Healthcare Webinar Slides

How do we Heal The Health Care
Value Chain?
A Closer Look at Healthcare
Providers

Supply Chain Insights LLC Copyright © 2013, p. 2
Presenters
Karen Conway
GHX
Lora Cecere
Supply Chain
Insights
Roddy Martin
Accenture

Healthcare Value Chain
Financial Metrics

Components of Cash to Cash

Supply Chain Organization:
Three-Quarters Have a Formal Supply Chain Organization

7 Functions Report Through It on Average;
Reports Primarily to Chief Financial Officer

Purchasing is Primarily Done Corporate-Wide

Hospitals: Measuring Value

Hospitals: Value Analysis

Value Analysis Group:
Supply Chain is Primary Leader;
Changing/Adding Products are Most Common Decisions

Value Analysis Program

Focus: Negotiating Lower Prices

Current State

SHARED
VISION
+ SKILLS + INCENTIVE + RESOURCES + PLAN + LEADERSHIP = CHANGE
SKILLS + INCENTIVE + RESOURCES + PLAN = CONFUSION
SHARED
VISION
+ INCENTIVE + RESOURCES + PLAN + LEADERSHIP = ANXIETY
SHARED
VISION
+ SKILLS + INCENTIVE + RESOURCES + LEADERSHIP =
FALSE
STARTS
SHARED
VISION
+ SKILLS + INCENTIVE + PLAN + LEADERSHIP = FRUSTRATION
SHARED
VISION
+ SKILLS + RESOURCES + PLAN + LEADERSHIP =
GRADUAL
CHANGE
Source: J.P. Kotter
Collaboration: The Right Stuff

Applying the
Supply Chain Index to Healthcare
A formulaic representation of
how companies are trading off
growth, profitability, cycle and
complexity performance on
selected supply chain financial
metrics against market
valuation.
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Step 1: Located data sources
Step 2: Selected core supply chain ratios from over 50 financial metrics
Step 3: Identified meaningful metrics per industry using regression analysis
among selected ratios
Step 4: Constructed industry equation based on correlation of industry
metrics to market capitalization values
Step 5: Determined company rankings within industry by applying 2012
company results to industry equation
Step 6: Analysis of peer group companies over the last decade
Step 7: Correlations to supply chain practices, technologies and
organizational design
Supply Chain Index Methodology
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– Market capitalization data of public companies
(Ycharts.com)
– Industry peer groups defined by Morningstar Sector
(36)
– Financial ratios built from balance sheet and income
statement data collected from OneSource
– Analysis of quarterly data using R (frequency 2006Q1
to 2012Q4)
Step 1: Located Data Sources
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Healthcare Value Chain

Value Chain
Metrics That Matter by Industry
Medical Care Industry Medical Distribution Pharmaceutical Major
Free Cash Flow Ratio Operating Margin Free Cash Flow Ratio
Working Capital Ratio Return on Invested Capital Return on Invested Capital
Operating Margin Free Cash Flow Ratio Altman Z
SG&A to COGS Ratio Working Capital Ratio Current Ratio
YoY Revenue Growth Return on Net Assets
Days of Payables
Outstanding
Current Ratio DPO/DSO Ratio
Days of Sales Outstanding Current Ratio
Days of Inventory Days of Inventory
Days of Payables
Outstanding

Medical Care Equation
Ln(market cap) = 6.24 + 16.33(FCF) + 10.34(WC) + 5.72(OM) –
2.39(SGAC) + 1.09(YOY) – 1.01(CR) + 0.02(DSO) + 0.01(DOI) +
0.01(DPO)
Medical Care Equation

Medical Distribution Equation
Ln(market cap) = 6.04 + 33.39(OM) – 24.69(ROIC) +
15.23(FCF) – 11.11(WC) + 1.49(RONA) + 1.37(DPODSO) +
0.83(CR) + 0.02(DOI)
Medical Distribution Equation

Major Pharmaceutical Equation
Ln(market cap) = 14.00 + 5.75(FCF) + 5.14(ROIC) – 4.02(AZ) –
1.09(CR) – 0.003(DPO)
Major Pharma Equation

Heathcare Value Chain

Implantable Devices: 15 Manual Steps
Typical process today involves 15 manual steps that are often
based on inaccurate catalog, pricing and charge data.

GHX Case Xpert Automation
Automation and process improvement eliminates or reduces labor needed in
process steps while significantly increasing accuracy and cycle-time.

• Redesign for value
• Focus on outcomes
• Management of end-to-end processes
How do we Heal the Healthcare Value Chain?

Our Focus
2-DAY PUBLIC
TRAINING
Princeton – June 24-25
Minneapolis – August 8-9
$1500
GLOBAL
SUMMIT
PODCASTS
www.supplychaininsights.com
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PAST SUPPLY CHAIN INDEX WEBINARS:
AVAILABLE ON DEMAND
• From September 24, 2012:
The Supply Chain Index, 20 Years in the Making:
A Focus on Process Industries
• From October 26, 2012:
The Supply Chain Index, 20 Years in the Making:
A Focus on Discrete Industries
Webinars
www.supplychaininsights.com/upcoming-webinars
#sciwebinar
UPCOMING WEBINARS
• May 23 rd: Supply Chain Index, Update, Part II
• June 13th: Sales and Operations Planning: State
of the Union
• July 11th: Big Data Supply Chains and the Future
of Analytics
• August 15th: State of Supply Chain Talent:
Missing Link in the Supply Chain
• August 29th: Digital Manufacturing

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