Maximizing Cost Savings Through Effective Process, System, and Contract Management Melissa Amell Director, MMIS and Value Analysis Brian Mikel Director, Materials Management Saint Thomas Health Services Nashville, TN Overview Saint Thomas Health Services Background Organization Structure Materials Management Information Systems (MMIS) Background Value Analysis Background Relationship and System Management Saint Thomas Health Services (STHS) System Structure St. Thomas Health Services 4 hospitals in middle Tennessee $200 Million supply budget Over $1 Billion annual revenue Baptist Hospital 600 beds 6,500 babies delivered each year Largest total-joint hospital in the area Official healthcare provider for the Tennessee Titans and Nashville Predators Saint Thomas Health Services (STHS) System Structure St. Thomas Hospital 571 beds One of the top five cardiac programs in the nation More than 245 heart transplants 52,000 open heart procedures performed Middle Tennessee Medical Center 286 beds 30 different medical specialties Over 55,000 patients visit the ED 2,500 babies delivered each year Saint Thomas Health Services (STHS) System Structure Hickman Hospital Critical Access Hospital Senior Care program Local home health program Nursing home STHS Previous State System-level value analysis teams did not exist Each facility operated independently Separate materials management systems Limited corporate sponsorship Limited accountability for cost savings and contract compliance Previous Value Analysis Team (VAT) Structure Prior to development of current structure, VAT program made little progress Prior structures allowed for little interaction between hospitals Limited Clinical Representation Representation in the past restricted the ability to “standardize” across all hospitals Supply Chain Structure Vice President Logistics Services & Support Environmental Services (Contractor) Bio-Med (Contractor) Food & Nutrition (Contractor Materials Director Purchasing Director MMIS / Value Analysis Director Mailroom Supervisor (1) Operations Manager (3) (one per hospital) Purchasing Agent (2) Senior Supply Analyst (3) Mail Clerk (4) Supervisor (5) Buyer (8) Supply Analyst (3) Materials Management Team Lead (7) Materials Management Specialist (52) Value Analysis Assistant Materials Management Information System (MMIS) Structure Vice President Logistics Services & Support Director MMIS & Value Analysis Senior Supply Analyst Surgery Items Senior Supply Analyst Contract Management Senior Supply Analyst Item Master Product Conversions Supply Analyst Item Master Approval Process Supply Analyst Vendor Master Item/Contract Research Supply Analyst Item Master Product Conversions Value Analysis Assistant MMIS Structure Responsible for maintaining these master files: Item Vendor (AP and PO) Location Vendor item Contracts Approval Process and Requesters MMIS Through the establishment of MMIS: Data is standardized and accessible Item, vendor, and contract master files are only accessed/maintained by the MMIS group (changes are logged in audit trails) Contract pricing is evaluated (audited) against actual purchases Contracts and/or purchasing patterns are modified as discrepancies are identified Value Analysis Team (VAT) Structure Vice President Logistics Services & Support Cardio-Vascular E.P. Director MMIS & Value Analysis Surgical Services Medical/Surgical Medical Imaging and Cath. Lab Support Services Pharmacy Lab Value Analysis Team (VAT) Structural Importance Current structure promotes system standardization Multi-disciplinary participation Clinical representation is key to selection/implementation success VAT priorities supported by senior leadership (i.e., system CEO, COO, CFO) Appoint key clinical leaders and ask leaders to select operational representatives (clinicians are required for success) VAT Purpose Reduce non-wage expenses while providing quality products and services Create a structure that supports product and service utilization Standardize vendors, products and services Manage new products and technology Identify and convert to best practices and protocols VAT Objectives Provide a strong, system-wide VAT framework Increase management, employee and physician awareness, while increasing participation and accountability for decision making and management of non-wage costs Communicate product utilization guidelines VAT Objectives Communicate system-wide policies and procedures Assure timely, consistent processes for vendor selection, product introduction, trial/evaluation activities, and conversion Monitor and measure product and service utilization Document and track savings VAT Meeting Structure Meetings are facilitated by the MMIS/VAT Director, and initiatives/topics are updated via the assigned task leader Each VAT meets monthly or as determined necessary by the group (e.g., bi-monthly) Meeting minutes are recorded, published, and reviewed by team members Initiatives/topics identified during meetings are assigned to hospital representatives VAT Meeting Structure New initiatives are added/discussed as required Contract expiration Corporate direction GPO decisions Clinical preference (physician/nursing) Product effectiveness/quality Conversion timing, buy-outs, and obstacles Safety VAT Meeting Structure Executive Sponsorship/ Leadership from the C-Suite Future agenda items include updating the team on initiatives/topic progress Meetings are scheduled for 2 hours MMIS/VAT Director reassigns tasks as required and follows-up with contracted vendors VAT Process Identify opportunity Discuss product requirements Identify vendors Conduct cost comparison