Value-based Strategies
for Implantable Devices
Suzanne Alexander-Vaughn,
Director, Product Management, GHX
Association of Healthcare
Value Analysis Professionals
1
©
© 2012
2012 Global
Global Healthcare
Healthcare Exchange,
Exchange, LLC.
LLC. All
All rights
rights reserved.
reserved. GHX
GHX proprietary
proprietary information:
information: Please
Please do
do not
not copy
copy or
or distribute.
distribute.
GHX: Formed by Healthcare for Healthcare
GHX operates in the United States, Canada and seven European
countries, and we employ more than 600 people worldwide. Our
corporate headquarters is in Louisville, CO, just outside of Denver.
2
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The GHX Community
Supplier
Over 5,500 Suppliers
• > 750 Integrated Suppliers
representing over 85% of the
med/surg market
• > 4,800 Supplier divisions
transacting through GHX
GPO
All Major GPOs
• Amerinet
• Premier
• HPG
• VHA
•UHC
•Broadlane/
MedAssets
Distributor
All major distributors
• Cardinal
•O & M
• McKesson
• Thermo Fisher
Provider
Over 16,000 Providers
• > 7,700 GHX integrated provider
facilities
• > 8,400 Provider facilities
transacting through GHX
• > 583,370 Hospital beds represented
by providers transacting through GHX
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Turning Healthcare on its Head
Healthcare providers and suppliers need to
change their
business models
Healthcare Providers need to make money by
keeping people OUT of the hospital
Healthcare Suppliers need to make money
By selling value, lowering the cost to serve
BOTTOM LINE: Both providers and
suppliers need to work together to
improve operational performance
and increase visibility to key data on
cost and quality drivers
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The Cost + Quality Equation
VALUE = COST + QUALITY
• What drives value? For whom?
• What role do products and services play in
lowering total cost, while improving
quality?
• Can a more expensive product reduce
Hospitals and providers
hospital acquired infections or
will be reimbursed on
readmissions and increase value?
• How is value measured? By whom? Over value, not volume.
what time frame?
BOTTOM LINE: We must work
together to understand what
drives cost and quality across the
larger value system.
5
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Healthcare: An Expensive Customer to Serve
SG&A costs much higher in healthcare than other industries
Pharma
Biotech
Segment Mean Segment Mean
33%
29.8%
Generic
Medical
Device
Segment
Mean
Segment
Mean
23.9%
32.7%
Three-Year Weighted SG&A Expense As a % of Revenue
Gartner Cross-Industry Supply Chain Top 25
(CP, High Tech,, A&D, Auto, Life Sciences, Industrial)
Segment Mean
17.51%
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We Must Collaborate
We must take costs (and risk) OUT
of the system.
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Supply Chain is a System
…and we are all in the same boat
Supply Chain is a great place to start the
collaborative process
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The Collaborative Healthcare Value Continuum
High
Low
Internal and external patientcentered collaboration
Increase internal collaboration for
better efficiency and visibility
Cost
Quality
Focus on products that
deliver the best outcomes
at the best price
Degree of
Collaboration/Data Sharing
Negotiate Best Price
Low
Price
High
Supply Chain Focus
Patient-Centered
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Healthcare Product Expenditures
NA Healthcare Product Expenditures = $185B
Food Service
$23B
MedSurg
Consumables $40B
Drugs
$44B
Implantables
$40B
Ophth
$3B
Lab
$5B
10
Med Equip
$13B
Med Instrum.
$16B
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What Are We Talking About
• Implantable Devices Supply Chain (IDSC)
– Complements the Med/Surg Consumables Supply Chain
– Referred to as physician preference items (PPI), trunk stock
• Typical products
– Orthopedic large joint (hip, knee)
– Spine
– Cardiology Rhythm Management (CRM)
– Interventional Cardiology
– Peripheral Vascular
• Typical settings
– Operating room
– Cath lab
– Trauma
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A Closer Look at Implantable Devices
Implantable devices typically represent:
•
•
~ 30% of total hospital supply spend
50-80% of total costs for some
procedures
Bottom Line: Healthcare facilities are focused on trying to
buy products that help drive the best outcomes from
manufacturers who will negotiate the best price.
