The Clinical Impact of Supply Chain Decisions and

The Clinical Impact of Supply
Chain Decisions and Managing
Physician Preference Items:
The Art of Collaboration and
Karen Rago, RN, MPA, FAAMA,
Imperative for Change: The IHI Triple Aim
New Economic Reality
Structure and Governance
Difference in Physician/Surgeon Styles
New Supply Implant Request Process
Vendor Negotiations
Examples of Successful Physician Engagement
Keys to Success
The IHI Triple Aim
The IHI Triple Aim is a framework developed by
the Institute for Healthcare Improvement that
describes an approach to optimizing health system
performance. It is IHI’s belief that new designs
must be developed to simultaneously pursue three
dimensions, which we call the “Triple Aim”:
• Improving the patient experience of care (including quality and
• Improving the health of populations; and
• Reducing the per capita cost of health care
New Economic Reality
Patient Experience
o Quality and Cost improvement imperatives
 The US health care system is the most costly in the
world, accounting for 17% of the gross domestic
product with estimates that percentage will grow to
nearly 20% by 2020 according to CMS projections.
 Aging populations and increased longevity, coupled
with chronic health problems, have become a global
challenge, putting new demands on medical and
social services
New Economic Reality
Patient Experience
• Quality and Cost improvement imperatives
– Medicare Pay for Performance
– Reduction in reimbursement from payors
– Obamacare: Increased number of people insured
but underinsured
– Continued transition to Outpatient and
Observation care with lower reimbursement than
– Aging population
Information for
mutual benefit
Short term
relationship for
information with
separate goals
and resources
Longer term effort
around a project or
task with some
sharing of
resources and
division of roles
Changes the way
organizations work
together for a common
vision resulting in
service integration, or
system change
Collaboration and Communication:
The Way to Win
• Redefinition of Partner: Hospital and Physicians
– Medical Directors
• Should have annual goals aligned with the strategic
• Contractual requirement for participation and
performance, aligned incentives
• Decision-making responsibilities
• Goals and objective determination
• Oversight of practice performance, quality and
Collaboration and Communication:
The Way to Win cont’d
• Supply Chain VP Role
– The supply chain is the second largest and fastest
growing expense for healthcare providers; with
only labor costing most providers more. *
– Supply chain is also a key to creating better endto-end visibility about all of the products, devices
and supplies used in healthcare – critical to
running businesses better
*Bruce Johnson, CEO of GHX
Collaboration and Communication:
The Way to Win cont’d
• Working in Interdisciplinary Teams
– Break down department boundaries
• Collaborative Approach
• Win-Win Situations
– Trust, openness and respect
• Steering Committee
• Clinical Improvement Team/Task
Analysis Committee
• Steering Committee
– Senior Leadership: CEO, CMO, CFO, COO,
CNO, VP Supply Chain
– Roles/Responsibilities
• Sets the mandate/goals
• Removes barriers to success
• Hold Teams accountable
Structure/Governance Cont’d
• Clinical Improvement Team/Task
Force/Value Analysis Committee
– Leadership
– Team Members
– Roles/Responsibilities
Structure/Governance Cont’d
• Clinical Improvement Team/Task
Force/Value Analysis Committee
– Leadership: Physician, Administrative and
Supply Chain Lead
• Physician needs to be someone who is respected
by his/her peers
• Empowered to make decisions
• Aligned with the hospital
– Medical Directorships with goals aligned with the strategic
mission of the hospital
– Team leadership’s goals aligned
– Quality and Efficiency goals
• Accountable to CMO
Structure/Governance Cont’d
• Clinical Improvement Team/Task Force/Value
Analysis Committee
– Team Members
• Physicians
– Involve multiple physicians to minimize or mitigate potential
conflicts of interest
– Have physicians complete a conflict of interest document
Supply Chain
Operating Room/Cardiac Cath Lab
Transfusion Services
Case Management/Social Work
Structure/Governance Cont’d
• Clinical Improvement Team/Task Force/Value
Analysis Committee
– Roles/Responsibilities
Patient Centered Decision Making
Approve of all new requests for Supplies/Implants
Generate quality and cost improvement ideas
Advance ideas that have high probability of successful
implementation and gain support from constituents
• Negotiate with Vendors
• Develop implementation plan
• Develop dashboard to track progress and make
adjustments as necessary
Recognizing Difference in Styles
• Medicine Physicians:
– Process oriented
– More willing to attend meetings
– Willing to discuss and develop ideas
• Surgeons
– Outcome oriented
– Less willing to attend weekly meetings
– More open to having ideas presented in an all
hands meeting for approval
Increase Knowledge:
Helps set the imperative for change
Educate all team members to:
Triple Aim
Improvement Process
Financial terms
Reimbursement from Government and Commercial Payors
• Readily share:
– Internal financial and utilization data
– External benchmark data
UHC for Academic Medical Centers
Advisory Board
Example of Slide included in all financial
Glossary of Financial Terms
Gross Charges-What the Hospital charges for services and supplies
Net Revenue-What the hospital gets paid by government and commercial payors
Direct Costs- any cost directly attributed to an individual patient
– Directly related to physician ordering practices and preferences.
