Now that their healthcare systems employ physicians, supply chain executives work to get everyone moving in the same direction
Getting down to business. That’s what healthcare organizations are doing. Providers, suppliers and payers have accepted that change is necessary, and, in fact, that it’s here – to stay, says Dan Nielsen, founder of the National Institute for Healthcare Leadership and moderator of the recent Healthcare Supplier/Provider Institute in Las Vegas, Nev. “As I interview people around the country, and listen to presentations at the [Supplier/Provider Institute], it’s more and more apparent that even if part of the [healthcare reform] law or even the entire law is struck down, the wheels are already in motion.” Those would be the wheels of change.
Payers – beginning with the federal government – are recognizing and rewarding performance and quality, says Nielsen. “You can argue about the measures, but it is getting organizations focused on what they need to be focused on.” Prior to founding the National Institute for Healthcare Leadership, Nielsen was CEO of Dallas Fort Worth Medical for 15 years, and then was responsible for national education and networking strategies and activities at VHA.
Here to stay
Surprisingly, there was relatively little talk about healthcare reform among the 135 suppliers and providers who attended the Supplier/Provider Institute, which was hosted by the Journal of Healthcare Contracting. That could be a strong indication that the industry has accepted the inevitability of change and is preparing to move forward, says Nielsen.
Panels of providers tackled some of the biggest supply chain issues of the day – physician alignment, self-distribution, regional purchasing coalitions and purchased services. And, as with healthcare reform in general, the attitude at the Institute was not, “Why are these changes taking place?” but instead, “How do we best proceed?” says Nielsen.
For example, momentum continues to build for alignment with physicians, and that often involves acquisition of physician practices. “I’m old enough to have seen this trend a couple of times,” says Nielsen. “But I see it as different this time. I think this is a true change in the mission and culture of healthcare organizations.” Today, hospitals and IDNs are applying better management strategies than they did in years past. For example, rather than hiring someone to take control of newly acquired physician practices, hospital and IDN executives are involving physicians in the direction of their organizations. “They’re saying, ‘Let’s get people integrated and comfortable,’ and then the group – not the hospital CEO or senior executives – choose which commitments they want to make in specific areas.”
Regarding regional purchasing coalitions, suppliers have accepted that RPCs are part of the contracting landscape, says Nielsen. “Two or three years ago, there was some resistance, as suppliers and vendors were thinking, ‘This is someone else I have to sell, and they’re going to try to beat me up on price.’ So the question a few years ago [from suppliers] was, ‘Why do we need your regional organization?’
“I’ve seen that change radically,” he says. “Both suppliers and providers see that this is reality, that they won’t go away, and that they’re highly supported by the organizations involved. In fact, many of the organizations involved in local or regional [RPCs] are more attuned to loyalty to that organization than to the big national organizations.
“My belief is, they’re here, they’re getting stronger and gaining credibility.”
Likewise, the concept of self-distribution “is probably here to stay, and will get stronger,” says Nielsen. Because of healthcare reform and the pressures the industry is facing, providers are finding themselves pushed into new directions. “They’re looking at this as a supply chain business,” and in some cases, are bringing in supply chain professionals from outside healthcare to run their operations.
That said, self-distribution may never be widespread, he says. “I think it will be highly selective and economically viable for some of the larger integrated healthcare organizations around the country.”
Aligned incentives
UPMC may have a leg up on other IDNs that have only recently stepped up efforts to acquire physician practices. “We have a unique model here,” says Mary Beth Lang, vice president of HC pharmacy and supply chain management commercial services. “We have enjoyed a very long, close relationship with UPMC’s Physician Services Division, and so have enjoyed the model that many other systems are starting to create.” In fact, more than 3,200 employed physicians, predominantly specialists, practicing in several hundred clinical locations, have been part of the UPMC system for years, she says. (The IDN also has more than 20 acute-care and specialty hospitals in the United States, Italy and Ireland.) “We’ve been able to do a lot through shared culture and aligned incentives, to prepare us for accountable care,” says Lang. In addition, UPMC has its own health plan.