Facilities look for manufacturers that can lower total cost of
ownership and help create value.
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A Shared Problem
The implantable device supply chain is a $5B+ annual problem –
shared equally by providers and suppliers
$3,000
$2,625 M
$2,725 M
Low-Value Sales
Tasks
$2,500
$2,000
Loss & Expiration
$1,500
Revenue Leakage
$1,000
Low Inventory Turns
$500
Loss & Expiration
Low Inventory Turns
$-
Back-Office Labor
Back-Office Labor
Provider
Manufacturer
Sources: PNC Healthcare; GHX Quantitative Research Study (Aug 2010; n=136 & n=25)
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A Shared Opportunity
The implantable device supply chain is $5B+ annual problem –
shared equally by providers and suppliers
$3,000
$2,725 M
$2,625 M
Low-Value Sales
Tasks
$2,500
$2,000
$1,500
$1,000
Automation, process
change and better
Revenue Leakage
data visibility
required to realize
shared savings.
Loss & Expiration
Low Inventory Turns
$500
Loss & Expiration
Low Inventory Turns
$-
Back-Office Labor
Back-Office Labor
Provider
Manufacturer
Sources: PNC Healthcare; GHX Quantitative Research Study (Aug 2010; n=136 & n=25)
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Limited Visibility and Control
“60% of my OR spend is on
consignment products and I have zero
visibility into what I’m spending”
- VP, Supply Chain
“We closely track our $500,000 in
hospital supplies, but I have a closet
with over $3M in consignment
inventory that I am not tracking at all”
- Director, Materials Mgt.
Complex, manual processes lead to higher costs, unnecessary
spend, revenue leakage, inability to source best products
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Healthcare’s Dual Supply Chain
Med/Surg
• Procure-to-Pay (P2P)  e-Commerce
– Requisitioned within the hospital or IDN
– Managed as part of Materials Management
Order
Implants
Ship/
Receive
Count
Use
• Pay-to-Replenish  Manual
– Consigned or walk-in
– Driven by consumption
– May or may not be on contract
Ship/
Receive
16
Count
Use
Order
•
•
•
•
•
•
More data
More systems
More roles
Complex pricing
Non-file spend
Manual, stickers
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Opportunity Areas: Manufacturers
For manufacturers, inventory management is a critical issue
Regarding implantables, which of the following are Most Important to you? (Rank 1-5)
Sources: GHX Quantitative Research Study (Aug 2010; n=136 & n=25)
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Opportunity Areas: Providers
For providers, inventory matters, too!
Regarding implantables, which of the following are Most Important to you? (Rank 15)
Sources: GHX Quantitative Research Study (Aug 2010; n=136 & n=25)
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Collaboration a #1 Response to Industry Trends
#1 Response from Implant Suppliers
Currently
24 months from now
57%
55%
Increase collaboration with internal functions
56%
Improve the effectiveness of the S&OP process
50%
53%
52%
Improve forecast accuracy
49%
Create demand visibility as far downstream as possible
62%
47%
Increase collaboration with trading partner's supply chains
56%
Develop greater resiliency through robust risk management
strategies and reassessment of supply network
Segment supply chains to better serve different demand
profiles
39%
44%
29%
38%
27%
Increase the adoption of global data standards
37%
25%
Develop capabilities to conduct cost-to-serve analytics
Accelerate product standardization
= 114
manufacturers
NN =
114
Suppliers
19
36%
18%
25%
Sources: GHX Quantitative Research Study (Aug 2010; n=136 & n=25)
Multiple responses allowed
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Collaboration a #1 Response to Industry Trends
#1 Response from Implant Suppliers
Currently
24 months from now
57%
55%
Increase collaboration with internal functions
56%
Improve the effectiveness of the S&OP process
2 Years from Now
50%
53%
52%
Improve forecast accuracy
49%
Create demand visibility as far downstream as possible
62%
47%
Increase collaboration with trading partner's supply chains
56%
Develop greater resiliency through robust risk management
strategies and reassessment of supply network
Segment supply chains to better serve different demand
profiles
39%
44%
29%
38%
27%
Increase the adoption of global data standards
37%
25%
Develop capabilities to conduct cost-to-serve analytics
Accelerate product standardization
