Mergers and acquisitions are on the rise in healthcare. In 2015, the number of mergers and acquisitions broke records and has not slowed down, as 2016 continues to see an upward trend. While such transitions can provide value to both large and small health systems, they also place a high demand on the effectiveness of a health system’s supply chain in managing supply costs, due to the sizable integration of catalogs and contracts. To respond to the demands, health systems need to meet these challenges head-on and seek out new ways to leverage their supply chain assets.
USE ACQUISITIONS AS AN OPPORTUNITY
When Temple Health acquired Fox Chase Cancer Center in 2012, the corporate supply chain department was tasked with overseeing integration of the supply chain. We relied on expertise from contracting, systems management and procurement groups of our supply chain department, with oversight from the management team throughout the process. Our team developed a strategic plan to consolidate and manage the transition, with close coordination among teams. The systems management team used this opportunity to explore new supply chain technologies that could help us with the integration and consolidation processes. As a 1,100-bed academic facility, we were managing thousands of items, and after the acquisition, the supply chain department experienced an influx of additional catalogs and contracts. Complicating matters further was duplication of items across entities with different contract parameters. We provided a comparative analysis of all of the items, vendors and contracts to support the contracting department’s work with the group purchasing organization to consolidate contracts. This was a big, complex task, and it needed a solution that enabled us to remain contract-compliant for thousands of items.
STREAMLINE THE SUPPLY CHAIN
Faced with fragmented contracts, broken processes for contract catalog management, inconsistent data, low contract compliance and no performance indicators to monitor and manage, it was decided early on in the planning process that the project would include an overhaul of the supply chain structure and process. The solution would be a combination of information, process and automation. The supply chain leadership made the decision to build a quality process to feed accurate data into the system and help maintain it. We sought a third-party supply chain technology to help us host all of the content, as well as manage it. After exhaustively researching multiple options, we selected and implemented a web-based supply chain management software solution that integrated into our existing enterprise resource planning (ERP) system and helped to streamline our processes, including the supply ordering function. The following are a few key features and functionalities we sought from the software technology solution to help prepare our supply chain and manage the integration.
Compatibility with existing ERP system: Finding a content management system that can work in conjunction with existing ERP systems saves time and money. Not only did this allow for a streamlined integration, but compliance rates didn’t suffer while we waited for the integration to get sorted out.
Streamlined collaboration across entities: Our supply chain groups were working in silos due to lack of cross-system visibility. Utilizing an enhanced catalog management solution allowed us real-time visibility across entities and improved efficiency and accuracy, helping us to manage the consolidation of large volumes of item masters and contracts.
Improved contract catalog management: Prioritization functionality of the software allowed the health system to influence purchases at the point of requisition. This improved our contract compliance. When shopping for products, requestors only see items for which the health system has negotiated the best price. This allows the system to direct spending to meet contract terms.
Enhanced search functions: During the requisition process, it is important that the requestor can find the right item from the right contract. Traditional procurement systems have limited search capabilities. Implementing modern procurement technologies provides detailed product descriptions and images to help clinicians and staff find the products they are looking for. This increases efficiency and reduces the risk of incorrect purchases.
Increased efficiency and accuracy: Before we utilized the software solution, we were manually processing our contracts. This resulted in inconsistent data, pricing inaccuracies and poor contract compliance rates. It cost the organization significant time and money. After several years of trying to improve manual processes and then ineffectively solving the problem through a data cleansing exercise, we transitioned to a technology that allowed us to replace manual labor- intensive processes. Moving to this technology reduced the chance of manual errors and increased our efficiency. It was possible to load entire catalogs comprising thousands of items in a short time.
Monitored key performance indicators: Our supply chain technology allowed us to measure key performance indicators using reports including catalog management and on-catalog purchases. We found that with the measurable data available, we could manage our supply chain better.
SUPPLY CHAIN SUCCESS
Using a combination of process improvements and system automation, Temple Health has successfully enabled ongoing data management with a high level of accuracy and synchronization. One year since implementation, Temple Health has realized several positive outcomes, including:
- A significant reduction in special orders a drop of more than 50% from 28% to around 13%
- Increased efficiency, speed, and accuracy of managing pricing updates, and
- Improved contract compliance rates, leading to dramatic cost savings
Improving catalog management through automation was one of the key strategies responsible for Temple Health meeting its 2014 cost-savings target. Contract compliance is now between 70- 80% each month. Improved data accuracy and analytics enabled us to conduct better-informed value analysis and maximize our future revenue potential, while supporting our cost, quality and outcome goals. These challenges were not unique to our health system, and neither are the results we achieved.
Whether you are experiencing a merger and acquisition or simply looking for a solution to help gain control of your supply chain, we learned that it is important to look at the problem as a whole. Once you understand what you need, you can evaluate technologies available to help you get the most from your assets and help your health system achieve significant savings.