med/Surg Mfg. Med/Surg Dist. Mercy Hospital ISSUE: Complexity Pharma Dist. Pharma Mfg. Mercy Clinics Complexity of product Lab Mfg. Lab Dist. Other Hospitals and information flow Film Mfg. Radiology Dist. Other Clinics within the traditional healthcare supply chain. Dietary Mfg. Dietary Dist. Retail Pharmacy Linen Mfg. Linen Service Home Health Retail Mass Merc. Other??? ISSUE: Geographical Match More than 90% of Mercy’s volume is OUTSIDE of the traditional distributors hub distribution service area 34 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Solution: MAKE Springfield, MO  101,000 Square Feet  Climate controlled  Refrigerated Storage  Frozen Storage  Controlled Substance Cage and Vault  Suitable for all Healthcare supply storage needs in one facility  Pharmaceutical Repackaging Operation  Customer Service Operations Center  Private Fleet (60+ vehicles)  Reduction in transportation expense by leveraging existing fleet and reducing third party transportation expenses  Shortened Order Cycle to 12 hours or less  66% increase in acute care Med/Surg deliveries  42% Reduction in hospital inventory  Elimination of 3,000 material service failures (stock-outs) per week 35 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Solution: MAKE MISSION RESULTS Each stocked product is proven to 94% of all traditionally distributed be clinically acceptable by the vast products are now currently majority of users. sourced through the CSC. Each stocked product targets Service levels from the CSC are at service levels of 100% with next 99.1%; our results are almost 10% day delivery without expedited higher than performance from freight expenses. traditional med/surg distributors. We can leverage our entire volume Products sourced through the through a single point to drive the CSC have no direct distribution lowest price in the market. or transportation fees. 36 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Solution: MAKE Asset Utilization Determining What’s Stocked and What’s Not A mathematic process used to determine the Stocking Logic Definition: product sourcing origin. Stocking Logic Categorical Algorithms: Revenue / Savings Expenses Velocity Unit of Measure 37 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Solution: MAKE Asset Utilization Stocking Logic – Example #1 Stock 38 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Solution: MAKE Asset Utilization Stocking Logic – Example #2 Not Stock 39 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Solution: MAKE Asset Utilization Stocking Logic Objective Finding the right balance 40 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Solution: MAKE Asset Utilization Balance = Ability Driving Value Through Space Utilization 49% 20% 21% 10% 41 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Opportunity: Patient Safety  Call to Action - IOM Study (1999) revealing significant patient safety issues • Medical errors were the 8th leading cause of death in the United States • More deaths than motor vehicle accidents, breast cancer or AIDS • 7,000 deaths per year from medication errors alone • Adverse events cost the United States approximately $37.6 billion each year • Approximately $17 billion of those costs are associated with preventable errors Institute of Medicine, Committee on Quality of Health Care in America. To Err is Human: Building a Safer Health System, Washington, D.C., National Academy Press; 1999 42 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Solution: PARTNER/MAKE The Goals: ▶Reduce medication administration errors ▶Integrate Pharmacy into clinical care delivery team The Action: ▶Prioritized clinical quality efforts ▶Determined target area of focus ▶Gained commitment ▶Engaged stakeholders ▶Constructed repackaging infrastructure ▶Standardized hospital-based infrastructure 43 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Solution: PARTNER/MAKE 44 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Solution: PARTNER/MAKE System-wide implications estimated based on number of beds Medication Error Potential Prevented Prevented Annual System- Type Events (6 mo sample) Administration Rate wide Implication Wrong Dose 967 99% 153,548 Wrong Patient 35 100% 5,556 Wrong Route 120 100% 19,050 Total 1,122 99.1% 178,154 Potential Adverse Drug Events Avoided (10%) 17,815 10% of medication events (excluding wrong time administrations) result in potential Adverse Drug Events (Archives of Internal Medicine,Vol. 162, Sep 9, 2002) 45 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • 46 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Surgical Instrument Repair Expense Service Days  Opportunity: $800,000 45 – Inconsistent service $700,000 40 Days 40 levels, provided by 7 $600,000 35 30 Days Service Days per Month vendors, with varying cost Annual Repair Expense 30 $500,000 points lead ROi to 25 $718,000 consider internalization $400,000 $584,000 20 $300,000 15  Solution: BUY/PARTNER $200,000 10 – Unique partnership with $100,000 5 Instrument Repair $0 0 company yields: Current State Proposed State • 2 dedicated vans with 3 drivers, reporting to ROi • Service standardization across all facilities - 33% overall increase in service days • 20% decrease in cost 47 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Opportunity: Product Waste and Program Control Why Self Manufacture Custom Packs?  Product waste  Lack of vendor trust  Lack of standardization  Excessive cost and inconsistent pricing 48 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Solution: MAKE Rationale:  Elimination of Unauthorized Substitutions  Elimination of Low Quality Components  Standardization Opportunity  Transparent Cost Structure - Elimination of Vendor Trust Issues  Appropriate Use – Elimination of Under/Over Utilization  Lower Total Cost Solution 49 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Opportunities and Solutions Private Label  Up-front customer input to assure buy-in.  