Partnering with IDNs for Efficiency and InnovationModeratorPatrick Carroll, President, Patrick E. Carroll & Associates, Inc.

PanelistsDavid McCombs, VP ERP/Supply Chain Operations, Bon Secours Health System

Tony Benedict, CPIM, CIO, Vice President Supply Chain, Abrazo Healthcare

Raymond J. Seigfried, MA, Senior Vice President Administration, Christiana Care Health System

Healthcare ReformFederal health care reform is the result of the March 2010 enactment of the Patient Protection and Affordable Care Act (PPACA) as amended by the Health Care and Education Reconciliation Act These two laws are commonly referred to together as PPACA, the Affordable Care Act (ACA) or health care reformMandates become effective over several years. While health care reform is now law, many implementation details remain unanswered and will be clarified by future regulations and guidance

Reform Impact on ProvidersInsurance CoverageBundled Payments for Episodes of CarePay for PerformanceMarket Basket UpdatesExpansion of MedicaidPrimary Care FundingDisproportionate CareAccountable Care OrganizationsHospital Acquired InfectionsPreventable Readmissions Device Taxes

The Response from IDNs Improve operational performance Changing decision-makers and influencers Physician consolidation and integration IDN/Hospitals mergers and consolidations Significant changes in the Care Model to create value Capital/Cash investments redirected Elevate role, responsibility and expectations of Supply Chain Management

*

The Healthcare Supply Chain Extremely heterogeneous marketplaceThe playing field is not level Advanced Supply Chain ExecutivesFocus on ValueFocus on partnerships with suppliers Middle Level Supply Chain ExecutivesFocus on CostPreliminary discussion of partnerships with suppliersLower Level Supply Chain ExecutivesFocus on PriceThe supplier is tolerated*

Value Based Competition

Bon Secours Health System, Inc. IDN Panel: Partnering with Suppliers for Efficiency and Innovation

Presentation ObjectivesReview four major issues that will impact our future Supply Chain model and relationship with Suppliers: Physician Preference Item (PPI) procurement will move from Contracts to more disciplined Formulary Models to insure optimal clinical outcomes and cost predictabilitySupply Chain Logistics and Value Optimization Strategies must be integrated across the entire continuum of careSupply Chain must directly support optimizing the Providers performance under Value Based Purchasing modelsProgress toward Global Data Synchronization is critical for provider/supplier transaction efficiencies and data transparency

Profile of Bon Secours Heath System Good Help to those in Need

Key Trends for Bon Secours Health SystemContinued movement to centralization and standardization of all support functionsWith EPIC installation nearing completion, movement toward standardized care and hard wired process/protocols in all locations Aggressive participation in ACO and population health risk

Medicare Shared Services PlanCovers all BSHSI Acute Service markets in five states57,000 beneficiaries as of January 2013Partnership with Aetna, community and employed Physicians, other acute non-BSHSI hospitals

Key Issues for BSHSI Supply Chain Partnering with Suppliers for Efficiency and Innovation

1. Physician Preference Item (PPI) procurement will move from Contracts to more disciplined Formulary Models to insure optimal clinical outcomes and cost predictabilityImplant Formulary Definition: The main function of the Implant Formulary is to specify specific implant products that are approved for physician use within a facility . Implant products are grouped into functionally equivalent classifications. Within the classification implant products are authorized for use based on evaluation of efficacy, safety, patient outcomes and cost-effectiveness.Differences of a Formulary and Contract Model:

Formulary ContractSame terms, definitions and provisions for change for all vendor purchase agreements for formulary itemsSeparate agreement for each vendor with distinct terms , definitions , changesAll items classified into functionally equivalent groupings; items evaluated in context of benefits as compared to equivalentsEach vendor item considered unique and evaluated separatelyIncludes only authorized items that meet evaluation criteriaIncludes full or selected portion of catalogueAll items must go through new product classification and Clinical Value Analysis Fairly open process for addition and conversion of new item versionsOngoing review of utilization, cost and outcomes at procedure and physician levelReview of purchase volume as compared to committed volumes

Implant Formulary Design example Spine hardware; other PPI products include Total Joint, Biologics, Cardiovascular products, Specialty Surgical devices

Implication of Formulary on BSHSI Vendor RelationshipsApproved Formulary Vendors Strategic Partner relationshipContinuous update of all purchase transaction data and priority Accounts Payable and SPS customer service responseCollaborative efforts to streamline transactions, reduce vendor inventory and minimize SGA expenseCollaborative clinical outcome studiesVendor Access Level 1 to approved clinical areasDirect Participation in periodic Clinician new product reviews, CVA process Non-Formulary Vendors Exception-based relationshipPer case exception approval of all product usedNo access to utilization data, clinical outcome data or collaborative studiesVendor Access Level 3 restricted access, appointment onlyNo direct participation in Clinician product reviews, CVA process

2. Supply Chain Logistics and Value Optimization Strategies must be integrated across the entire continuum of care

Areas of Focus for Healthcare Continuum Supply Chain IntegrationKey Activities for Integration:

Tracking utilization, cost and correlated outcomes of key supply products across the continuumFocus on cost/utilization management of products/equipment that follow patient and support the patient through the continuum

IssuesMultiple and non-integrated product distribution processesNeed for Standardization of products across continuumExpansion of Formularies to covered populationElimination of waste, duplication in care transitionPricing models/cost predictability item, bundled, per acute episode of care, per patient across continuumLogistical support, distribution, procurement, patient-level customer serviceClinical Value Analysis New technology assessment, outcomesEquipment Total Cost of Ownership, inventory management

*HCAHPS = 25%Outcomes = 40%Core Measures = 10%Efficiency = 25%3. Supply Chain must directly support optimizing the Providers performance under Value Based Purchasing models

