Frontiers of the Healthcare Supply Chain – The Journal of Healthcare Contracting

Empowering Value-based Contracting Through Technology and Automation

By John Strong and Jim Ivers

While there continues to be significant interest in value-based contracting, technology that can accommodate the large-scale monitoring of these contracts has been slow to materialize. With Mondopoint LLC completing a successful year-long pilot of its automated platform at a major health system, it seems that both providers and suppliers can finally realize the benefits of value-based contracting.

More than a decade ago, the United States government began pushing providers toward outcomes-based care models. Other payers followed suit, increasing the pressure for providers to explore alternatives to the fee-for-service models of the past. One area of opportunity quickly revealed itself in the purchasing decisions of medical devices. This provided an opportunity for device manufacturers / suppliers who wished to set themselves apart from the rest by demonstrating the efficacy of their products through improved patient outcomes. Together, suppliers and providers began exploring new contract models that would reflect the improved patient outcomes that payers required.

Ever since, interest in value-based contracting (VBC) programs has continued to grow. A 2018 survey of C-suite and supply chain executives found that 81% would be interested in VBC programs if they were offered by a supplier¹. While overall progress toward VBC adoption slowed in 2020 and 2021 due to the pandemic, supply chain challenges, and product shortages, interest remains high. This is particularly the case when VBCs are coupled with technology that can transform cumbersome manual processes into automated, performance-monitoring solutions.

Mondopoint LLC., a Chicago-based startup, has completed the first year of a proof-of-concept implementation with a major New England-based health system. This proof-of-concept has successfully demonstrated that large-scale VBCs can be implemented and automated. In collaboration with the device supplier and the provider, Mondopoint integrated its SaaS platform with the health system’s existing infrastructure to automate performance tracking and rebate submission for over 5,000 patients across two product categories. As a result, the health system of seven acute care hospitals – collectively representing approximately 2,400 total beds – can effectively monitor patient outcomes while the device supplier can demonstrate the value of its medical devices. It’s a win-win.

Existing Efforts Toward VBCs

While the consensus has regarded value-based contracting as a positive step in the right direction, there have been organizational challenges in implementing. Lack of information and data has been a key concern of supply-chain professionals who have been hesitant to implement VBCs. In addition to the lack of information, aggregating existing data has also proved a challenge. Both smaller and larger health systems have expressed that manually tracking adverse events and calculating value based on specific device performance can be an immense burden.

Trading Partner Collaboration Critical to VBC Success

For the past decade or longer, the healthcare supply chain has been visiting the need for better trading partner collaboration. It has been an elusive goal.

graphic demonstrating components of a collaborative relationship

While there have been many definitions or prerequisites for improved collaboration, it seems that very few organizations have been successful in “true” trading partner collaboration. VBC requires this sort of collaboration, or ultimately it will fail. Often identified characteristics of these types of relationships include institutional trust, clear expectations and goals, accountability, transparency, and good communication. Perhaps there has been little traction because all of this requires time and commitment.

In the past, meaningful outcome data or ways to measure issues (such as a readmission) have been difficult to obtain and a manual process. Applying VBC to products and services is relatively straightforward if certain factors are met during the planning stage of a contract.

Mining the Electronic Medical Records and Other Systems

By bringing trading partners together to identify mutual goals (“wins”), Mondopoint has been able to support constructing successful VBCs based on these goals. Mondopoint has then been able to mine patient data to support these VBC programs. This longitudinal data includes cohorts of patients and the criterion, such as a patient readmission within a defined number of days, that signals to both the provider and the supplier that a VBC condition has been met. This might trigger provision of a no cost replacement, a rebate, or payment for a readmission due to the adverse outcome.

Types of value-based contracts

Risk Share
Outcomes Guarantee
Gain Sharing
VBHC Partnership

First-Year Results

Mondopoint implemented its SaaS platform at a major New England-based health system in 2021 – monitoring outcomes on two selected products from Medtronic that guaranteed product use/outcome results to the health system. The pilot included six hospitals and eight locations.

