achieving results through a multiple hospital material management model

Achieving Results through a Multiple Hospital Material Management Model

Jerrold MakiVice President, Clinical Services

Stanford Hospital and ClinicsStanford, CA

Ryan SiemersManager

PricewaterhouseCoopers LLPChicago, IL

Agenda

The Goal

Structure to Support Change

The ORC (Offsite Reprocessing Center)

Maintaining IT Infrastructure

Business Partners

Key Performance Indicators

The Goal

Enhance and optimize the Supply Chain across the four Bon Secours hospitals in the Richmond market through:

Maximization of Offsite Reprocessing Center

Effective use of MMIS & other technology

Partnering with Distributors and GPO

Cost Management

Performance Measurement

V.P. Materiel Management

Materiel Management Organizational Structure

SMH Mat Dir

SFMC Mat Dir

MRMC Mat Dir

ORCAdmin Dir

Purchasing Manager

Central Sterile Admin Dir

Clinical Resource Analyst

Lawson Systems Analyst

Chief, Network Operations

Admin Asst

Clinical Engineering

Pharmacy Admin Dir

SFMC Phar Dir

RCH Phar Dir

SMH Phar Dir

MRMC Phar Dir

Receptionist

Admin Asst

Admin Asst

Senior Buyer

4 Buyers

2 P.O.U. Analysts

Contract Specialist

Procurement Specialist

ORC Overview

What is the Offsite Reprocessing Center (ORC)?

The ORC was created in order for Bon Secours Richmond Health System (BSR) to be proactive toward a projected increase in surgical procedures and supply utilization across the local market.

To offset the financial and operational demands of this increase, the BSR Executive Management Team, along with CVHN, approved the creation of the ORC.

ORC Benefits

The consolidation of 4 hospitals and all ambulatory surgery centers’ sterile processing departments (SPD) to an off-site location resulted in:

Improved quality for end-users

Greater speed of service

Freed-up much needed space at the hospital campuses

Consolidation of hospital storerooms and full movement to a just-in-time (JIT) hospital environment utilizing a bulk inventory facility at the off-site location resulted in:

Avoidance of vendor JIT service fees (ValueLink), which were increasing due to increased surgical services volumes and the opening of a new hospital

Reduced inventory and carrying costs at hospitals

Future opportunities of utilizing the ORC as a revenue generating entity by selling services to other regional health care providers

Case Cart Process Flow

Dirty Case Carts arriving at ORCDirty Case Carts arriving at ORC

Dirty Case Carts get scanned into Decontam

Dirty Case Carts get scanned into Decontam

Carts are emptied and trays prepped for washCarts are emptied and trays prepped for wash

Dirty Case Carts get washed

Dirty Case Carts get washed

Trays exit the washer and techs pickup for Assembly

Trays exit the washer and techs pickup for Assembly

Trays get assembledTrays get assembled

… … and count and count sheets printedsheets printed

Trays are Sterilized

Trays are Cooled

Trays are Cooled

Trays are scanned to locationTrays are scanned to location

Trays are pulled for Case Cart assemblyTrays are pulled for Case Cart assembly

Case Carts are Assembled

Case Carts are Assembled

Case Carts are pre-staged for deployment

Case Carts are pre-staged for deployment

ORC driver logs in and scans Case Carts to truck

ORC driver logs in and scans Case Carts to truck

Case Carts are loaded onto truck for deployment

Case Carts are loaded onto truck for deployment

Case Carts are transported to different hospitals

Case Carts are transported to different hospitals

Case Carts are scanned to hospital clean dock

Case Carts are scanned to hospital clean dock

Case Carts are pre-staged for ORCase Carts are pre-staged for OR

OR Nurse scans Case Cart to room

OR Nurse scans Case Cart to room

OR Nurse scans any additional instruments needed for

procedure

OR Nurse scans any additional instruments needed for

procedure

OR Nurse sprays with Pre-Klenz and places instruments back in container.

OR Nurse sprays with Pre-Klenz and places instruments back in container.

