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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.

With ROi's value analysis programs, all of that has changed. “As we continue to mature, the accuracy of data and the consolidation of data allow us to look at utilization of product,” says Moore. “Now we can get more and more sophisticated by having standardized platforms and standardized datasets, and longevity of data within those constructs, so that we can go back and compare.”

Maintaining data in an effective way can make or break a supply chain, says Ripollone, as it can help organizations to more productively complete tasks like ordering, receiving, purchasing, and running cost-analysis studies.

“If you want to do electronic purchasing and electronic receiving, the data has to match up,” she says. “If the data is correct, it is a seamless process; if it is not, there is a lot of manual work that has to be done.” (For information on more supply chain innovations, please see the sidebar).

While ROi's system has many components that separate it from other supply chains, the star attraction is the bar code/distribution system. Before medications are distributed to Mercy's facilities, they are repackaged into unit dosing and bar coded, which all but eliminates any room for error. According to Moore, the impetus for the initiative was a study published by the Washington, D.C.-based Institute of Medicine in November of 1999, entitled, “To Err is Human: Building a Safer Health System.”

“As we looked further into the study,” says Moore, “we found out it wasn't bad people or bad medicine, but bad processes that were harming patients. And as supply chain people, we're supposed to be good at process.”

Deciding that the provision of care begins with the supply chain, Moore and his team collaborated with the pharmacists to initiate bedside bar coding. This entailed repackaging all of the medications in a unit-dose and in bar-coded form, and deploying an automated cabinetry system that can continuously replenish medications through the system, says Moore. For this, Sisters implemented OmniRx medication dispensing cabinets from Mountain View, Calif.-based Omnicell, and utilized Kansas City, Mo.-based Cerner's Bridge Medication Administration. These systems had to integrate with the warehouse inventory management system from TECSYS Inc. (Quebec, Canada), which manages the inventory that feeds the repackaging operation and St. Paul, Minn.-based Lawson's ERP system.

“The levels of integration are just unprecedented, and because of the sophisticated nature of their operation, interfaces just won't do it,” says McCurry. “The TECSYS system is completely integrated with Lawson's ERP — not interfaced to it — and that's a profound difference.”

As Sisters continues with a system-wide implementation of the EMR from Epic Systems Corp. (Verona, Wis.), which includes a medication administration application that will replace the existing system (Bridge), the supply chain will be heavily involved in the process, says McCurry.

“As we transition from Bridge to Epic, which has its own drug administration and patient charting capability, it's the supply chain guys who are helping to figure out how we organize and set up the systems,” he says. “ROi is a very sophisticated operation.”

Owning the supply chain

After Rick Schooler paid a visit to Sisters, where he and his corporate director of supply chain services met with Moore's team, they revived a vision that had been previously discussed at Orlando Health that would incorporate some of the best practices from ROi as well as supply chains from other industries. The basis for the plan is a consolidated services center, which is currently being deployed. According to Schooler, the operation will start by receiving a bulk order of medical and surgical supplies and distributing them, loaded and measured, to facilities.

“After that, we'll look at bulk pharmaceuticals and surgical packs, and we'll start to look at infusion therapy and linen cross-docking and other potential services. We want to be a lot more efficient in sending and receiving and moving things between our health facilities with our own trucks,” he says.

Orlando Health is currently implementing the TECSYS warehouse and distribution management system that Schooler says will be the foundation for the consolidated service center. The goal is to have a 24-7 operation up and running by January 1, 2009. Orlando Health plans to actually begin the distribution process in December of this year, and as the supply chain is able to decrease the number of products distributed by its current outscoured partner, it will increase the volume it purchases and distributes, says Schooler.

This feeds into one of the organization's key strategies, he says, which is to take ownership of the supply chain process.

“The whole idea is to try to get the purchasing and the distribution direct to the supplier or the manufacturer,” says Schooler. “That's our strategy, and we believe we have enough volume, expertise, and supply chain moxie to pull this off.”

For Schooler, the expertise comes largely from two senior leaders who have been critical in the process — Randy Hayas, corporate director of materials management, and Rosaline Parson, corporate director of the group purchasing organization (GPO) and of supply chain services at Orlando Health. “They make all the difference,” he says.

One of Parson and Hayes' most important functions is to conduct value analysis, which is done by sitting down with clinicians to discuss which items should be purchased for the facilities. “We have our GPO sit in on what we call the medical economics and outcomes committee, along with our materials management team,” he says. “It's mind-boggling the number of preferences and requests they have to deal with. That's why we have the committees to govern what physician-preference items we buy, and who we buy them from; that can get pretty dicey, believe me. You have to ensure that physicians have a sense of ownership and authority.”

It's the kind of task, he says, that the CIO must delegate to senior leaders to make sure everyone's needs are being met to the largest degree possible.

“I'll keep track of non-compliance, and I'll get involved if we've got a major problem. But for the most part, our corporate directors run that,” says Schooler.

According to Ripollone, Schooler has the right idea when it comes to the CIO's role in automating — not micromanaging — the supply chain process, and making sure checks and balances are in place.

“The CIO functions as the overarching mediator and expeditor,” says Ripollone. “The processes (need to be) seamless throughout the organizations, and it's usually the CIO who functions in that role. It's a very collaborative approach, but as far as the communication with the enterprise-wide system, the CIO is really the controller of that, the overseer.”

It is important, explains Ripollone, that CIOs encourage communication between the supply chain and IT departments, and make sure that supply chain managers are receiving the necessary support. CIOs must also provide the supply chain with guidance in maintaining data and staying current on IT performance items.

“The supply chain cannot be a silo. It supports every department in not only the hospital but the health system,” Ripollone adds. “CIOs cannot allow silos to occur. From a supply chain point of view, let the system be the platform; let that be the language. And there really needs to be a lot of education and hand holding for that to occur.”

Above all, the CIO, as well as any executive engaged directly in the supply chain, must keep a clear head and have thick skin when it comes to issues that may arise — and they will, says Schooler.

“The minute a system experiences a performance or functional problem, everybody feels it,” he says. “As is the case with point-of-care technologies, CIOs know just how temperamental things are with regard to material and information flow; they know that downtime of a major system gets a lot of attention, real fast. The organization looks to the CIO to get this back on track. You have to be willing to live with that,” touts Schooler.

CIOs, says Schooler, should think of themselves as “agents of change.” This role entails paving the way for strategic progress as well as supporting supply chain management and ensuring smooth operations. Strategic planning and technology adoption are vital components; however, he says, so is correcting fill-rate problems where product can't be delivered on time or at all, or if inventory counts are off.

A well-managed supply chain requires a great deal of blood, sweat and tears on the part of its leaders. But on the flip side, a successful supply chain can transform an organization, enabling it to save millions of dollars, simplify the processes of purchasing and distribution, and ultimately enable delivery of better care.

“When we think of the value that ROi has brought Mercy, we really don't even think of it in terms of the dollars that they've saved,” says McCurry. “It's the culture that they helped bring. We're implementing a system that will fundamentally change the way physicians and nurses practice, and it is an enterprise-wide system that is standardized above 90 percent. That simply would not have been possible before the supply chain efforts.”

Healthcare Informatics 2008 September;25(9):32-35

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