On a daily basis, Mondopoint’s SaaS platform tracks the procedure date, type, surgeon, and location for specific cohorts of patients who receive eligible devices and treatments. To date, Mondopoint is tracking longitudinal outcomes of over 5,000 patients, including product information such as lot, serial, and other identification.

In addition to the daily processing, Mondopoint performed a one-time retrospective report of the same data for comparison purposes.

Because the Mondopoint platform is able to connect to a variety of EMRs and other hospital IT systems, monitoring of outcomes was available from all hospitals within the system. Mondopoint successfully identified all cases where patients were readmitted for infection or recurrent AFib, two of the key elements that trigger a VBC rebate from the supplier back to the hospital.

The retrospective information is useful for supply chain activities including historical usage information and physician preferences.

New, Innovative Technologies a Key Target

VBC benefits provided to trading partners can include:

Supplier

Increased willingness by the hospitals to trial, evaluate and use new technology to reduce infection in certain patients
Expansion of sales at a faster rate than projected because the product performed as promised
A context and platform for better trading
partner collaboration
Increased supplier credibility around claims made for the product

Health System

Provides assurances product will perform as promised – or there is remuneration for the product and in certain cases re-performing the procedure
Allows the collection of data that can monitor product performance automatically over an extended period. This allows value analysis follow-up of results at various intervals
Can serve as a “launching pad” for additional value analysis projects
A context and platform for better trading partner collaboration

Conclusion

A new value equation is emerging in patient care whereby the value of the services is related to the quality-of-care outcomes as opposed to the quantity of provider visits. This value equation can be easily translated, especially to new technologies and products.

It was predicted that value-based care (and perhaps value-based contracting) would take a back seat in 2022 because of the global pandemic and the fallout from it. In addition, supply chain disruptions, additional waves of COVID and financial challenges at the end of government support have all had their impact.²

While supply chain’s use of value-based contracting cannot eliminate risk, it provides a way to lower the inherent risk of changing products, to adopt new, innovative technology and to verify and monitor product claims.

² Bannow, Tara, “Value based care evolution might take a back seat in 2022”, Modern Healthcare, December 27, 2021; www.hcinnovationgroup.com/policy-value-based-care/article/21256189/valuebased-contracting-at-an-inflection-point

DISCLOSURE: John Strong is a member of the advisory board and an investor in Mondopoint.

John Strong, Co-founder and Chief Consulting Officer, Access Strategy Partners Inc

Jim Ivers, Founder and Ceo of Mondopoint

Measuring Our Success

Froedtert Health’s Supply Chain Scorecard

By Jack Koczela

In a moment of temporary insanity, I decided I would start running. Over several months, I proudly went from walking around the block to (relatively) comfortably finishing two miles. Because I ran in the morning, I rarely saw other runners, until one day someone blew past me like I was standing still. Horrified, I downloaded a running app and checked my mile time. It confirmed what I had seen – I was still moving little faster than a walk! What gets measured not only gets done – it gets improved.

In 2018, Froedtert Health’s Supply Chain leadership began a journey toward disciplined improvement. Through regular measurement of our performance, we would align our priorities, focus our teams and hold ourselves accountable to our customers. Froedtert Health’s Supply Chain Scorecard has achieved these goals and continues to be a central part of performance measurement for our team. All Supply Chain departments ought to adopt a similar tool to celebrate their successes and align on opportunities.

