Doug Bowen, MBA, CMRP
Vice President Supply Chain, Banner Health
Dorance Dillon
Director of Supply Chain Management, Yavapai Regional Medical Center
Les Feka, MBA, CPM
Director of Supply Chain Operations, Tucson Medical Center
Mike Hildebrandt, CMRP
Associate Vice President of Supply Chain, Scottsdale Healthcare
Tam Tang B.S.E, MBA
Analyst, Catholic Healthcare West

Introductions

Facility Overview
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
Banner Health
Yavapai Regional Medical Center
Tucson Medical Center
Scottsdale Healthcare
Catholic Healthcare West
Panel Questions
•Non-profit Secular Multi-State Health System, formed
in 1999
•23 Acute Care Hospitals
•Long Term Care Units, Surgery Centers, Home Health,
Clinics, Hospice, Behavioral Health, Home Medical
Equipment
•3 Regions within Banner Health
•4,520 Licensed Beds
•35,300 Employees
•>60 Physician Clinics
•>550 Employed Physicians
“I realized that my role at Banner Health was
not to try to tell a physician which products
to use. My real role was to try to manage
the cost of the products coming in to
Banner. The benefit of capped pricing is
that you can allow as much physician choice
as you want, and the hospital is going to
pay the same price for the same product no
matter who the vendor is.”
Doug Bowen, Vice President, Material Management Banner Health
“A Team Approach to Cost Containment” HFM Magazine, April 2008
Banner is committed to an all-play
physician-driven free market strategy
◦ Surgeons are assured professional independence
to use the implant that best meets their patients’
needs
◦ All vendors will be asked to meet the fair price
points in all implant sales to Banner Facilities
(Non-contracted vendors will not be allowed to
conduct business at Banner)
◦ Reasonable control of implant costs consistent
with current market and reimbursement levels




2003
2006
2007
2010
–
–
–
–
Cardiology
Total Joints: Hips, Knees, Shoulders
Spinal Implants
Heart Valves

Surgeon resistance
◦ Surgeons had to be trained on use of new implant systems
◦ Only 3 surgeons left BH hospitals due to not being able to
use their preferred total joint vendor

“Special” circumstances at certain hospitals
◦ Small, rural hospitals often have only one specialty
surgeon; don’t want to alienate them

Assurance that correct pricing was billed by the
vendor
◦ Built Lawson item numbers for capped pricing
◦ Created charge sheets that contain capped price and charge
code info (we no longer accept vendor charge sheets on
totals)

Communication
◦ Inform and engage surgeons and administration
◦ Use multiple means to communicate





Conference call w/live meeting
PowerPoint
Letters
Internal website
Data
◦ Know your data
◦ Research
 Vendors
 Benchmark pricing
 Contracting programs at other facilities


Formed in 1940 as not-for-profit, locally
owned & locally operated, healthcare IDN.
2 Great Hospitals…One caring Spirit: Prescott
& Prescott Valley – Totaling 206 beds. 1800
Employees

Women’s center, Wound Care, Home Health,
Hospice, Imaging Centers, etc.

6 Physician clinics, with 17 physicians


TMC HealthCare is Southern Arizona's
regional nonprofit hospital system with 642
adult, pediatric and behavioral health beds.
The hospital serves more than 30,000
inpatients and 122,000 outpatients yearly.
TMC's campus also serves as home to the
Tucson Orthopedic Institute, the Cancer Care
Center of Southern Arizona and the Children's
Clinics for Rehabilitative Services.



Value Analysis
Capped Pricing
Data Mining

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
Scottsdale Healthcare is a not-for-profit organization led by a volunteer
board of directors comprised of leading local citizens. That means we
answer to our community, rather than stockholders.
A leader in medical innovation, talent and technology, Scottsdale
Healthcare was founded in 1962. Today, we serve the entire Northeast
Valley and beyond through two comprehensive medical centers and the
first hospital north of the Loop 101.
Scottsdale Healthcare also offers outpatient surgery centers, home
health services, and a wide range of community health education and
outreach services. Not to mention clinical and research services not
typically found in community healthcare systems.
Our compassionate staff members and expert physicians are dedicated
to providing world-class patient care. Supporting Scottsdale Healthcare's
staff in providing patient and family-centered care is a corps of 800
volunteers who donate more than 155,000 hours of service each year.