Identical or improved product in all cases.  Focus on specification not brand.  Reduces variation and proliferation of SKU’s.  Local, regional, national, international sourcing strategy.  Pride in ownership of brand.  Reduces non-value added cost of products (marketing & sales).  Significant value to Mercy through price reduction.  $12 million in annual spend today , doubling every year.  Double digit savings… every time 50 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • What is Really Important… Three Fundamental Goals of Decision Making… Good Patient Positive Outcomes Bottom Line Happy Care Givers 51 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Agenda  Mercy Overview  Issues Facing Providers  Understanding the Issues  ROi Model – An Approach to Solutions  Keys to Vendor Compliance – Less is More  Opportunities and Solutions – Our Approach to Integration  Staying Ahead – Where do We Go From Here?  National Recognition 52 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Staying Ahead Connecting the Links Distributors GPO’s Warehousing Manufacturing Supply Purchasing Revenue / Expense Management Chain Makers of Users of Transportation goods goods Pipeline Visibility Backorder Supply Chain Management Inventory ERP Systems Management Electronic Data Interchange 53 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Staying Ahead External – Driving Volume, Leveraging Partnerships HEALTHCARE RETAIL 27.6% Opportunity (13.5%) 14.1% Healthcare Retail Source: Average of group as per public company financials. 54 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Staying Ahead External – Driving Volume, Leveraging Partnerships Spend Breakdown of Mercy Observations: $43,426,000 ▶ Our largest vendors SG&A is… ▶2.8 X R&D $50 ▶1.1 X COGS ▶1.6 X Net Income $45 ▶ Mercy spent $13,892,100 for a $40 vendor to sell us your $8.8 NI (19.8%) products… $35 ▶ Only 2 of Mercy’s 23 hospitals $2.1 Tax/Other (7.1%) make more Net Income than $30 the vendors SG&A from our business. $25 $14.6 SG&A (32.0%) $20 $15 $5.3 R&D (11.3%) Are we the problem? $10 SG&A is a reflection of $12.6 what it takes to get the $5 COGS (29.8%) product to the customer $0 We have the ability to impact this line – let us... SOURCE: Vendor financials as reported in Reuters ProVestor Plus Company Report, December 27, 2009 55 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Staying Ahead External – Driving Volume, Leveraging Partnerships Typical $1 of Spinal Device Revenue Profit (2%) $1.00 Taxes (4%) Air Freight (2%) 9 cents dedicated $0.90 Inv. Set Depreciation (7%) to avoidable cost $0.80 Rep Comp (25%) 50 cents $0.70 dedicated to $0.60 G&A (12%) selling us the $0.50 product $0.40 Sales & Marketing (13%) $0.30 R&D (13%) $0.20 Royalties (7%) $0.10 Device Cost (15%) $0.00 Source: information provided by Spine Vendor 56 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Wrap Up… ▶ Sustainability ▶ GPO Design & Metrics ▶ Medication ▶ Maximization of Operations Safety Integrated ▶ Product ▶ Smart Pump Model ▶ Formulary Implementation Standardization Management ▶ Distribution ▶ Antibiotic Design & Stewardship Operations Consultant Advise It Contract It Source It Make It Package It Store It Move It Use It Pay For It GPO Broker Manufacturer Packager Distributor Transporter Provider Payor ▶ 5th Largest ▶ International ▶ 1st Provider ▶ Largest ▶ Top 10 ▶ 60+ Vehicles ▶ 20 Hospitals in ▶ Operation in 3 GPO in US focus based Private Provider Volume four states states Label program based CPT Distributor ▶ +500,000 ▶ $670 million ▶ Demonstrated in US manufacturing according to miles per year ▶ 28th largest ▶ Over 150,000 under results in operation in HIDA health system members contract reducing cost ▶ $4 million US. ▶ Every location annually ▶ Med/Surg every day ▶ 4,379 beds ▶ Nationally ▶ 300+ ▶ Aggregated ▶ FDA Recognized contracts buying events ▶ Growing Registered ▶ Rx ▶ Back-haul ▶ 1,100 Disease interest with common integrated Management ▶ Most ▶ Efficiency other ▶ Rx Unit Dose ▶ Office carrier physicians Programs compliant based providers Repackaging GPO in US sourcing ▶ Courier, TL ▶ $4 B in assets ▶ Incorporated in and LTL 1994 ▶ Single ▶ Provider ▶ $3.9 B in op. Negotiation Integration Revenue 57 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • Agenda  Mercy Overview  Issues Facing Providers  Understanding the Issues  ROi Model – An Approach to Solutions  Keys to Vendor Compliance – Less is More  Opportunities and Solutions – Our Approach to Integration  Staying Ahead – Where do We Go From Here?  National Recognition 58 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • National Recognition  Most Wired Supply Chain Innovator Award Finalist 2006  NCI Supply Chain Innovator of the Year Award 2006 – One of three providers highlighted  Winner – Council of Supply Chain Management Professionals – Supply Chain Innovation Award 2006 (October 2006)  Winner – GHXcellence 2007 Award for Large Providers (April 2007)  Winner – FierceHealthcare Innovator of the Year (May 2007)  HFMA / AHRMM – Breaking down Barriers: Achieving a High Performance Finance/Supply Chain Team (May 2007) – Highlighted Large Provider  Winner – GHX 2008 Innovator of the Year  IDN Summit Peer Award Winner (April 2009) 59 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.
  • National Recognition Healthcare Top 25 Supply Chains #2 Overall #1 Provider #1 GPO #1 Distributor 60 * * * CONFIDENTIAL * * * © Resource Optimization & Innovation, an Operating Division of Sisters of Mercy Health System. Creation January 2010.