= 114
manufacturers
NN =
114
Suppliers
20
36%
18%
25%
Sources: GHX Quantitative Research Study (Aug 2010; n=136 & n=25)
Multiple responses allowed
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Provider Responses To Industry Trends
#1 with providers today and 2 years from now
Currently
24 months from now
65%
62%
Increase collaboration with internal functions
Develop capabilities to conduct cost to serve analytics
47%
55%
52%
Accelerate product standardization
Increase collaboration with trading partner's supply
chains
52%
53%
39%
35%
Improve the effectiveness of the S&OP process
Create demand visibility as far downstream as possible
32%
Increase the adoption of global data standards
32%
30%
30%
Improve forecast accuracy
Develop greater resiliency through robust risk
management strategies and reassessment of supply…
Segment supply chains to better serve different demand
profiles
N = 66 Providers
55%
41%
47%
27%
27%
21%
Sources: GHX Quantitative Research Study (Aug 2010; n=136 & n=25)
allowed
21 Multiple responses
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Provider Responses To Industry Trends
#1 with your customers today and 2 years from now
Currently
24 months from now
65%
62%
Increase collaboration with internal functions
Develop capabilities to conduct cost to serve analytics
47%
55%
52%
Accelerate product standardization
Increase collaboration with trading partner's supply
chains
52%
53%
39%
35%
Improve the effectiveness of the S&OP process
#2 Priority 2 Years from now
Create demand visibility as far downstream as possible
32%
Increase the adoption of global data standards
32%
30%
30%
Improve forecast accuracy
Develop greater resiliency through robust risk
management strategies and reassessment of supply…
Segment supply chains to better serve different demand
profiles
N = 66 Providers
22
55%
41%
47%
27%
27%
21%
Sources: GHX Quantitative Research Study (Aug 2010; n=136 & n=25)
Multiple responses allowed
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…Requires a Shared Solution
CR
Compliance
Reporting
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A Word about UDI
• Proposed rule published September 10, 2012
• Comment period ends November 7, 2012
• Final Rule expected May 2013
Compliance Timeline:
• May 2014: Class III Devices
• May 2015: Non-class III implantables and “life
saving and life sustaining” devices”
• May 2016: Class II devices
• May 2018: Class I devices
The Secretary shall promulgate regulations establishing a unique
device identification system for medical devices requiring the label
of devices to bear a unique identifier, unless the Secretary requires
an alternative placement or provides an exception for a particular device
or type of device. The unique identifier shall adequately identify the
device through distribution and use, and may include information
on the lot
or
serial
number.
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Global
Healthcare Exchange,
LLC. All rights reserved. GHX proprietary information: Please do not copy or distribute.
UDI Across the Value Chain
To Achieve Return from Required Investment,
Manufacturers need to collaborate internally, understand
application across value chain:
• Consider Objectives, Benefits, Impacts
• Regulatory compliance
• Customer demand/service
• Supply Chain Efficiency
• Manufacturing
• Marketing
• Other
• Who needs to be involved? Who, what is impacted?
Providers will use the UDI for a wide variety of purposes:
• Document UDIs in EMRs
• Link to systems for post market surveillance and comparative
effectiveness research
• Post market data required for reimbursement
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The future is unclear, but some things are certain
Healthcare providers must survive on declining
reimbursement.
Healthcare providers will be
reimbursed on value, not volume.
There is a set pool of
dollars with which we
must all learn to live.
26
The Bottom Line: We must break down the
historic boundaries that exist between functions,
organizations and individuals to understand
what drives better value in healthcare.
© 2012 Global Healthcare Exchange, LLC. All rights reserved. GHX proprietary information: Please do not copy or distribute.
Supply Documentation in the OR Still Highly Manual
• Even with electronic implant recording capability, most
nurses use paper and stickers for recording usage
during procedure.
