A name change is just one sign of the evolution of one Ohio-based IDN. Formerly known as Catholic Health Partners, the IDN was renamed Mercy Health in 2014 to strengthen its brand and capitalize on the existing names of most of its seven regions, explained Kara Finnegan, corporate director, purchasing affiliate operations, Mercy Health. Finnegan made her comments at the Journal of Healthcare Contracting’s recent Purchasing Coalition Forum in Atlanta.
Along with the name change, Mercy Health has been working on the following supply-chain-related initiatives:
- Centralization of the IDN’s supply chain operations.
- Development of an efficient, effective supply chain program for newly acquired physicians’ offices.
- Growth of its purchased services program.
- Expansion of its affiliate program.
Put them all together? “We are a completely different organization than we were when I last gave a presentation [at the Purchasing Coalition Forum] several years ago,” said Finnegan.
Approximately three years ago, the IDN consolidated all supply chain activities under one executive – Calvin Wright, chief resource officer. (The IDN had consolidated IT in the prior year.) Prior to that, each hospital’s supply chain officer reported to his or her facility’s CFO. The arrangement “made it very difficult to truly implement contracts,” said Finnegan.
“It took a year or a year and a half to get through that process and change our culture and understanding, and it was certainly predicated on the fact that we needed to save dollars. We were very excited about the opportunity, and today, we are an incredibly cohesive group, communicating on a very regular basis.”
Physicians’ offices
Another change involved integrating Mercy Health’s newly acquired physician practices. In 2010, the IDN began a concerted effort to acquire practices, which grew in number from 100 to 500 in a year and a half.
“We recognized through that process that we were good with acute-care purchasing, but we didn’t know the language of some of the other areas of business for which we were now responsible,” said Finnegan. Lacking a central supply chain structure, each local supply chain officer had responsibility for the non-acute-care sites in his or her market. What’s more, those local supply chain teams simply didn’t have the resources to focus on the non-acute-care sites; their attention was fixed on the hospitals. “With limited resources, you always look at the larger opportunity,” she said. “We recognized this wouldn’t work on a long-term basis,” particularly as the number of Mercy Health practices multiplied.
Some of those newly acquired practices made use of a Miamisburg, Ohio-based company called MedCost, an outsourced procurement company for non-acute-care sites. The company has a strategic alliance with MedAssets, but created a separate database for Premier and Mercy Health contracts to accommodate Mercy Health.
Now, MedCost handles procurement for all of Mercy Health’s physician practices. The office places its orders, which are transmitted to MedCost; MedCost parcels out those orders to the appropriate supplier – which, for med/surg distributed items, is either Medline Industries or Henry Schein. MedCost receives the invoice, then transmits a check request to Mercy Health. “Service levels have increased significantly,” said Finnegan. “Even better, the fee we pay MedCost is offset by the savings we achieve.”
Purchased services
As Mercy Health consolidated its supply chain team, the IDN decided to make inroads in purchased services, said Finnegan. It wasn’t always easy. “Purchased services are all over the place,” she said. “And it’s interesting, as you start to look at them, how different they are, and how many people in the hospital each one touches.” That’s a lot of decision-makers to accommodate.
“We’ve taken a very strong stance with these agreements,” she said. “There is no fluff.” Mercy Health assesses the need, then gives service providers the opportunity to tour the hospital(s) to get a sense for the scope of the services required. Contracting for so many services is challenging for supply chain, “as we don’t have that level of expertise in all these different areas,” she said. Nevertheless, Mercy Health now has 60 such contracts in place.
Affiliate program
Benefiting from all the supply chain activity are Mercy Health’s affiliate hospitals. The affiliates – which include SUMMA Health and Consolidated Supply Chain Services – add approximately $275 million of annual contracting volume to Mercy Health’s $400 million, said Finnegan, who manages the affiliate program. The program is free to affiliates.
Extending the IDN’s contracts to affiliated hospitals accomplishes several things, she said:
- Increases volume for the affiliates and Mercy’s owned hospitals, driving down prices for all.
- Helps affiliates in their quest to remain financially strong. “And as we move toward accountable care organizations, we want them to be as financially solvent as we are and drive cost out of the system.”
- Opens up a revenue stream for Mercy Health, which collects administrative fees from Premier contracts that are extended to affiliates.
As Mercy Health moves forward, it intends to continue its involvement in the Committed Contracting Group, or CCG, a 10-year-old subset of Premier IDNs which collaborate to drive committed-volume pricing for more than 200 acute-care hospitals. “We feel we need partners to help us aggregate volume,” said Finnegan. With some 200 contracts – half of which Finnegan refers to as “super-tiered,” CCG is the right partner to help Mercy Health do just that, she said.