Case Carts are scanned into Decontam

Case Carts are scanned into Decontam

GOES TO GOES TO ORCORC

St. Mary’sSt. Mary’s MRMCMRMC St. FrancisSt. Francis O R CO R C

STAYS AT STAYS AT HOSPITALHOSPITAL

Case Carts are inspected in DecontamCase Carts are inspected in Decontam

Scanning trays into DecontamScanning trays into Decontam

Scanning trays that go to ORC

Scanning trays that go to ORC

Pulling trays that stay at hospital

Pulling trays that stay at hospital

Dirty Case Carts are pre-staged in Decontam for pickup

Dirty Case Carts are pre-staged in Decontam for pickup

Performance Improvement

Performance Improvement Methodology

Team Leaders Chief, NetworkOperations

V.P., MaterielManagement

Bon Secours Richmond Team Members

V.P., Surgical Services

Directors of Operations

Finance

Hospital EVPs

ORC Supervisor

Purchasing Manager

Director, Internal Audit

Health Systems Office Team Members

Corporate IT Corporate MM

The following table depicts the Core Team structure:


Develop a work plan that incorporated all improvement initiatives including implementation steps, dates for completion, and responsible parties. The work plan was discussed and updated at each Core Team meeting.

Develop metrics that could be used to track progress. The fill rate of hospital supply requisitions was the high level indicator that was used to track progress. Other indicators were used to track progress of individual initiatives, e.g., killed line items, past due purchase orders, discontinued items ordered, number of temporary ORC employees, etc.


Examples of some of the initiatives in the work plan:

EDI 856 receiving interface

Shipping feedback interface

Receiving interface

Unit of Measure (UOM) adjustments

Inventory synchronization - Spectrum to Lawson

Physical inventory

Overflow resolution

Spectrum hardware and software maintenance

Cardinal item file review

Spectrum re-order point analysis


Work Plan Initiatives (cont.):

Instrument processing

Lawson kill list review

Past due PO list review

Product substitution process

Product return / credit process

Report access

Min / max reorder points

ORC staffing resource analysis and organization structure

Supply cabinet interface

ORC Staffing

ORC Staffing & Organizational Structure

V.P. Materiel Management

SMH Mat Dir

SFMC Mat Dir

MRMC Mat Dir

ORCAdmin Dir

Central Sterile Admin Dir

Clinical Resource Analyst

Lawson Systems Analyst

Chief, Network Operations

Admin Asst

Clinical Engineering

Pharmacy Admin Dir

SFMC Phar Dir

RCH Phar Dir

SMH Phar Dir

MRMC Phar Dir

Receptionist

Admin Asst

Admin Asst

Med / Surg Warehouse

Manager

Inventory Analyst

3 Shift Supervisor

14 Mat Mgmt Tech

ORC Staffing Analysis

An ORC staffing analysis was performed to identify the resource requirements needed to manage and run the operation

For the ORC Central Stores processes, the original Project Plan called for a Monday through Friday work week and two 8 hour shifts per day. Cardinal was required to deliver products Monday, Wednesday, and Thursday evenings, while Baxter would deliver on Tuesday and Thursday. The FTE resources allocated for this project were 6 FTE’s as seen below:

One ORC Manager

Five Materiel Management Technicians

Prior to the ORC going live, it was decided that, for the interim, Cardinal would deliver products Monday through Friday. Also, a third shift was added to breakdown and put away the products so that the first and second shifts could concentrate on picking. To facilitate these changes, 4 additional FTE’s were requested and approved. They are:

One Inventory Analyst

Three Shift Lead Mat. Mgmt. Tech’s

ORC Staffing Analysis (cont.)

Therefore, the new budgeted FTE allotment increased to 10 as seen below:

Budgeted Positions FTE’s

ORC Manager 1

Inventory Analyst 1

Shift Lead MM Tech’s 3

Materiel Management Tech’s 5

Totals 10


In December of 2005, it was decided that further additional resources would be required to complete the staffing of the three shifts. PWC was asked to perform this analysis. The following table shows the results of this analysis:

Position Description FTE’s Required Buyer 1 Control Desk Tech 1 Materiel Management Tech’s 7 Totals: 9

The Shift Leads will support the picking process during periods of high volume.


Below are the calculations on processed lines used to determine the required FTE’s:

• The average number of lines processed per day for the time period of Nov. 1, 2005 through Dec. 9, 2005, excluding the week of Thanksgiving, equals 4,418, or 22,090 lines per week

• The ORC has two carousels that are used over two shifts, equating to 32 hours of productivity per day (2 carousels x 2 shifts x 8 hours per shift)

• Each Carousel is rated at 150 lines per hour


Carousel 1 is named zone 1, carousel two is named zone 2, and zone 3 is used for bulk items considered too large to be picked efficiently by the carousel. Data is not available on the breakdown of where the lines are filled. However, observations and interviews showed that the breakdown is roughly 40% from each of the carousels and the remaining 20% from zone 3.