Lang is responsible for HC Pharmacy Central Inc., a for-profit membership corporation and group purchasing organization that annually distributes $550 million in pharmaceuticals on behalf of its members. She also leads Prodigo Solutions Inc., a supply chain management services company designed to leverage UPMC contracts along with management, consultant and technology expertise, particularly in the area of e-procurement. Prior to joining UPMC, she was the senior vice president of business intelligence for Amerinet, and president of Amerinet subsidiary Diagnostix.
“As we move from a fee-for-service environment to value-based purchasing, we are able to work with our physicians and model the behavior we’ll need in the future,” she says. One example is panel management. “Through our health plan technology, we can look at key markers to tell us how compliant patients are [to prescriptions, or to referrals for diagnostic tests, etc.].” With that information, UPMC providers can intervene and help keep patients in better health and avoid potentially harmful – and expensive – incidents. At the same time, physicians are expecting patients to become more accountable for their lifestyle choices, and to participate in their care.
In conjunction with its physicians, UPMC has improved care coordination, so that patients are seen by just the right caregiver, be it a physician, physician assistant, nurse, etc. “We’ve looked at care coordination under a new model, where you look at the handoffs and try to make care more efficient,” says Lang.
The IDN is also conducting pilots of the “medical home” concept as well as population management. “Physicians are looking for new members of the care team that can shoulder the burden of addressing socio-economic patient issues, so [physicians] can spend their time with patients on clinical issues.”
Population management isn’t new, points out Lang. It’s what health maintenance organizations, or HMOs, were all about 15 or 20 years ago. In that model, providers attended to the healthcare needs of a given population on a per-member-per-month (or other time period) basis. “But what was missing was all the technology that surrounds the ability to do that efficiently,” she says. “There were no electronic health records, no health information exchanges to allow you to look at disease state management regionally or nationally, to allow you to get to best practices or protocols for appropriate care. All those foundational steps are now being put into place through ‘meaningful use,’ certainly here at UPMC.
“We have a very strong focus on technology and on being able to get more real-time data to assist our physicians in making appropriate treatment recommendations.” That, in turn, reduces duplication of tests, and hence, costs. In fact, utilization of images has decreased 20 percent since UPMC developed and deployed SingleView, a standards-based platform that pulls together the multiple picture archiving and communications systems, or PACS, used across the medical center’s facilities, she says. SingleView lets the medical center’s radiologists and other clinicians access reports and imaging studies in any of the PACS and other imaging systems across the enterprise.
“As physicians move toward making value-based care decisions in a culture with aligned incentives, they are beginning to demand the rational use of resources,” she says. “They understand the need to contain costs, and are demanding real-time data and evidence-based guidelines to follow, so they can stop practicing defensive medicine.”
In the fee-for-service model, not only are physicians reimbursed differently from hospitals, but primary care physicians are reimbursed differently from specialists, she points out. “Each has a very different payment structure. A key goal is to align these.” Shared savings programs and new delivery models are two ways to start that alignment process.
Rational use of resources
Supply chain professionals can contribute to the rational use of resources, both in supplies and people. “As we look at alignment, we look to see, ‘How can we reduce variation, both in practice and supplies used?’” says Lang. “All of this will help us provide quality, cost-effective care.”
With UPMC’s emphasis on treating episodes of care (both inpatient and outpatient) and ultimately, managing the health of populations, Lang and her staff are re-examining how they source supplies and pharmaceuticals. “We see a new class of trade emerging that will address the new delivery models and payment based on value, not volume. Suppliers who understand how their products and services contribute to value will be the winners.”
