This document summarizes the transformation of the supply chain management at NYC Health and Hospitals Corporation (HHC). HHC is the largest municipal healthcare system in the US, serving 1.3 million patients annually. It was facing a $1 billion budget shortfall and needed to restructure its supply chain to reduce costs. The transformation established pillars like strategic sourcing, vendor management, and performance management to standardize processes and leverage the system's size. The results included over $8 million in supply savings in the first year and a projected $21.46 million in total annual savings from various initiatives. Key metrics were also implemented to track progress. The transformation of the supply chain was a critical part of HHC's "Road A

1. NYC Health and Hospitals Corporation
Supply Chain Management Transformation
Joseph Quinones
Franco Sagliocca, MBA, FACHE
Richard Olah, CMRP

2. 2
About HHC
• $6.7 billion integrated healthcare delivery system
• Largest municipal healthcare organization in the country
• MetroPlus is HHC’s own 400,000 member health plan
• Serves 1.3 million New Yorkers / year (475,000+ are uninsured)
• Provides medical, mental health and substance abuse services through:
▫ 11 acute care hospitals
▫ 4 four skilled nursing facilities
▫ 6 large diagnostic and treatment centers
▫ 70+ community based clinics
• HHC Health and Home Care also provides in-home services for New Yorkers
• 2008 recipient of the National Quality Forum
• 2008 recipient of The Joint Commission’s John M. Eisenberg Award for Innovation in
Patient Safety and Quality

3. 3
NYC HHC Networks

4. 4
Grappling with the Magnitude of the Problem
$1,000,000
At a Million dollars
the questions and trade-offs are important but focused
$1,000,000,000
At a Billion dollars
the questions and trade-offs involve thousands of NYC residents
and entire communities
The imperative for change was very clear for everyone

5. 5
Supply Chain Management is Accountable
for Sustaining Financial Stability
• Hospitals are the central focus of our modern healthcare
system, where the most advanced scientific knowledge and
technology meet the vulnerability of patients in need of care. They
rival the busiest hotel or the most bustling airport in the logistics of
admitting and caring for patients 24/7, and often serve as research
labs and teaching institutions as well. These complex enterprises are
as challenging to manage as a global business, but most hospitals
struggle because they aren’t run enough like businesses, says John
Hammergren in his book, ―Skin in the Game.‖ (Part 2 of 5)

6. 6
Total Cost of Ownership…
is a philosophy for really understanding all supply chain related costs of doing business
with a particular supplier for a particular good or service
-World Class Supply Management, 2003
Price Paid for a Product or
Service
Acquisition Costs Logistics Cost Quality Equation
Inventory Costs Inventory Risk
Cost to Serve
6

7. 7
The Environment (Opportunities)
* Opportunity
Maintenance, 21%
Other, 26%
NonSupply Cost Rx, 18%
Supply Cost, 30%
70%
Lab, 5%
Food, 3%
Med/Surg, 27%

8. 8
NYC HHC

9. 9
Business Case
Source: Oracle Healthcare Insight Study as reported in HFM magazine, June 2010

10. 10
Focus…
Order Price Focused
Takers/Placers
Box Movers
Evolving
Traditional Better Data to Drive Operational
and Clinical Excellence

11. 11
Pillars

12. 12
At the end of the day it’s all about…
EXCELLENT Patient Care
• The history of our healthcare system is an incredible story of
scientific and technological innovation, but its evolution is
incomplete. The gaps and disconnections can be addressed by
technologies already in existence, but they need to be widely and
consistently adopted. When advances in the following areas are put
into practice — transparency, connectivity, productivity and
efficiency, best practices, diagnostics, robotics, retail healthcare and
personalized medicine — we’ll be able to fulfill the promise of
putting the patient back into the center of care, says John
Hammergren in his book, ―Skin in the Game.‖ (Part 4 of 5)

13. 13
Savings
FY 2012 Savings Savings
Supply Savings (as of June 2011) Employee Redirection $ 2,240,000
Vendor Amount
Cardinal New Opportunities $ 2,000,000
NY blood & Service $ 3,422,631.00
Total $ 4,240,000
Braun IV Solutions and Sets $ 969,523.00
GE Savings on Preventive
$ 715,963.00
Maintenance Contract Physician Preference Items Savings
Cardinal Products $ 921,000.00 Orthopedics $ 2,000,000
Cardinal Growth Rebate $ 264,981.00
Surgical Solutions Scopes* $ 5,000,000
Citi Storage $ 650,000.00
US Surgical - Sutures Endomechanicals Conversion** $ 2,000,000
HWS Waste Amendment $ 215,000.00
Total $ 9,000,000
Braun Pump Savings Woodhull $ 115,750.00
Braun Pump Savings Coney $ 111,130.00 *Currently some use at Bellevue
**Currently some use at Bellevue and 100% use at Coney Island
Coney Second Year Warranty $ 75,000.00
Braun Second Year Warrnty $ 78,000.00
Met pumps savings $ 73,450.00
Projected Savings =
Met second Year Warrnty $ 48,750.00 $21.46M
Central Poly Savings Plastic $ 281,782.00
3 M SAVINGS $ 21,000.00
ARJO HUNTLEIGH $ 65,000.00
Contracts Media $ 192,384.89
Total: $ $8,221,344.89