CarouselLines Processed Zone 1 Zone 2 Rating (Each) Zone 3

22,090 8,836 8,836 12,000 4,418

Carousel


Final approved FTE’s:

Position Description FTE’s

Manager 1

Inventory Analyst 1

Buyer 1

Shift Leads 3

Zone Operators 13

Total FTE’s 19

ORC Organizational Structure Shift One: 8:00 a.m. – 4:00 p.m.

ORC Manager1 FTE

First Shift Lead1 FTE

Zone 1 Operator1 FTE


Whites Control Desk1 FTE


Buyer1 FTE

Inventory Analyst1 FTE

Positions shown are approved and budgeted.

Shifts one and two primarily perform picking duties.

Shift three performs breakdown and put away.

ORC Organizational Structure Shift Two: 3:00 p.m. – 11:00 p.m.




ORC Manager1 FTE

Second Shift Lead1 FTE




ORC Organizational Structure Shift Three: 11:00 p.m. – 7:00 a.m.

ORC Manager1 FTE

Third Shift Lead1 FTE

Zone 2 Operator2 FTE’s






Final plan is to move to Monday, Wednesday, and Friday Cardinal deliveries, thus reducing the breakdown and storage coverage required. Scheduled implementation for first week of April, 2006.

Results Tracking

Tracking Mechanisms

The primary tracking tool is a Microsoft Access database which is populated by raw data from Lawson. The main tracking mechanisms are:

• Fill Rate Percentage

• The fill rate percentage at the ORC is calculated by taking the total lines killed during the ordering process and dividing by the total number of lines ordered and then subtracting this answer from 1. For example, 100 lines are ordered and 10 lines kill.

• Fill Rate Percentage = 1 – (10 / 100) = 0.9 or 90%

• Past Due Purchase Orders

• Past Due Purchase Orders are tracked due to their impact on receiving. A PO is considered past due if it has not been received after three consecutive business days from its order date. To elaborate on the impact of this report, if an item has a re-order quantity of 50 and 20 of those 50 are on a past due PO, the procurement system (Lawson in this case) will continually only order up to an additional 30 items (50 minus 20) because it knows that 20 are already on order. This has effectively reduced the on hand quantity (par level) to 30 instead of 50.

Tracking Mechanisms (cont.)

Repeat Killed Items Report

Report shows various levels of detail on items that are killing during the filling process, either in Lawson or the Carousel. Specific information available is:

Current weeks killed items with # of days item has killed

Previous weeks killed items with # of days item has killed

Items specific volume rank calculated from total lines ordered (i.e., the #1 ordered product in the ORC)

The total number of lines ordered for that specific item corresponding to the given date range

The total number of lines killed for that specific item corresponding to the given date range

Lawson Discontinued Items

When items are discontinued in Lawson (typically initiated by the HSO), the item description is modified by adding “(D)” at the beginning.

instead of 50.

Offsite Reprocessing Center – Tracking Mechanisms

Offsite Reprocessing Center – Tracking Mechanisms (cont.)

Offsite Reprocessing Center – Tracking Mechanisms (cont.)

Repeat Killed Items Report: Note that this is a condensed version of a full report. It has been condensed to better fit on to this page.

Supply CostManagement

Cost Reduction Opportunity Benchmarking

High-level Key Performance Indicators ($5M - $12M) Supply Cost per CMI Wt. Adj. Pt. Day

Supply Cost as % Net Revenue

Supply Cost as % Operating Exp.

Supply Cost per CMI Wt. Adj. Disch.

Detailed, item-level Benchmarking ($2.2M - $6.3M) 7 Months PO History Data (09/2005 – 03/2006)

121,608 lines of data represented (PO and drop ship purchases)

~$60M in total spend

56% of the lines were matched for benchmarking

Cost Reduction Initiatives

Contracting opportunities divided into Phases:

• Phase IA: Local Vendor Negotiations

Contact vendors and request pricing agreements

Execute agreements and upload pricing

• Phase IB: GPO Opportunities

Ensure correct tier pricing

Identify standardization opportunities

• Phase II: Further Savings on Phase I Products

Obtain better pricing from remaining vendors

Identify standardization opportunities

• Phase III: Smaller $ Opportunities

Pursue better pricing

Cost Reduction Initiatives (cont.)