UPMC is also working to make it easier for physicians and staff to purchase what they need. Under the leadership of Chief Supply Chain Officer Jim Szilagy, the IDN has examined the entire procure-to-pay process, and has created an electronic marketplace through its wholly owned subsidiary, Prodigo Solutions, called ProdigoMarketplace. “It’s a one-stop shop for physician offices,” explains Lang. That’s especially important for physicians practicing in remote locations, who lack easy access to UPMC’s supply chain team. “Part of Jim’s vision is to bring contract compliance to the point of requisition,” says Lang. UPMC has 2 million items in its ProdigoMarketplace. “We’re able to decrease the variation as far as special orders, because we make it easier for our physicians and office staff to find the supplies they need.”
Now that pharmacy has been brought into the supply chain department, UPMC is working to improve the procure-to-process in that category as well.
But all this is a work in process. To date, approximately 8,000 of UPMC’s 55,000 employees can order via ProdigoMarketPlace. Close to 60 percent of the 70,000 transactions processed monthly are now fully automated, that is, through requisition, purchase, invoice and payment.
The fact that many of UPMC’s physicians are employed by the IDN doesn’t really change how supply chain approaches and works with them, says Lang. Rather, UPMC achieves alignment through participation. “Any system will tell you, employment status does not equal compliance,” she says. “Physicians are driven by evidence-based decisions.” UPMC enlists physicians – employed and independent – to participate in its 32 value analysis teams. “And once an item has been vetted and selected, we provide a period of time for any physician to give us input into the selection.
“We walk through why it’s important [for physicians to get involved in product selection], the money we save by them doing so, and the need to reduce practice variation and maintain the quality of our services in line. So I don’t think employment status changes anything we do. Education is probably the No.1 focus now and in the future to make sure we can get, in this case, 5,000 physicians on a similar page.”
Avera Health
Like many IDNs, Sioux Falls, S.D.-based Avera Health is expanding its base of physician practices, both primary care and specialists, says Kevin Goos, corporate director of procurement and strategic sourcing. In addition to its five regional hospitals in South Dakota and Minnesota, the Avera Medical Group serves patients in a five-state region from 130 locations. In addition, the IDN has seven long-term-care facilities and 14 HME locations.
Currently, the Medical Group comprises about 550 individuals, close to 400 of whom are physicians, the remainder allied health professionals. “In the last two years, we have seen physician practices coming to us rather than us going out recruiting,” says Goos. That’s not surprising, given the uncertainty of healthcare reform and accountable care, he says.
“Partnership” is the key word when it comes to physician alignment, says Goos, who, prior to joining Avera 10 years ago, worked in corporate contracting with the Evangelical Lutheran Good Samaritan Society. Prior to that, he was a sales rep for Sysco Medical. He is also a respiratory therapist.
No takeovers
“We don’t go in and ‘take over’ a clinic,” he says. “We’re very community-focused.” The rural locations that Avera serves are full of community pride, and Avera doesn’t want to trample on that. “If we purchase, lease or manage a facility, even an acute-care facility, we want to partner with that community; we want to bring resources to it.” Avera works with physicians and staff to align goals across the system. “When it comes to the supply chain, we try to determine their needs. And we engage physicians in value analysis teams.” Regional, face-to-face meetings as well as Internet-enabled meetings help people keep in touch.
In fact, given the far-flung nature of its hospitals and other facilities, Avera relies on electronics to help with the delivery of care as well, says Goos. For example, board-certified emergency room physicians at the flagship facility in Sioux Falls monitor ER cases at Avera’s small, critical-access hospitals. Emergency physicians in Sioux Falls can run codes remotely, at least until the local physician arrives on the scene.
Like all IDN supply chain executives, Goos and his team must tread a delicate balance between accommodating physicians’ needs on the one hand, and achieving supply chain efficiencies on the other. Creating an IDN-wide med/surg formulary “has to happen,” he says. “You can’t carry every product that’s out there.”
But supply chain can’t dictate that formulary. “There has to be intense clinical involvement and physician engagement through our value analysis teams,” he says. “This will be important, because that is how we will aggregate volume, drive compliance and get to lowest cost.”