Creating the scorecard

To create the scorecard, Supply Chain senior leaders turned to many existing sources of recommended metrics. Drawing heavily on the excellent methodology laid out in The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard (Rohm et. al.), we began with our Mission, Vision, Values, Strategic Plan and key business priorities. These key pillars of our organization would become the framework of the scorecard, thus ensuring that it would measure what is important to Froedtert Health as a whole, not just Supply Chain performance. The business pillars of Froedtert Health are Consumer-Guided Experience, Exceptional Care, Business Transformation, Extraordinary People and Market Leadership. Many of these areas already had internal benchmarks tied to leader pay and incentives. For example, the whole organization was already measured on staff engagement under “Extraordinary People.” We knew it would be important to align to this and other strategic goals, rather than creating too many goals for leaders to chase.

We also drew on industry sources for recommended supply chain metrics, such as AHRMM, Gartner, GPOs and SMI. With these sources in mind, we identified more than 150 potential metrics to include. Clearly, this was too many for productive measurement – each had to be worthwhile! To prioritize the metrics we looked at:

Alignment with Froedtert Health’s Mission, Vision, Values and Strategy
Common metrics suggested by industry organizations
Common requests from customers, particularly those where we had improvement opportunities

With our metrics in hand, we worked to determine targets or benchmarks. Most of our benchmarks are set using national standards. If a target did not exist from a third party, Supply Chain would at least benchmark against previous year’s performance to demonstrate accountability and progress. In most cases, we chose to target top quartile or decile performance. In the end, Froedtert Health’s Supply Chain Executive Advisory Council provided a final sign off on the list of metrics selected and the overall scorecard framework.

On a monthly cadence

Now, on a monthly cadence, the Supply Chain Scorecard is shared with all Froedtert Health Supply Chain staff, the Supply Chain Executive Advisory Council, key organizational leaders – such as the CFO and hospital presidents – and the Supply Chain Strategic Partner Council. Through this transparency, Supply Chain has fostered collaboration and alignment between teams. Indeed, Supply Chain’s methodologies have now worked their way into the broader success metrics of the organization. For example, in standard financial reports, “Supply Expenses” include both supply and drug/pharmaceutical expenses in a single number. Noting the difference in spend and trends between these two categories, Supply Chain broke these metrics into two separate numbers and worked closely with Finance to begin displaying them separately on organization-wide reports.

When the scorecard is published each month, an accompanying narrative draws on the detailed reports to explain the performance of a certain metric. These detailed reports are available to Supply Chain managers to guide the performance of our team. For example, the Supply Chain Procure to Pay Automation Ranking is a roll-up metric on the overall dashboard. Behind the scenes, the Supply Chain Informatics team monitors a detailed report that breaks out the individual components of P2P automation such as data management, EDI usage and exception management.

In a true demonstration that “what gets measured gets improved,” Froedtert Health has seen many of the metrics on our scorecard lead to meaningful change. In 2018 when the scorecard was first created, our diverse supplier spend was inaccurately monitored with out-of-date tools. Because Diverse Supplier Spend is now on our Supply Chain Scorecard, we have doubled Diverse Supplier Spend through internal programs, partnership with our Diversity and Inclusion team and close collaboration with our key suppliers, who now report Tier 2 diverse spend on a regular basis.

Creating and operating a scorecard can help guide the conversation of your supply chain, and proactively “tell the story” of your department. When COVID-19 began impacting Froedtert Health, Supply Chain leaders were able to demonstrate the reality of the situation through our report outs. While headlines were screaming that the “supply chain is broken,” the Froedtert scorecard clearly demonstrated the extent of the problem by reporting on statistics such as our lower internal Fill Rate. In addition, Supply Chain demonstrated our reaction by reporting on increased internal inventory stockpiles as a resiliency strategy in the face of unprecedented disruption.

Froedtert Health’s monthly Supply Chain Scorecard is a key part of our success. The scorecard aligns the department and our internal and external partners around a clear set of goals – with clear targets – that are all important to Froedtert Health’s strategic priorities. As we move forward, we continue to tweak and develop the scorecard to tell our story and propel our success. This tool draws heavily on existing sources of information and benchmarks. All Supply Chain leaders should develop a similar structure to drive their organizations forward.