• Only 10% of entry is based on barcodes or RFID
5
37 2
Barcode
2
RFID scanned into
cabinet
RFID scanned into app
Manually - keyboard
224
27
166
Manually - paper
Survey conducted with OR nurses attending the 2011 AORN Conference
N = 326 © 2012 Global Healthcare Exchange, LLC. All rights reserved. GHX proprietary information: Please do not copy or distribute.
What Research Told us
Supplier
Provider
Master Data Services
Catalog/Pricing
Item Master
Shared Workflow
Case Creation
Case Scheduling
Billing
O&M
Inventory
MHS
IBM
Inventory
Care
Fusion
Exchange
Business
Solutions
Chang
e Mgt.
Clinician
training
Purchase
training
Wave Mark
Consumption
Mobitor
PO
Omnicell
Consumption,
Requisition
Outsourcing
PO
Value
analysis
Supplier
Informatics
Market Share
Individual point
solutions are costly
& slow to adopt
28
Provider
InvivoLin
k
Best
practices
Utilization
Conventional solutions
ignore the full workflow
falling short of the need
Adoption requires end
user centric design for
all stakeholders
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Desire for Hub-based Solutions
What is the likelihood that your organization would adopt the use of a manufacturerspecific solution for point-of-use capture? For inventory tracking?
60%
50%
40%
30%
POU Solution
Inventory Tracking
20%
Strong support for
industry-wide model
vs. one-to-one
10%
0%
Highly Likely
29
Likely
Don't Know
Unlikely
Highly
Unlkely
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Partnered with Industry
Provider
Advisory Board
Manufacturer
Advisory Board
Provider and
Manufacturer
Pilots
Special
Interest Group
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Charter: Partner with GHX to
define, develop and lead the
implementation of an industry
solution, shape best practices
Charter: Partner with GHX to test
the implementation of an industry
solution.
Charter: Inform, provide feedback
and awareness to industry
challenges, requirements and
priorities, share best practices
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Elapsed Time Value Metrics
Aggregate of Provider Pilots (9/1/12)
Procedure Date to PO
Release Date (days)
PO Release Date to
Invoice (days)
Initial
State
Current
State
Initial
State
Current
State
4.26
2.07
11.45
5.71
Invoice Receipt
Date to Invoice (days)
Procedure Date to
Invoice Payment Date
(days)
Initial State Current State Initial State
14.13
12.40
28.62
Current
State
19.96
Average Reduction in Elapsed Time*:
▼ 30% Procedure to Payment
▼ 51% Procedure to PO Generation
▼ 50% PO to Invoice Generation
▼ 12% Invoice Receipt to Payment
Initial State= Prior to Pilot
Current State = As of 9/1/12
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*Based on©results
from 6 initial provider pilots and their trading partners as of 9/1/12
2012 Global Healthcare Exchange, LLC. All rights reserved. GHX proprietary information: Please do not copy or distribute.
Implantable Device Management
Case Scheduling
• Manual and Integrated
case scheduling
Case
• Notification of case
Scheduling
schedule events
Usage Capture &
Documentation
• Point of use capture
• Usage reconciliation
and agreement
• Usage audit &
approval
• Usage reports
available
• Integrated data feed
to other systems
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Case
Preparation
Case
Preparation
Intelligent
Ordering
Item & Price
Validation
Security
Reporting
Transport
Usage
Capture &
Documentatio
n
• Item preparation
prior to procedure
• Item “Finding”
optimization
Intelligent
Ordering
• Secured transport
of consigned
orders
• Intelligent routing
• Intelligent data
review
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Key Takeaways
• Healthcare demands a new way of doing business
• We share the same problems; we can share the same solutions
• Automation and supply data capture at the point of use are key
• Objectives and processes must be aligned
internally and across trading partners
• Reducing costs associated with implants
and devices is critical to clinical, financial
and operational performance for all
FOR MORE INFORMATION:
Suzanne Alexander-Vaughn
svaughn@ghx.com
© 2012 Global Healthcare Exchange, LLC. All rights reserved. GHX proprietary information: Please do not copy or distribute.