Physician Preference Initiatives

Continue to discuss opportunities at Clinical Utilization Committee meetings (Cardiology-Radiology, Surgical and Nursing) and control introduction of new products

Additional Initiatives: Reprocessing, Pharmacy, Dietary, Linen & Laundry, Instrument Purchase & Repairs, outstanding GPO Initiatives

Supply Cabinets Lease

Savings Matrix

SAMPLE

Sample Orders

Special Orders Issue

April 2006 Actual

3,352 Special Order Lines out of 14,242 PO Lines (23.5%)

$2,154,018 Special Order $ out of $6,047,147 PO $ (35.6%)

Target

10% of PO Lines

20% of PO $

Special Orders Issue (cont.)

Goal was to reduce the # of Special Purchases to 10% / 20% by:

• Identifying and adding items to the Item File and updating department templates accordingly (established criteria and policy)

• Educating requisitioners on importance of using Item File and not “free-texting” orders

• Monitor and track departments in relation to the target utilizing the Special Orders Database

Benefits of ensuring items are in the item file include:

• Ensure receiving contract pricing and compliance

• Identify products for which a contract needs to be negotiated

• Ensure accurate purchase history

• Reduce manual entry time required for ordering

Special Orders DashboardPO Lines

0

5,000

10,000

15,000

20,000

25,000

Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06

Total Lines Total X Lines Target at 10%

PO Dollars

$0

$3,000,000

$6,000,000

$9,000,000

$12,000,000

Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06

Total Dollars Total X Dollars Target at 20%

Received-Not-Invoiced

Received-Not-Invoiced Issue

41.7% of RNI Dollars are greater than 30 days

The oldest RNI transaction dates back over a year

Cath Lab and OR = 61%

190 Vendors have RNI transactions > 45 days

Standard payment terms – 45 days

Note: RNI as of April 2006.

100%100%4,904,6727,577Total RNI

41.7%38.0%2,046,2042,877>30 Days

58.2%62.0%$2,858,4674,700<30 Days

27.3%25.5%$1,337,2161,930April 1-15

31.0%36.6%$1,521,2512,770April 16-30

DollarsLinesTotal DollarsTotal Lines

Receiving Month

Percent of TotalMonthly Accruals

Note: RNI as of April 2006.

100%100%4,904,6727,577Total RNI

41.7%38.0%2,046,2042,877>30 Days

58.2%62.0%$2,858,4674,700<30 Days

27.3%25.5%$1,337,2161,930April 1-15

31.0%36.6%$1,521,2512,770April 16-30

DollarsLinesTotal DollarsTotal Lines

Receiving Month

Percent of TotalMonthly Accruals

RNI Reduction Improvement

Clean up RNI > 30 days old

• Establish plan and goals to clean up aged RNI transactions

• Identify resources to research RNI and determine resolution

• Obtain vendor statements for top vendors

• Establish procedures to clean RNI transactions in Lawson

RNI Reduction Improvement (cont.)

Establish goal to resolve RNI within 30 days

• Develop report to group RNI into <15 days, 15 – 30 days, and >30 days

• Run RNI report weekly to help ensure resolution of RNI

• Establish roles and responsibilities, processes and expectations to resolve RNI

• Institute vendor statement review

• Implement RNI Policy

RNI Weekly Dashboard

RNI Trending - BSR Market

$1,446,832

$2,772,782$2,403,982

$1,267,933$888,904

$1,390,073

$0

$1,500,000

$3,000,000

$4,500,000

$6,000,000

$7,500,000

05/01/06 06/01/06 07/01/06 08/01/06 09/01/06 10/01/06

$ < 30 Days $ > 30 DaysNOTE: Dollar values denote > 30 Days

Note: reported for each facility as well

Other Cost Management and Performance Improvement Activities

Implemented system-wide monitoring and tracking of Key Performance Indicators (KPIs)

Developed Vendor Access Policy

Established more rigor around introduction of new products and new technology

Enhanced effectiveness and process of Utilization Committees

Increased GPO involvement and services

Performed system-wide item file clean-up

Educated staff to better utilize Lawson reporting capabilities

Note: reported for each facility as well

Results/Conclusion

KPIs (high-level and departmental) Tracking Down

Special Orders Declining

RNI Decreasing

ORC Growing and Expanding

Speakers

Jerrold Maki, Vice President-Clinical ServicesStanford Hospital and ClinicsStanford, CA650-736-8962 [email protected]

Ryan Siemers, ManagerPricewaterhouseCoopers LLPChicago, IL312-298-3783 [email protected]

achieving results through a multiple hospital material management model

Documents

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