14. 14
Metrics / Scorecard

15. 15

16. 16
Overview: Project Description
• The Road Ahead is a restructuring initiative that HHC is undergoing to
become a more cost-effective, more efficient, and stronger organization. To
meet new economic demands, to rise to the challenges of delivering
healthcare today, and to plan for the future, HHC must act now.
• What are the goals of The Road Ahead?
▫ To streamline care delivery for greater efficiency
▫ To restructure and combine some services to lower costs while maintaining needed capacity
▫ To ensure that changes are as fair as possible to our patients, communities and staff
▫ To preserve our essential mission of affording broad access to the uninsured
• If HHC is to continue to fulfill our mission to all New Yorkers, we must reduce our
costs of providing care and we must become the healthcare provider that New
Yorkers will choose. There will be difficult choices ahead. While every step is not yet
clear, The Road Ahead begins now.

17. 17
Overview: Challenges
• HHC is facing extraordinary financial deficits. Specifically, we will have a budget shortfall
of more than $1 billion in fiscal year 2011 (which begins July 1, 2010) and in the following years thereafter. What does this
mean to us as an organization? It will mean that there is
not enough money in the budget to continue to work the way we do. This will require us to
re-think the way that we operate our facilities and provide much of our care.
We are facing this dire financial future for several reasons, among them:
▫ Reduced funding from state Medicaid reimbursement • Reduced funding from the Federal Government • Growing
numbers of patients without health insurance • Increased healthcare equipment costs
▫ Higher costs for pensions and other benefits
• In addition, it is clear that HHC has important operational challenges as well as financial ones. We need to do better to
leverage the size of our system through collaboration and greater standardization of best practices. And we need to design
our delivery of care process so that it is consistently as efficient and patient-centered as possible. Beyond our own budget
challenges, the intense competition in our healthcare world means that we must earn patient loyalty every day. To do that,
we must:
▫ Make sure that the services offered meet the needs of today’s HHC patient
▫ More effectively deliver a continuum of care across HHC services to serve patients responsively at all stages of their
lives and
▫ Work together better across work areas, teams, and facilities to improve patient safety and satisfaction
Given our significant budget constraints, we expect that there will be reductions and consolidations in programs and
staff. Making these changes will be difficult but necessary if HHC is to be able to sustain our mission. We must keep our
morale up and remember that HHC has successfully navigated tough times before. We will do it again.

18. 18
Overview: Purpose
• As part of The Road Ahead, one of the goals is for every HHC facility to
become more productive and more effective. We are already doing good
work toward these goals, using other HHC resources that rely on the
ingenuity and support of employees to succeed. Our efforts in support of
Breakthrough are an important demonstration of how HHC employees can
work together to identify and implement process improvements. These
efforts are already yielding positive results, new revenue, and cost savings.
• The continuing commitment to Patient Safety is another good example of
how HHC employees have taken personal responsibility for doing the right
thing.
• By supporting our staff and serving our patients better, we'll also meet
another important goal: We will see satisfaction increase and our hospitals,
clinics, and long-term care facilities become the healthcare choice that all
New Yorkers will make.

19. 19
Overview: Moving Forward
• In 2009, the Restructuring Steering Committee – leaders from across HHC – began analyzing, planning, and working to
identify options to be considered as part of The Road Ahead – HHC’s restructuring strategy. The Restructuring Steering
Committee met often, consulted with outside experts, and established a broad agenda for change. In the spring of 2010, the
Restructuring Steering Committee deliberated, reviewed, and evaluated a range of very specific options, some of which have
been selected, some of which were rejected. The decision-making process balanced the need for deep cost-containment
actions with concern and consideration for HHC employees, targeted opportunities for growth, and the importance of
preserving HHC’s historic mission to care for all.
• Most of the options that are finally chosen will become part of The Road Ahead and will be implemented over the next four
fiscal years, beginning with fiscal year 2011 (which starts on July 1). They will all be discussed in detail in the weeks to come,
as the City’s budget gets worked out, but they reflect the hard realities of NYC in 2010. Some changes will happen quickly;
others will take longer to develop and implement.
• We have already brought staffing down by 1,000 full-time jobs through attrition – not filling every job when employees have
retired or voluntarily left HHC – but we will not be able to solely rely on attrition in the future and, as programs are
consolidated, staffing levels will need to be reduced. Planned workforce reductions will occur after discussions with labor
representatives and their implementation will be consistent with our collective bargaining agreements and our Personnel
Rules and Regulations.
These painful steps have been carefully considered by our Restructuring Steering Committee — which includes
representation from all of our networks. The Restructuring Steering Committee thoroughly weighed proposed actions and
recommendations from Deloitte and made decisions that are as fair as possible to all of our facilities, communities, patients
and staff. All employees should know that HHC is still advocating strongly for fair and supportive treatment from all
government funding sources. On a positive note, our collective work through Breakthrough and other major operational
improvement efforts are projected to close more than $200 million of our budget gap in the next fiscal year.