Capped Pricing whenever possible

Provide Physician Choice

2010 – Spinal Implant Capitated Program

2010 – Cardiology

2011 – Total Joint Capitated Program

2011 – Bone and Biologics

Partner with GPO to get Benchmark Pricing Data and
Physician Utilization Information

Begins with senior administration, service line directors, supply chain, physician
leaders and department managers

Develop physician compact agreements

Conduct physician surveys annually

Supply chain reports at medical staff and section meetings

Provide capital equipment support to physicians

Provide GPO physician practice purchasing cost savings and support

Work with physicians to improve quality process flows – (block times, start times,
scheduling)

Gain physician support prior to any cost savings initiatives

Recognize physician's by name for success stories

Celebrate successes
Catholic Healthcare West
• Fourth largest not-for-profit
system in the U.S.
• Consistent year-over-year
operating performance
• $10.9 billion in assets
• Leader in quality and safety
• Employing 53,000 people
• Associated with more than
10,000 physicians
• Offering care to a population of
more than 22 million people
• Serving growing communities
• Helping to shape healthcare
reform



2000 - Cardiology
◦ Facility market share & volume commitment
for price tier
◦ System market share aggregation to
leverage price with preferred vendors
◦ System aggregation and blended
commitment to 2 preferred vendors
2007 – Total Joints Implants
◦ Cap pricing
◦ Local and regional contracts
2010 – Spine Implants
◦ Price parity
Phase 1
Detailed Survey & Analysis


Gather spend data and analysis
◦ Total spend by surgeon and device
◦ Margin gaps
◦ Practice pattern variations
◦ Sourcing approach (formulary or discount)
◦ Savings and revenue opportunity
On-site observations / interviews
◦ Surgeon – sales representative relationships
◦ Price compliance in the market with surgeon
consulting relationships
Phase 2
Cardiology & Total Joints Strategy

Established Cardiovascular Operations Council
◦ Service line VPs, Directors, Medical Directors

Appoint task force committee for select contracting projects


Surgeon Involvement
◦ Make a case for change and improvement
◦ Jointly develop the constructs / discount tactics
Sourcing
◦ Customized constructs with definitions understandable by
surgeons
◦ Model price points with defined constructs

Coordinate with Board / Medical Executive Committee

Execute purchase agreements with vendors
Phase 3
Manage

Growth Reporting
Manage the implant formulary
◦ 100% charge capture
◦ 100% on contract
◦ 100% maintenance of the implant log (ie,
recalls, serial numbers)
◦ 100% coding validation