Just as supply chain professionals have to cultivate partnerships with their physicians and other clinical staff, so too must they cultivate partnerships with their suppliers, says Goos. “Everybody wants to have strategic partnerships, but very few understand the concept,” he says. Having been a sales rep himself in the foodservice industry, he understands the challenges of developing such a mindset. “The word ‘partnership’ is used loosely, but providers and vendors need to move away from being transaction-oriented, and move toward being more strategically oriented.”
But that will only happen if both sides get what they need from the relationship, he says. Providers need good products and quality outcomes, and they need to save dollars. Vendors, on the other hand, need to know that the facilities with whom they’ve signed agreements will drive compliance. “We want to lower our healthcare supply costs, but we need to perform for the supplier.”
But price isn’t the main thing. “We need to make sure we’re choosing the right product to improve clinical outcomes,” he says. “So it will be quality-driven.”
One more thing about strategic partnerships: They require nurturing. Both sides have to monitor them regularly, perhaps every quarter, through business reviews, says Goos.
Novant Health
Ten or 15 years ago, the relationship between physicians and supply chain was, often, a polite and cordial one, which sometimes went no further than, “How are you today?” says Tony Johnson, senior vice president, Novant Health Supply Chain. That’s changed. “Today, we sit at the table as partners and stewards of resources, trying to find the best outcomes for our patients, understanding that it will take the talent and expertise of our physician partners, coupled with administrators and the limited resources we have. The whole dynamic of the conversation has changed.”
With 13 hospitals, a medical group consisting of 1,124 physicians in 355 clinic locations, and outpatient surgery centers, imaging centers and other facilities, Novant Health cares for patients in North Carolina, Virginia, South Carolina and Georgia. The number of physicians employed by the IDN has grown dramatically since Johnson came onboard in 2003.
Alignment occurs when everyone – administrators, staff and physicians – is working toward the same objective or objectives, says Johnson. And Novant has achieved it to a certain degree. But it’s not because those physicians are employed. “There’s more to it than who pays the paycheck. What constitutes alignment is buy-in to a common set of objectives.”
What’s best for the patient is for the physician to have on-hand the resources he or she needs to generate the best clinical outcome with limited resources, says Johnson. That’s where supply chain comes in. “When we engage physicians in that way, they become a bigger partner in trying to find the right solution.”
Physicians also understand that if they can help conserve resources in one area, they may gain resources elsewhere, perhaps more space, staffing or equipment, which ultimately contribute to improved patient care.
Online shopping experience
Like other supply chain executives whose IDNs have acquired physician practices, Johnson pursued a med/surg formulary, so that the IDN could achieve standardization. He and his team sat down with clinicians and tried to come to some agreement on the products they use. “But we could never get there,” he says. Everybody wanted his or her preferred products on the formulary. “It ended up being a list of preference products for every practice.”
So supply chain stepped back and took a fresh look at the situation. “We found that [the clinics’] real desire was to have a simple, easy-to-use tool to order what they needed,” says Johnson. Traditionally, the Novant supply chain, like those in many other IDNs, used an ERP system that had been designed from the financial perspective. Hence, to order a medium size exam glove, the clinic staff had to locate the product number, then place the order. The process was tedious, and not at all like the process online shoppers use today, says Johnson.
“So we introduced a product that looks like amazon.com, and they loved it,” he says, speaking about the clinical staff. Rather than hunt for a product number, clinicians can type in, say, “latex-free exam glove,” and view all the gloves available from Novant, from the most expensive to the least. “We found that this is what they really wanted – a simple way to relay their needs to us, without getting stuck on a particular product.” In many cases, by viewing the gloves side by side, clinicians decide they don’t need the most expensive one. In fact, the Novant supply chain team has deleted some of the more expensive product choices, and the clinical staff has barely noticed. “They don’t seem to be missing them. So, in a roundabout way, we’re building a formulary, but nobody even knows it.”
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