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UPMC, IBM to Apply Analytics, Machine Learning to Improve Healthcare Supply Chain

July 8, 2016
by Rajiv Leventhal
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The University of Pittsburgh Medical Center (UPMC) has formed an independent company with the aim to help hospitals apply data-driven insights to one of the most fundamental aspects of running a health care system, supply chain management.

The company, Pensiamo, will aim to help hospitals improve supply chain performance through a comprehensive source-to-pay offering, including cognitive analytics with IBM Watson Health technologies, officials say. IBM is a minority owner of Pensiamo.

UPMC officials note that supply chain costs are the second-largest and fastest-growing expense behind labor costs for healthcare providers As such, providers face mounting pressure to improve the effectiveness of patient care while controlling costs. Increasingly, providers need to understand their costs at a patient-specific level to succeed under performance-based payment systems.

One of the nation's largest integrated healthcare delivery and financing systems, with $12 billion in revenue, UPMC will own a majority of the new Pittsburgh-based company and be the initial customer under a long-term contract. Meanwhile, IBM has strong capabilities in managing supply chain spend and operations across several industries, with more than $57 billion of spending under its management. UPMC and IBM have a long history of working together to try to improve operations, including working to lower the cost and improving the performance of UPMC's own data infrastructure.

"At a time when patients are demanding higher quality and value, traditional approaches to providing healthcare supply chain services are no longer sufficient," said James Szilagy, who will transition from his current role as chief supply chain officer for UPMC to chief executive officer at Pensiamo. “The aim is to offer providers a supply chain management approach tailored to each institution's specialties, patient population and other unique needs, and which will learn and respond over time to the changing needs of the business."

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