Track contract compliance and utilization

Track/report implant cost per case and
volume
O'Quinn
Hunt
CHW
Contract Compliance Report
By Facility Across all Contracts
Q1
Q2
Q3
Q4
Facility
Med/Surg Contracts
Bakersfield Memorial
94% 90% 95% 97%
Dominican
93% 95% 93% 89%
Mark Twain
81% 84% 88% 86%
Mercy Folsom
93% 92% 94% 97%
Mercy General
88% 89% 93% 86%
Mercy Bakersfield
97% 96% 98% 95%
Mercy Merced
96% 96% 93% 94%
Mercy Mt. Shasta
93% 90% 92% 96%
Mercy Redding
95% 92% 92% 92%
Mercy San Juan
92% 92% 98% 95%
Mercy Southwest
100% 94% 98% 98%
Methodist
90% 92% 95% 97%
Saint Francis
91% 94% 93% 95%
Sequoia
92% 94% 91% 92%
Sierra Nevada
92% 93% 88% 94%
St. Elizabeth
93% 93% 94% 93%
St. Joseph's - Stockton
93% 92% 94% 91%
St. Mary's - S.F.
88% 82% 83% 90%
Woodland
91% 96% 95% 94%
Arroyo Grande
94% 95% 94% 98%
California Hospital
97% 93% 93% 93%
Chandler Regional
91% 93% 91% 87%
Comm Hosp San Bernardino
94% 93% 93% 95%
French
90% 91% 91% 95%
Glendale
95% 95% 95% 94%
Marian
100% 96% 95% 90%
Mercy Gilbert
91% 92% 90% 89%
Northridge Roscoe
92% 90% 91% 91%
Saint Mary's Reno
88% 90% 95% 97%
St. Bernardine
93% 88% 87% 88%
St. John's Oxnard
91% 92% 93% 95%
St. John's PV
91% 92% 92% 96%
St. Joseph's - Phx
94% 96% 93% 91%
St. Mary - Long Beach
97% 93% 96% 95%
St. Rose Delima
93% 95% 92% 94%
St. Rose San Martin
91% 91% 97% 90%
St. Rose Siena
91% 93% 94% 95%
CHW System
93%
92%
93%
93%
Q1
Q2
Q3
Q4
Q1
Q2
Pharmacy Contracts
Utilization
92%
67%
92%
81%
96%
88%
85%
82%
85%
96%
88%
92%
88%
73%
96%
92%
81%
92%
96%
83%
96%
96%
92%
92%
85%
92%
92%
85%
83%
96%
73%
73%
100%
92%
96%
85%
88%
100%
88%
96%
77%
92%
82%
96%
100%
100%
85%
81%
100%
96%
88%
92%
86%
100%
100%
92%
96%
96%
96%
92%
92%
92%
92%
92%
83%
88%
77%
83%
100%
96%
85%
100%
96%
96%
100%
75%
92%
88%
92%
71%
100%
100%
100%
92%
77%
100%
100%
96%
96%
100%
92%
100%
100%
81%
100%
100%
88%
96%
100%
92%
100%
92%
83%
96%
81%
92%
100%
92%
96%
92%
88%
100%
86%
93%
93%
93%
87%
93%
93%
100%
80%
77%
97%
100%
93%
96%
96%
93%
100%
100%
85%
100%
93%
83%
93%
93%
87%
100%
86%
73%
90%
79%
86%
93%
93%
97%
90%
90%
57%
50%
71%
88%
93%
88%
92%
88%
75%
79%
89%
83%
64%
93%
81%
100%
83%
67%
93%
100%
92%
100%
89%
88%
86%
83%
64%
93%
64%
89%
58%
94%
79%
88%
100%
100%
81%
63%
56%
79%
81%
88%
64%
78%
89%
88%
69%
88%
88%
93%
94%
63%
94%
94%
70%
86%
93%
86%
88%
88%
94%
69%
100%
69%
94%
81%
83%
75%
94%
67%
83%
100%
100%
100%
88%
92%
93%
91%
83%
83%
Q3
Q4
Q1
Q2
Q3
Q4
Combined
75% 81%
56% 57%
93% 86%
100% 81%
88% 88%
69% 75%
81% 81%
93% 92%
88% 94%
63% 75%
88% 88%
88% 88%
69% 71%
94% 94%
81% 94%
94% 93%
78% 67%
63% 81%
93% 100%
100% 81%
71% 86%
81% 81%
88% 94%
88% 86%
69% 79%
100% 100%
75% 69%
72% 72%
81% 81%
56% 56%
81% 94%
100% 93%
69% 75%
81% 94%
94% 100%
100% 88%
88% 88%
82%
84%
91%
85%
82%
90%
90%
95%
94%
91%
91%
92%
97%
90%
88%
89%
91%
93%
90%
87%
92%
93%
97%
92%
93%
90%
92%
97%
89%
91%
85%
93%
85%
88%
94%
96%
94%
91%
90%
89%
90%
86%
88%
90%
91%
94%
91%
93%
89%
91%
93%
94%
93%
90%
92%
84%
96%
95%
93%
93%
93%
92%
92%
96%
90%
91%
88%
88%
88%
91%
93%
93%
91%
96%
93%
94%
94%
87%
89%
94%
92%
91%
93%
93%
93%
94%
94%
95%
91%
92%
89%
95%
92%
84%
96%
92%
93%
92%
92%
92%
93%
95%
90%
89%
92%
85%
90%
93%
92%
94%
93%
96%
92%
96%
86%
87%
94%
88%
91%
93%
95%
94%
90%
93%
96%
94%
92%
94%
93%
89%
91%
96%
94%
94%
87%
92%
94%
93%
90%
89%
88%
91%
85%
92%
94%
90%
95%
95%
90%
93%
91%
91%
92%
92%
Glendale
California
French
Marian
Sequoia
Arroyo Grande
St. Mary SF
Mercy Bakersfield
St. Mary LB
St. Elizabeth
St. Francis
Mercy Mt Shasta
Chandler
St. Bernardine
Mercy Gilbert
Sierra Nevada
St. Rose Siena
Mercy General
Northridge
Mercy Folsom
Mercy Merced
Dominican
Mercy Redding
Methodist
Woodland
Mercy San Juan
Bakersfield Mem
Saint Mary Reno
Mark Twain
St. Joseph Stockton
St. Rose DeLima
St. Rose San Martin
Comm San Bernardino
St. Joe's Phx
St. John PV
Avg Implant Cost/Case
$12,000
$10,000
100
$8,000
80
$6,000
60
$4,000
40
$2,000
20
$-
Volume
CHW Hip chart
Hip Implants: Average Implant Cost and Volume by Hospital (Q4F09)
120
Significant
Incremental Improvements
0
Focus on
These
Facilities
CHW Knee chart
Knee Implants: Average Implant Cost and Volume by Hospital Q2FY09
From Worst
Performance to Best
New Facilities for Focus
DES Stent
Bare Stent
y
Facility
DES Avg
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36% 35%
40% 39%
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St
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Drug Eluting Stent Utilization
CHW Stent Utilization
Stent Usage By Facility - FY08 Q2
100%
25% 23%
60%
50%
40%
75%
77%
49%
55%
42%
32%
10%
14%
0%

