Supply Chain Excellence: What are the Key Drivers?

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  • Duval
  • Duval
  • Data Collection: Data Collected from UHC’s Operational Database Data request sent to all non-ODB members – 10 respondents Required data fields Total Supply Expense (Excl Drug) per CMI Weighted Adjusted Dx At least 2 departmental supply expenses measures and/or operating margin % Data Normalization Used variety of data transformation techniques to fit each measure to the normal distribution Extreme outliers assessed individually for data quality issues When appropriate, extreme outliers excluded and scored accordingly Number of standard deviations from the mean used as basis of scoring
  • Duval
  • Introduce/handoff to David Entwistle
  • Entwistle Top performing institutions do the following in supply chain …
  • Entwistle
  • Entwistle
  • Limiting the span of control of multidisciplinary teams to approving new products, unsupported in saying “no”, and without a process/expectation for reviewing existing products/services
  • Entwistle Leadership Priority - Senior Leaders recognize supply chain management as a strategic issue and invest their time and organization resources Culture of shared purpose - Institute a strong Value Analysis committee structure that has far reaching multidisciplinary teams , promotes physician involvement , and requires a demonstrated value (quality, cost, and reimbursement) for new products Data - Provide dedicated analytical support with access to financial, quality, and supply chain data systems to facilitate data driven decision making
  • Supply Chain Excellence: What are the Key Drivers?

    1. 1. Supply Chain Excellence: What are the Key Drivers? Aligning leadership and culture to achieve new heights of performance excellence
    2. 2. <ul><li>William Brewer </li></ul><ul><ul><li>Senior Consultant </li></ul></ul><ul><ul><li>University HealthSystem Consortium </li></ul></ul><ul><ul><li>Oak Brook, IL </li></ul></ul>
    3. 3. <ul><li>Challenges lead to critical questions </li></ul><ul><li>Collaborative approach </li></ul><ul><li>Organizational performance score </li></ul><ul><li>Key findings </li></ul><ul><li>Checklist for excellence </li></ul>Outline
    4. 4. University HealthSystem Consortium Overview <ul><li>Composed of 102 of the leading academic medical centers and 184 of their affiliated hospitals </li></ul><ul><li>Represents 90% of the nation’s non-profit academic medical centers </li></ul><ul><li>Provides differentiated services and products that help member AMCs improve supply chain, operational, and clinical performance </li></ul>
    5. 5. Environment Drives CEO Engagement in Supply Chain Management Revenue pressures; need for GPO to reduce costs; commitment drives best price; UHC forms UHC Services Corp. GPO Revenue pressures lessen; volume drives best price; UHC forms Novation to expand volume Revenue pressures increase; effective supply chain management contributes to overall organizational performance CEO Engagement High Low 1985 1991 1998 2004 2008
    6. 6. Common Challenges <ul><li>Narrow view of supply chain management and its importance to overall performance </li></ul><ul><li>Lack of executive support for supply chain improvement initiatives </li></ul><ul><li>Supply chain leaders unsure of how to engage leaders and demonstrate organizational impact </li></ul><ul><li>Marketplace changes creating increased pressure on revenue </li></ul><ul><li>New, better technology increase supply expense </li></ul><ul><li>Physician preference driving up costs </li></ul><ul><li>Vendor and physician relationships </li></ul><ul><li>Lack of physician interest or engagement in managing supply cost with the hospital </li></ul><ul><li>Rapid introduction of new technology requires organizational alignment for decision making </li></ul>
    7. 7. Critical Questions <ul><li>If supply chain management were a strategic organizational priority, would it address hospitals’ supply chain challenges? </li></ul><ul><li>What are the proven strategies that can be employed to reduce supply costs and make and sustain a positive impact on key organizational performance metrics? </li></ul><ul><li>What tactics achieve the greatest results? </li></ul><ul><li>What are the defining supply chain management characteristics of a high performing organization? </li></ul>