– Nursing Care, Supplies, RT, PT, OR time, diagnostics, devices and implants…..
– Variable costs – costs that go up or down with patient volume (labor, supplies)
– Fixed costs – costs that don’t change with changes in volume (CT, surgical
instruments, medical director)
Contribution Margin-Net Revenue minus Direct Costs
Indirect Costs-Overhead of running the hospital
– Administration, Billing, Heating and Lighting, Building Maintenance
Total Costs-Direct and Indirect Costs
Net Profit/Loss- Net Revenue-Total Costs
New Supply/Implant Request
• Develop process for physicians to request new
• Develop form to be completed by physician,
vendor and department administrator to include:
Supply item, catalogue number
Supply/Implant to be replaced if any
Analysis of annual financial impact
Clinical/Quality imperative
• Requesting physician presents request to the
Supply Chain Value Analysis Team
– Team includes peer physicians
Vendor Negotiations
• Identify team members to participate in
meeting with vendors
– Physician
– Administrative
– Supply Chain
• Prep with physicians for meeting with
• Utilize hospital reimbursement and cost
Examples of Successful
Physician Engagement
• University of California Medical Centers
– 5 Academic Medical Centers
– 5 Electrophysiology Chiefs
– Collaboration between all to reduce
costs for EP implants
• Process
– Led by UC Office of the President and
UCSF CV Administrator
– Supply Chain Administrators collated the
utilization data
– Several conference calls with the 5 Chiefs
and respective administrators
– Consensus reached on implant utilization
and price point for each Medical Center
– Successful negotiations with vendors with
full support from the EP Chiefs
Examples of Successful
Physician Engagement
• Stanford University Medical Center
• Reduction in number of Cardiac
Coronary Artery Bypass Graft
(CABG) and Valve Surgical Packs
– Unique pack for each procedure
for each of the 6 surgeons
– Set up a conference room with all
– Reviewed each pack item in a single
meeting with 5 of the 6 surgeons
– Outcome
• 1 pack for CABG and 1 pack for Valve
procedures that all surgeons would use
• Reduce “have available” items
Examples of Successful
Physician Engagement
• Stanford University Medical Center
– Swan-Ganz Catheters
• Were used in every cardiac surgery
• Developed guidelines for utilization
– Left Ventricular Ejection Fraction
(LVEF) threshold set for abnormal
– Swan-Ganz Catheters utilized only
in cases with abnormal LVEF
– Reduced utilization by 25% year over
– Reduced Nursing time in the ICU
» No need to record data
» No need to change solution and
Examples of Successful
Physician Engagement
• Stanford University Medical Center
– Infusion Pumps
• Several different infusion pumps used throughout the hospital
• Goal was to agree on one vendor and one
• Pulled a multidisciplinary team together
– Anesthesiologists
– Nurses
– Supply Chain
• Each Infusion Pump Vendor presented to the team including
demonstrations of pump
• Consensus reached on one vendor and one pump
Keys to Success
• Senior Leadership and Physician Support/Partnership
• Physician Leader
Respected by peers
Annual goals are aligned with hospital
Included in discussions/negotiations with supply vendors
• Partnership with Supply Chain VP and Team
• Multidisciplinary Teams
– Led by Physician, Administrator and Supply Chain Administrator
• Collaborative Process
• Knowledge
– Educate to:
• Improvement Process
• Financial Terminology
• Reimbursement from Government and Private Payors
• Financial Analysis Support: Data
• Dashboards and Follow-through
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