In collecting data, what source do you utilize for
◦ Internal benchmarks




Hospital to Hospital
Budgetary goals
Surgeons, volumes, cost per procedure
Vendor contract variation




GPO
IMS Health Inc.
ECRI
AHRMM PPI Surveys when available
◦ External benchmarks
◦ Reimbursement
 DRG benchmarks
 Third party reimbursement
◦ Clinical evidence
 SHC uses GPO data for external benchmarking plus the MIDAS
system for internal clinical data

In your contracting process do you utilize a
value analysis process and evidence based /
peer reviewed data?
◦
◦
◦
◦
Yes, value-analysis process
Clinical data requested as available
Level of clinical involvement
Evidence based / peer reviewed data

Do your agreements include key contract
clauses that address the following and if so
what do they say?
◦ Product exclusions
 Statement No-Product exclusions
◦ New technology
 FDA 510k non-predicated device
◦ Premium technology
◦ Wasted products
 Vendor waste
 Surgeon waste
◦ Lost Instruments
◦ Consignment inventory
 Expect vendors to provide

Are off contract vendors allowed to conduct
business at your hospital?
◦ No

Is there a lock-out period for nonparticipation?
◦ Yes – 1, 2, or 3 years
◦ Mandates that all vendors must comply with the
contract terms. If the vendor is unable to comply,
there is a lock-out period established

How do you address billing on capped
agreements?
◦ Price points for all components or one price
 Single price for hips, knee, partial
 Knees by type of procedure
 Spine capped components
 Ala-carte
 Per level
 Break cap price up through all components to meet
construct price
◦ Vendor vs. Hospital Charge Sheets
 Hospital

How have you addressed surgeon resistance
to contracting physician preference items?
◦ Put the pressure back to the vendor
◦ SHC seeks to obtain physician input and support
prior to the implementation of capped programs.
When surgeon resistance is established, SHC
attempts to work collaboratively with the surgeon,
service line leader, and chief medical officer.

Which items are considered outside of your
cap?
◦
◦
◦
◦
Custom Cutting Blocks
Sawblades
Cement
Products or items that fall outside the caps are
dealt with by a small task force which includes the
service line leader, service line medical director,
and chief medical officer if necessary.

Once the contract is in place what do you do
to ensure you are receiving the contracted
price?
◦
◦
◦
◦
As soon as case is done
Purchase/invoice processing
Monthly audit reports
Manual