Impact of VBP Measures on Supply ChainHCAHPS 25% Unacceptable for patient to experience changes of direct supplies during care transitions ( trach, lines/ports, Ortho soft goods, etc.)2. Core Measures 10%Supply Chain logistics must support 100% compliance to care process protocols (timeliness of intervention, supply packs, etc.)3. Outcomes 40%Only products that have evidenced-based support for optimal clinical outcome will be utilized4. Efficiency 25% ( cost per beneficiary)Cost measured from pre-acute, acute and 30 day post acute time periodRequires suppliers to directly assist with utilization management and support predictive capped cost per episode of care

4. Progress toward Global Data Synchronization is critical for provider/supplier transaction efficiencies and data transparency

Key Data standards and benefits:

A. GLN: Global Locator NumberThe GS1 Identification Key used to identify physical locations or legal entities. Requires conversion from provider/supplier unique ship to identifiers and required crosswalks to standardized GLN Critical to insure right item gets to right location and minimize any transaction or accounting errors

B. GTIN: Global Trade Item Numberan standardized identifier for trade items developed by GS1requires conversion from unique provider/supplier item identifiersCritical to support tracking/analysis across many transactional and clinical databases as well as to support transaction efficiencies ( barcode/RFID data capture, etc.)

BSHSI Global Data Synchronization Plan and StatusGLN Implementation PlanComplete internal ERP build and test of GLN for all BSHSI locations FY 2013, completeImplement GLN with major BSHSI suppliers and Distributors FY 2014Status: Limited Suppliers ready to transact Distributors maintaining legacy ship to General lack of urgency

GTIN Implementation PlanImplement as first priority the FDA UDI for Class III High Risk items, including implement process changes in all phases of business transactions and device documentationIdentify high-value categories of products for next phase of ImplementationStatus: In early stages of assessment Challenge of supporting multiple processes as GTIN adoption progresses

Partnering with IDNs for Efficiency and Innovation Tony Benedict, CPIM, CBPP CIO, Vice President Supply ChainTenet/Abrazo Healthcare

Biography2010-Present - Tenet/Abrazo Healthcare, CIO, VP Supply Chain2010-Present Association of BPM Professionals, (abpmp.org), President, Director, Board of Directors 2003-2010 Association of BPM Professionals, VP Relationships, Director, Board of Directors 2006-2010 Tata Consultancy Services, Senior Manager, Strategy & Operations Management Consulting/Outsourcing1997-2006 Intel Corporation, Supply Chain Management, Technology Manufacturing Group1988-1997 GlaxoSmithKline, Medical Center Sales

*

The New Tenet Healthcare

Tenet Healthcare

Service Line Feeders to Care Delivery SettingsCare & Service Delivery SitesCardiovascularOncologyWomen ServicesNeurosciencesOrthopaedicsBariatric / SleepPrimary CarePsychDrive VolumeContinuum of Care*

Tenet/Vanguard Integration ChallengesTenet49 hospitalsGPO MedAssetsSimilar VAT structure/processesSupply Chain outsourced, not regionalizedHigh C-Suite AccountabilityGeographical regions

*Vanguard28 hospitalsGPO Premier (just switched from HPG 1/13)Similar VAT structure/processesSupply Chain insourced and regionalizedLow C-Suite AccountabilityMarket based fiefdoms

Imperative to drive $200+ million of cost out of new organizationWhat is best way to structure Supply Chain in the new Tenet?There are best practices in each organization, plan is to merge best, drop worstGPO will play role in commodities, PPI strategy going forward?

Healthcare Reform ChallengesTsunami of Baby Boomers beginning transition to MedicareCost of Healthcare increasing 2x faster than inflationFee for Service model is obsoleteImplications of declining reimbursement on case cost and profitabilityMedicare provider payments will face a cut of 2%/yr over nine years (2013-2021). How to bend the cost curve to remain profitableSupply base (PPI) stuck in dollar/margin/market share growth paradigm

*

Bending the Cost CurveSeveral opportunities in combination exist to bend the cost curve:Reduce acquisition costsBundled PaymentsDisease management/Care ReliabilityMedical homes*

IT Market DynamicsLeading Software Supplier Market Share (2000 2010) *Source: Dorenfest Institute & HIMSS Analytics Database (2011) HIMSS, The Clinical Systems Hospital IT Market, 1998 2005 (2006) Scott Weiss, The Enterprise Software Massacre (2011)

*Risk Platform Future StateComprehensive portfolio of discrete, integrated assets

Acute PhaseSurveillance/ Risk mitigationPost Acute PhaseRisk mitigationIllustrative Care EpisodeAllowed Dollars Paid(2)Additional acute phases may be avoided or delayedIndividualized Longitudinal Analytics Performance / Payment = Value Creation / Value Demonstration Longitudinal analytics

Cost Prediction AnalyticsAnd this model chasing historical claims data is all wrongMedical and Pharmacy CostsQuarters before and After High Cost EventMonths before and After High Cost EventDiabetics with Heart Failure Event

The Healthcare Supply ChainThe future is a volume based game for supplies, the intention of ACA is to commoditize healthcare

Suppliers need to think long term and redefine what partner means to IDNs and themselves

Suppliers need to design for safety, predictable outcomes and cost, not just margin*

Christiana Care Health System Wilmington, DelawareRaymond SeigfriedSenior Vice President Administration

Paradigm Change

The current system is not a health care system; it is a sickness and disability-care system. Getting rid of illness, what we dont want, is not the same as maintaining wellness, what we do want. Russell Ackoff 2003

Value formula that sustained volume and profit Value =Product QualityPrice

New World Value Formula PatientValue =

Innovation that supports healthAdds valueImproves quality of careImproves quality of life

Healthcare reform the factsThe impact on providers first the economic