Supply chain transformation:
Setting the stage to improve your bottom line
Heather O’Sullivan
VP, Clinical Operations
Steve Thompson
VP, Supply Chain Innovation
Cardinal Health™ Inventory Management Solutions
October 1, 2015
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trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
Welcome
• Healthcare trends impacting the supply chain
• Why traditional approaches to the supply chain are
no longer working
• Alternative ways to manage inventory and clinical
efficiency
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© 2015 Cardinal Health. All Rights Reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are
trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
About Cardinal Health
Recognized leader in healthcare supply chain transformation
• Ranked #1 by Gartner 2011-2013 for transforming the
healthcare value chain to meet new challenges around costs,
revenue and outcomes
Unparalleled understanding of healthcare value chain
• Nearly 100 years of experience serving hospitals
• 40+ years of leading supply chain solutions
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© 2015 Cardinal Health. All Rights Reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are
trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
Shift from pay for volume to pay for value
Health and Human services has set explicit goals for alternative
payment models and value based payments
Alternate Payment Models (e.g.,
bundled payments, ACOs)
20%
60%
30%
50%
Fee-for Service (FFS) Linked to
Quality or Value
55%
40%
Traditional FFS Payment
20%
15%
10%
2014
2016
2018
Source: CMS.gov
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trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
Impact on providers
What does value-based care mean to
providers?
• Pressure to reduce spending while improving
quality of outcomes
• Financial risk and costs shifting from payor to
provider
• Pressure for providers to demonstrate
differentiated outcomes
• Increase in the need for better care
coordination and patient care
Source: Deloitte Center for Health Solutions. “The road to value-based care.” 2015
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trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
A changing landscape
Affordable Care Act (ACA)
Expenses
Regulatory requirements
• Unique Device Identification (UDI)
• Joint Commission audits
10 percent
other
Census and demographics
• 10,000 people turning 65 every day
• 10M Americans over 80
• 20 percent population >65 by 2030
35 percent
materials
Pressure to reduce costs
• Reimbursements are declining
• Products are being commoditized
55 percent
labor
Source: The Centers for Disease Control and Prevention (CDC), The State of Aging and Health in America, 2013
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trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
Immense waste in the supply chain
Does not include
indirect costs of:
Millions
• Excess time spent by
nurses searching for
inventory
• Time spent (or patient
risk) during product
recalls
• Risk of non-compliance
to regulations set by
Joint Commission
10%-30%1
Waste in PPI supply chain
$5,000,000,0002
Estimated loss per year
1- Modern Healthcare “Losing preferential treatment” (February 2013)
2- PNC Healthcare; GHX quantitative research study (August 2011)
•
Source also applies to chart
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trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
Managing costs within the supply chain
Rising product costs
Nature
of product stocking
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CARE are trademarks or registered trademarks of Cardinal Health.
Manual/multiple
inventory systems
Barriers to data sharing
How do things work in retail?
Manufacturer
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Distributor
Distributor
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trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
Supermarket
Consumer
…and for a hip prosthesis in the OR
?
Manufacturer
10
?
Hospital
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trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
?
Patient
10 barriers to effectively managing inventory
1
2
3
4
5
Difficulty with charge/cost
capture
6
Consignment
7
D
Duplications
8
Lack of automated inventory
systems
9
Multiple supply categories
10
Consignment
Physician preferences
Diversity of procedures
and service lines
Expiration/Obsolescence
Limited data
Source: Gagliardi, A., Supply Chain Management Inventory Control: The Basics, ASCs Conference, 2010
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trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
What are the priorities?
Eliminating
product waste
Charge/cost capture
Supply Chain
Optimized par levels
Regulatory
compliance
Business
Manager
Director
Having the right
product when
needed
Visibility to
product
Clinician
Patient care
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trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
Documenting
implants
From 12 steps to two
Number of steps within the workflow:
Current manual state:
With automated
inventory management:
Number of steps*
Number of steps*
*Process is repeated for each additional item opened during a case
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trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
Where to begin
• Recognize there is a problem
• Agree on the vision
• Build alignment with key stakeholders
• Assess the current state
• Understand automation options and
impact on key areas including point of
use
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trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
Inventory management best practices
Best practice
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Reason
Using an RFID-enabled
system
•
•
Real-time visibility, accurate tracking and intuitive
Unique Device Identification
Using 2-bin Kanban
methodology
•
Used for commodity products
Point-of-care charge/cost
capture
•
•
Eliminate manual processes
Improve compliance and accuracy
Interface with systems
•
Integrate inventory management into data analysis system
No cycle counting
•
•
High compliance — because it’s a reliable, trusted process
Clinicians not involved in PAR level reconciliation
Strong analytics platform
•
More predictable ordering patterns and ability to use data to
optimize purchasing
© 2015 Cardinal Health. All Rights Reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are
trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
An ideal inventory management solution
Integrated
advanced
analytics
Low-cost supplies
like gauze
and bandages
Low-cost supplies
that require
each-level tracking
Surgical packs and
other mid- to
high-cost supplies
High-cost
physician
preference items
and implantables
Low
product cost
High
product cost
2-Bin Kanban
Barcode
RFID-enabled
Smart Wand
© 2015 Cardinal Health. All Rights Reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are
trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
RFID-enabled
Smart Cabinets
Cost per case
© 2015 Cardinal Health. All Rights Reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are
trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
Cardinal Health™ Inventory Management
Solutions for the OR
2. Store inventory
a. Central supply
b. Core
1. Receive product
a. Add RFID-tag
b. Scan
3. Pick for procedure
5. Manage inventory
a. Advanced analytics
b. Smart order
c. Enterprise visibility
d. Expiration management
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© 2015 Cardinal Health. All Rights Reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are
trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.
4. Use and document
a. Scan for charge capture and/or tracking
b. Return unused items
Q&A
Heather O’Sullivan
VP, Clinical Operations
Steve Thompson
VP, Supply Chain Innovation
gmb-cims@cardinalhealth.com
614.553.5322
www.cardinalhealth.com/cims
© 2015, Cardinal Health. All Rights Reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are
trademarks or registered trademarks of Cardinal Health. All other marks are the property of their respective owners.