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Linking the Chain

September 1, 2008
by Kate Huvane
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Sisters of Mercy's highly successful supply chain is becoming a best practice in the healthcare industry

Rick schooler

Rick Schooler

When Rick Schooler was planning a warehouse distribution management system to revamp the supply chain at Orlando Health (Orlando, Fla.), the CIO and vice president of information services did what so many others have done — he paid a visit to Sisters of Mercy Health System, an 18-hospital network based in St. Louis, Mo.

The reason? Sisters has earned national recognition for its innovative supply chain management and processes.

Vance moore

Vance Moore

Sisters has hosted visitors from 670 hospitals across the country — which represents just shy of a quarter of the United States healthcare space — along with representatives from such industry giants as Wal-Mart (Bentonville, Ark.) and Johnson and Johnson (New Brunswick, N.J.). According to Vance Moore, president of the resource optimization and innovation (ROi) department, all these organizations are seeking to learn about the health system's supply chain operation division.

Mike mccurry

Mike McCurry

ROi began as an internal network at Sisters in 2002, and has since evolved into an organization with internal and external clients and a contracting volume of more than $360 million, says Moore. Its business model is built around a centralized storage and distribution center (known as the consolidated service center) that enables its users to take ownership of the supply chain, and decrease reliance on third parties. But instead of focusing solely on Sisters' facilities and wiping up the competition with its sought-after techniques, ROi wants to become a best practice model that can provide guidance for other organizations.

“As an industry, we have too much of a tendency to look to third parties to try to solve our problems for us,” says Moore. “One of our challenges at ROi is to try to understand the process — define our needs and seek out the best alternatives — and then do our best to apply those.” One of ROi's initial goals was to escape the confines of the traditional supply chain and focus more on quality than just on cost savings. “If you look at most supply chains in healthcare, they're considered almost minions of the finance department. That's just the opposite of the fundamental philosophy we've had since the beginning,” says Moore.

At Sisters, the process of deciding upon which products to purchase and distribute begins with discussions during which clinicians state their case about the products they feel are superior in each category. If ROi can get that particular surgical tool or other piece of equipment at the right price, it will. It's as simple as that.

As one might expect, clinician satisfaction has increased significantly since the system was implemented, according Mike McCurry, vice president and CIO at Sisters. “I was there the day they explained this to the clinicians across the organization. It was funny to watch; they'd been called together and were ready to protect their turf,” says McCurry. “So when the ROi guys said to them, we want you to have the very best, but what we need you to do is simply tell us, as a group, what is the best in every category, and we'll buy that for you — they didn't know what to do with that.”

The major benefit of ROi, says McCurry, is the “quality of the service that supply chain offers for Mercy, through the visibility of the data and purchasing decisions.”

However, before any of that could be achieved, ROi was faced with the task of standardization, which was not an easy process since Mercy had at least 8-10 different materials management systems spread out among the 20 hospitals, says Moore. Once ROI's staff converted to a single system and started to migrate all the hospitals, it found that although the individual facilities were using the same products much of the time, they identified them with different nomenclatures.

According to Barbara Ripollone, principal, CSC's Global Healthcare Sector (Falls Church, Va.), this occurrence is not at all uncommon. “People can be following the process and doing fine, but if the clinical unit calls an item a sponge and materials management calls it a bandage, you have a problem,” she says. Now, most systems list the official term that the materials management or vendors may use, along with an “also known as” field for what clinicians might call it, explains Ripollone.

According to Moore, “One of the best things we ever did was to consolidate and drive toward standardization within our system. With standardization, we increased productivity and coverage.”

By transitioning to a standardized system, ROi was able to access comparative data, which allowed the division to perform value analysis and to challenge not just the quality and prices of individual products, but entire orders.

In doing this, Moore and his colleagues found that Mercy was paying different prices for identical products because manufacturers were treating the facilities within Sisters as separate entities, and not as one health system. Therefore, Sisters wasn't able to leverage the large volume of products it ordered as a group.