    8. 8. Supply Expense (excl drugs)/ CMI-Adjusted Discharge Source: UHC Operational Data Base – Q3 2007 90 th Percentile 10 th Percentile 75 th Percentile 25 th Percentile Median
    9. 9. Surgical Services Medical Supply Expense/Case Source: UHC Operational Data Base – Q3 2007 90 th Percentile 10 th Percentile 75 th Percentile 25 th Percentile Median
    10. 10. Collaborative Approach <ul><li>Uncover the characteristics that high-performing member organizations demonstrate in supply chain and overall </li></ul><ul><li>Share the supply chain management strategies that drive supply chain excellence </li></ul><ul><li>Assist members in implementing these proven strategies and tactics </li></ul><ul><li>Track, demonstrate, and reward improvement </li></ul>In September 2007, UHC launched the Supply Chain Performance Excellence Collaborative to:
    11. 11. Collaborative Overview Determine measurement and ranking methodology Conduct blinded site visits and interviews Compile and validate findings Report findings and present awards at annual forum Implement findings, distribute White Paper Data request sent to members Gather data from UHC data sources Compute ranking scores Select top and middle performers Sept 2007 Oct 2007 Oct 2007 Oct 2007 Oct 2007 Dec 07 – Jan 08 Jan 2008 Feb 2008 Advisory Team Initial Meeting Sept 2007 Ongoing
    12. 12. Data Collection <ul><li>Data collected from UHC’s Operational Data Base </li></ul><ul><li>Data request sent to members that do not participate in UHC’s Operational Data Base – 10 respondents </li></ul><ul><li>Required data fields </li></ul><ul><ul><li>Total Supply Expense (Excl Drug) per CMI Weighted Adjusted Dx </li></ul></ul><ul><ul><li>At least 2 departmental supply expenses measures and/or operating margin % </li></ul></ul>
    13. 13. Data Normalization <ul><li>Used variety of data transformation techniques to fit each measure to the normal distribution </li></ul><ul><li>Extreme outliers assessed individually for data quality </li></ul><ul><li>When appropriate, extreme outliers excluded and scored accordingly </li></ul><ul><li>Number of standard deviations from the mean used as basis of scoring </li></ul>
    14. 14. Organizational Performance Score Mortality Safety Effectiveness Supply Cost (excl Pharm)/ CMI Adjusted Discharge Pharmacy ($/Pharm Intensity-Weighted Discharge) Cardiology ($/RVU) Overall Organizational Performance Score Surgical Services ($/case) Operating Margin Equity Quality and Safety Composite Score from UHC’s Quality & Accountability Study
    15. 15. Site Visit Selection <ul><li>Scoring resulted in ranking of all UHC members included in study </li></ul><ul><li>3 members selected from top 10 percent and 3 selected from 50 th percentile </li></ul><ul><li>Blinded onsite interviews completed with organizations to understand the strategies and tactics each employed to manage their supply chain </li></ul>
    16. 16. <ul><li>What did we learn? </li></ul><ul><li>What can you do? </li></ul><ul><li>Which AMCs were the better-performers? </li></ul>Achieving Excellence
    17. 17. Key Findings <ul><li>Engaged Leadership – Support is Driven from the Top Down </li></ul><ul><ul><li>Senior leaders see supply chain management as a vital strategic component of their organization </li></ul></ul><ul><li>Physician Support </li></ul><ul><ul><li>Physician leaders are active members in cost savings initiatives and participate in Value Analysis or Product Review Teams </li></ul></ul>The organizations with high-performing supply chain management consistently demonstrated these key characteristics:
    18. 18. <ul><li>Culture of Shared Purpose and Ownership </li></ul><ul><ul><li>Supply chain goals are aligned with the organization's goals and are shared throughout the organization. All staff exhibit a sense of ownership in managing supply chain </li></ul></ul><ul><ul><li>Multidisciplinary teams are used throughout the organization to support process improvement initiatives and to manage new product evaluation. Lean principles are prevalent </li></ul></ul><ul><ul><li>Structured educational programs are used to train all levels of employees and physicians on their role in supply chain management </li></ul></ul><ul><ul><li>Leaders are never complacent and are always looking for ways to improve operational efficiency and to save money </li></ul></ul>Key Findings continued
    19. 19. <ul><li>Data-driven Decision Making </li></ul><ul><ul><li>Supply chain and financial performance data are shared across the organization and everyone understands their part in driving the numbers – transparency </li></ul></ul><ul><ul><li>Dedicated analytical staff analyze data and share supply chain analysis throughout the organization to drive decision making </li></ul></ul><ul><li>Vendor Management and Strategic Relationships </li></ul><ul><ul><li>Rigorous vendor management policies are adopted and practiced, which regulate vendor access and engagement </li></ul></ul><ul><ul><li>Promote strategic relationships with vendors and integration of these external partners into supply chain management </li></ul></ul>Key Findings continued
    20. 20. Pitfalls to avoid <ul><li>Setting up a process (Value Analysis, Vendor Management) without the support of administration, department heads, physicians </li></ul><ul><li>Assuming physicians do not care about costs and pose insurmountable barriers </li></ul><ul><li>Being DRIP – Data Rich, Information Poor </li></ul><ul><li>Developing budgets solely on prior year performance </li></ul><ul><li>Assuming incentive plans and gain-sharing increase success </li></ul><ul><li>Avoiding opportunities to establish collaborative relationships with vendors or assume they do not care about the financial health of your organization </li></ul>
    21. 21. Your Checklist for Supply Chain Excellence <ul><li>Engage senior leaders - Make supply chain management a strategic priority for leadership </li></ul><ul><li>Create an environment of involvement and shared purpose </li></ul><ul><ul><li>multidisciplinary teams </li></ul></ul><ul><ul><li>physician involvement </li></ul></ul><ul><ul><li>demonstrated value (quality, cost, and reimbursement) for new products </li></ul></ul><ul><li>Use data for effective decision making </li></ul><ul><ul><li>Set cost reduction goals for department leaders and provide detailed supply chain data to managers to support effective supply chain management and drive good supply chain decisions </li></ul></ul><ul><li>Establish effective communications and a structured educational program for staff and physicians at all levels to teach the value of effective supply chain management for overall organizational excellence </li></ul>
    22. 22. Continuing the journey… <ul><li>Publishing the study </li></ul><ul><ul><li>HFMA – Healthcare Cost Containment </li></ul></ul><ul><ul><ul><li>-Collaborative Overview, June 2008 Issue </li></ul></ul></ul><ul><ul><ul><li>-Better Performer Case Studies (June, July, August 2008 Issues) </li></ul></ul></ul><ul><ul><li>UHC Supply Chain Performance Excellence Collaborative White Paper (May 2008) </li></ul></ul><ul><li>Assisting members interested in implementing findings </li></ul><ul><li>Refining of supply chain data </li></ul><ul><ul><li>Reporting </li></ul></ul><ul><ul><li>Metrics </li></ul></ul><ul><li>Continuing the study </li></ul><ul><ul><li>Track performance </li></ul></ul><ul><ul><li>Rank AMCs </li></ul></ul><ul><ul><li>Reward improvement </li></ul></ul><ul><ul><li>Share new knowledge </li></ul></ul>
    23. 23. Congratulations! Congratulations to the recipients of the first UHC Supply Chain Performance Excellence Collaborative Award
    24. 24. <ul><li>Questions? </li></ul><ul><li>Contact Information </li></ul><ul><ul><li>William Brewer </li></ul></ul><ul><ul><li>Senior Consultant </li></ul></ul><ul><ul><li>University HealthSystem Consortium </li></ul></ul><ul><ul><li>Oak Brook, IL </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul><ul><ul><li>630-954-6670 </li></ul></ul>Closing

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