Evaluate/select products Convert Document savings Cross Reference Cost Analysis Current Items Current Current MFG Conversion Annual Current Extended Facility Facility ID# Location Distributor Manufacturer Description Product # Factor Packaging UOM Usage Cost Cost Proposed Items MFG Law son Product Conversion Each Annual Manufacturer Num ber Description # Factor Packaging UOM Price Cost Savings Savings Standardization Standardization examples Orthopedic implants (3 vendors) over $1 million savings on $15 million spend CRM/CRT products (2 vendors) $859,000 savings Spinal implants (3 vendors) $400,000 savings Cochlear implants (2 vendors) $291,000 savings Peripheral Products (2 vendors) $462,000 savings Standardization Limited vendor benefits include cost savings and reduced O.R. time (e.g., setup) General medical supplies – 90 percent contract compliance – single distributor Moving to direct shipments where appropriate Current direct conversion will result in $60,000 annual savings (one vendor) Savings Documentation A project sheet is maintained by the MMIS/VAT Director for each team (templates can be sent upon request) After conversion, savings are tracked for 12 months Potential opportunities are listed Realized savings are reported quarterly to VAT and system leadership VAT Project Sheet Project Drug Eluting Stents-Price Reduction Baptist Hospital St. Thomas Hospital Middle Tennessee Medical Center Closure Devices Baptist Hospital St. Thomas Hospital Middle Tennessee Medical Center Baptist Hospital St. Thomas Hospital Middle Tennessee Medical Center Ablation Catheters (per AH doc) Baptist Hospital St.Thomas Hospital Middle Tennessee Medical Center Nat'l / Team Launch End Date Local Leader Date Projected Annual Savings Projected Projected FY08 Qtr 1 FY07 FY07 Savings Savings Savings Impact Impact N Cline Jul-06 Jun-07 $ 504,710 $ 504,710 N Cline Jul-06 Jun-07 $ 236,420 $ 46,800 $ 117,300 $ 27,610 $ 630 $ 44,080 $ 236,420 $ 46,800 $ 117,300 $ 27,610 $ 630 $ 44,080 N $ 4,123 $ 4,123 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 23,125 2,325 20,800 13,890 2,000 600 270 11,020 - Qtr 2 FY07 Savings Qtr 3 FY07 Savings $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 25,320 $ 16,100 $ 4,350 $ 725 $ 20,970 $ 15,375 $ - $ $ 2,100 $ 500 $ 1,500 $ 500 $ - $ $ - $ $ - $ $ 600 $ $ - $ $ - $ $ - $ $ - $ $ - $ - $ 86,615 $ 900,891 22,070 2,185 19,885 12,619 1,000 600 11,019 - Qtr 4 FY07 Total YTD Savings FY07 Savings $ 29,109 $ - Pacemakers and Defib's Baptist Hospital MTMC St. Thomas Hospital L Cline Jul-06 Jun-07 $ 900,000 $ 900,000 $ 242,889 $ 117,577 $ 670 $ 124,642 $ 162,467 $ 62,343 $ 1,080 $ 99,044 $ 245,269 $ 59,823 $ 2,757 $ 182,689 $ 250,266 $ 71,193 $ 7,699 $ 171,374 Heart Failure Devices Baptist Hospital St. Thomas Hospital Coronary Stent Pricing Baptist Hospital St. Thomas Hospital MTMC Cardiac Grand Total L Cline Jul-06 Jun-07 $ 450,000 $ 450,000 L Cline $ 200,000 $ 200,000 $ 81,000 $ 28,000 $ 53,000 $ $ $ $ - $ 360,904 $ 89,000 $ 33,000 $ 56,000 $ $ $ $ $ 286,156 $ 39,000 $ 30,000 $ 9,000 $ $ $ $ $ 311,689 $ 35,000 $ 244,000 $ 23,500 $ 11,500 $ $ $ $ $ $ 301,866 $ 1,260,615 $ 2,295,253 $ 2,295,253 $ VAT Success Annual Savings: FY2005 - $12.8 million FY2006 - $10.15 million FY2007 - $14.5 million FY2008 (Projected) - $11.2 million VAT Success FY07 (by VAT): Cardiac - $1.260 Million General Medical - $1.552 Million Pharmacy - $2.310 Million Surgery - $1.841 Million Lab - $430,736 Support Services - $6.979 Million Imaging - $213,455 Managing Relationships MMIS works with the vendor community and inventory managers to insure Proper cross-referencing Adherence to contracts Coordination of buy-outs MMIS maintains conversion schedules and communicates timeline/manages project plans MMIS team reminds inventory managers when conversions have not been completed Managing Relationships Hospital leadership must support VAT decisions (even if physicians disagree) C-suite involvement from system president to department managers Physician liaison required Vice President of Logistics for STHS Meets with physicians Coordinates initiatives with senior leaders Participates on each VAT Works through issues between vendors, VAT, and physicians Contract Management Centralized contract management provides tools for pricing resolution Purchasing agents can research confirmations against contract pricing, but cannot update contract prices Properly maintained contracts are compared to actual purchase orders to determine pricing discrepancies Centralized maintenance provides the ability to examine contract compliance with each vendor System Requirements Systems must be able to support centrally managed contracts, masters, audit trails, and security System security restricts access within master files, contracts, and other functions Restrict accounts payable and purchasing from master file maintenance System Requirements STHS allows access to the MMIS group (8 associates) Purchasing/AP associates must also submit requests for new items/vendors Contract start/end dates and related pricing must be maintained Keys To Success Establish policies and procedures for system processes (MMIS and customers) Restrict access to systems and master files Make effective use of audit trails Obtain organizational leadership support Ensure research is performed on each vendor, item, and contract addition (reduce duplicates) Vendor Master Form Vendor Master Form Vendor Master Form Vendor Master Form Item Master Form Item Master Form Item Master Form Item Master Form Contact Information Melissa Amell mamell@stthomas.org (615) 222-3030 Brian Mikel bmikel@stthomas.org (615) 222-6864