Highly integrated IDN spans nine states
Ten years ago, the Journal of Healthcare Contracting interviewed Paul Swanson, executive partner, materials management, MeritCare Health System, Fargo, N.D., about the IDN’s path to becoming a highly integrated healthcare provider. In November 2009, MeritCare merged with Sanford Health to create one of the country’s biggest integrated rural healthcare systems.
Today, Sanford Health operates 42 medical centers, 225 clinics and 22 long-term-care facilities, primarily in six states — North Dakota, South Dakota, Nebraska, Iowa, Minnesota and Montana. In addition Sanford operates pediatric clinics in Duncan, Okla.; Klamath Falls, Ore.; and Oceanside, Calif.; as well as pediatric clinics in Ghana, Mexico and China.
Tom Harvieux, vice president supply chain management; and Jason Wilson, enterprise executive director, supply chain operations, provide an update on how Sanford has evolved in the past 10 years.
Shared services team
Sanford Health Supply Chain operates a shared services team that operates several unified functions, explain Harvieux and Wilson. While leadership and accountability are consolidated, team members can be decentralized to support operational needs.
Supplies, capital, and purchased service contracts are managed by the corporate supply chain team. Clinical services are managed centrally by the legal department.
“Sanford has a diverse contracting strategy,” according to Harvieux and Wilson. The IDN is a member of VHA (its primary GPO) and a founding member of the Upper Midwest Consolidated Service Center (UMCSC) regional aggregation purchasing group. Sanford uses the UMCSC and VHA contracts heavily for commodity and clinical products, where aggregated volume supports market-leading pricing. The IDN self-contracts for the majority of medical devices, capital and purchased services.
Other centralized supply chain functions include:
- Purchase order authority is limited exclusively to Supply Chain Management. Ninety-seven percent of purchase orders are executed by the central purchasing team; just over 3 percent are with a limited number of decentralized supply managers. Additional centralized functions include management of recalls, device warranty claims and product failures.
- Value Analysis. Sanford Health has 10 Enterprise value analysis teams. The supply chain director and analysts support teams comprised of clinicians and physicians from entities across Sanford.
- Capital acquisition. Capital purchases and service agreements are negotiated and finalized by Corporate Supply Chain. Decisions are facilitated through the VAT process.
- Information system. All facilities in the enterprise are on a single materials management information system, item and vendor master, contract files, data integrity, GS1 standards and new product adds.
Sanford Supply Chain operates central leadership of operations consisting of the following areas. Teams report to corporate supply chain but are regionally based to support hospital and clinic operations.
- Inventory management. Enterprise management of inventory strategy, product shortage coordination and product conversions.
- Project Management Office. Central project management and performance improvement resource to drive supply chain operational improvements and enterprise non-labor expense reduction opportunities.
- Provides enterprise reporting and analysis of supply chain operational metrics, supply utilization, cost data, go-to market intelligence and VAT supporting information.
- Sanford operates four primary regions and uses a hub-and-spoke network to provide logistical support. This includes a blended model of internal and third-party warehousing.
- Sanford has a unified distribution model that uses internal warehousing for all ambulatory and up to 20 percent of medical center needs; third party distributors support the majority of bulk order fulfillment. Hospital-based supply chain team members oversee all internal distribution and replenishment activities.
- Mobile equipment management is performed by Supply Chain as independent operations by facility. Location tracking system and metrics are compared across enterprise.
- Couriers and transportation: Central leadership structure with regional courier operations. Central strategy and oversight on freight/mode management, channel optimization, integrated network, dedicated fleet and outsourced carrier management and overall distributed cost.
Challenges facing the rural IDN
Covering six states presents unique challenges, say Harvieux and Wilson. For instance:
- Bulk deliveries can be as infrequent as two days a week.
- Higher inventory levels are needed to support fewer deliveries and supply disruptions.
- Distributors are a minimum of four to 12 hours away, with no ability to just “cab” over a critical item
- Vendor representative coverage is difficult.
- Daily courier routes for lab, supplies, etc., can be up to 410 miles round trip.
- Geographic separation leads to redundant inventory, warehouses and logistics staff.
- Distributor-managed low-unit-of-measure models are inefficient. (A lot of air is shipped in totes.)
- Freight costs are high.
- Leadership travel time means lost productivity, and team cohesion is difficult to achieve. (Some teammates never have met each other.)
- Travel time to build local relationships and participate in regional hospital team meetings is also challenging.
IT
Despite the challenges, Sanford continues to build a highly integrated organization. The IDN has completed implementation of EMR and ERP systems across all medical centers and clinics. Both systems are fully integrated with each other and share a common unique number as the item and charge master number. The IDN recently implemented Real Time Location System (RTLS) technology, which is being applied to medical equipment tracking, potentially enabling inventory visibility on the supply chain side.
Other systems include a pilot project with a major supply chain technology company to streamline procedural area inventory management and associated operational workflow and expanded use of a business intelligence platform. “Sanford Supply Chain strives to focus on improving operational processes prior to overlaying technology,” say Harvieux and Wilson.