Healthcare in GombalaHealthcare in GombalaFinal Round

Team 15Will ConradDavid DeSandreDavid DeSandreNick HowertonDeepak Ponnavolu

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Agenda

f id i l diI. Impact of Presidential Edict

II Ri k F t & Miti ti T h iII. Risk Factors & Mitigation Techniques

III Improving Gombala’s Healthcare Supply III. Improving Gombala s Healthcare Supply Chain

Team 15

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Team 15

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Demand Shock

i k/• Pregnant Women Estimate: 350 k/yr▫ 42.84 births/1000 people1/yearChild 0 5 E ti ti 1 3 M+• Children 0-5 Estimation: 1.3 M+▫ (350 k/year) * (5 years) * (75% survival rate)

Number will increase with improved survival rateNumber will increase with improved survival rateDifficulty identification at upper cutoff

• Total Population Eligible for Free Healthcare: p g~2 M /year

Team 151Sierra Leone data from 2005 CIA Factbook

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Capacity Constraints

h i l i l /• Doctor Theoretical Capacity: 3.6 M consults/year▫ Assumes 200 doctors, 10 min. consults, 60 hrs/wk

• If free healthcare patients each required >1 consult • If free healthcare patients each required >1 consult with a doctor, system would face constrained capacitycapacity▫ This ignores the 75% of Gombalans that do not

qualify for free healthcare

Team 15

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How Do We Supplement Capacity?

h / l h ff f i i• Leverage the Nurse/Health Staff for triage, minor health issue consults and post-doctor consults

Nurse Theoretical Capacity: 10 5 M patients/yr▫ Nurse Theoretical Capacity: 10.5 M patients/yrEstimation of 1400 nurses off Sierra Leone ratios

4 min. triage + 20 min. consult/patient, 60 hrs/wk4 g /p , /

• Refine triage system to focus on identifying patients requiring doctor consult vs. nurse consult only

Team 15

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Patient

Triage ProcessPatient

Nurse Triage2

Doctor Consult1 Nurse Consult2

Team 15

1Annual Doctor Resource Capacity = 3.6 M consults/ year2Annual Nurse Resource Capacity = 10.5 M patients/ year(or includes both triage and consult)

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Compensation = Motivation!S i d d ill t l d d t ff d • Surge in demand will tax an already understaffed system

• 100% of “Volunteers” should be salaried▫ 60% of all healthcare workers considered volunteers▫ Reduces chance of opportunistic fees

• Paying salaries to all “Volunteers” would cost an y gestimated ~$650 k/yr1

▫ Doubling all salaries would cost another $1.08 M/yrAdditional volume may necessitate higher compensationAdditional volume may necessitate higher compensation

Team 151Assuming monthly salaries for $100 for doctors and $50 for nurses.

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Funding Source?

i f d hi i ll d f d di• Divert funds historically used for drug spending and now covered by Europa

56% of women receive pre /post natal care1▫ 56% of women receive pre-/post-natal care1

▫ 60% of kids receive at least one vaccination1

• These current drug expenditures can be reallocated to boost systemwide capacity by:▫ Increasing the salaries of current health staff, OR▫ Adding additional staff (if available)

Team 151WHO Sierra Leone Health Profile

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Team 15

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Risk – Creation of Grey Market

ll ib d d i k• Users may resell prescribed drugs in grey market▫ Potential profit opportunity

• Mitigation Create a special packaging for the programprogram▫ Utilize special packaging to identify drugs

distributed from hospitalsp▫ Enforce law preventing resale of drugs in this

packaging

Team 15

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Risk – Gaming the system

• Users may try to game system to procure duplicate prescriptions

Increase in program cost▫ Increase in program cost▫ Incents creation of grey market

• Mitigation Issue medical ID ‘passport’▫ Issued to eligible citizensg▫ Includes pages for medical history documentation

Team 15

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Other Potential Mitigation Techniques

Utili d h i t k t it ti• Utilize drug vouchers in stock-out situations▫ We estimate Pharmasecure program would cost $2m

annuallyD i b i d Drug companies may be incented to cover program cost to reduce prevalence of counterfeit drugs

BUT I t i iti ti f k t f h• BUT Incents initiation of grey market for vouchers

• We recommend not implementing a voucher programp g p g▫ Instead, focus should be minimizing stock-outs through

supply chain efficiency improvementsIf stock-outs prove to be a recurring issue for epidemics, program review in 1-2 years may be justified

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Team 15

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Measuring Impact of Donations• Tracking donation Impact on

RODC with

Doses Delivered Drug availability, fund availability, drug quality

geffectiveness can be linked to one primary metric:▫ RODC1

Function of…

RODC with factor increase

+ΔDALY

Cost / Dose Delivered

Purchase Cost

T i C

-

RODC1

Transportation Costs

Drug Inventory

ΔDonations * 0.018 = ΔDALY2

-

-

Donated Capital

Working Capital

Temporary Funding

(Line of Credit)

SMS Pull System / QA System

-

Team 151 Return on Donated Capital2Based on a local approximation Sierra Leone’s current DALY rate (Source: WHO data, team analysis)

Overhead SMS Pull System / QA System Investment -

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Europa’s Proposed Supply Chain

Copenhagen 100 HospitalsCope age 00 osp ta s

• Direct shipment from Copenhagen to hospitals• Direct shipment from Copenhagen to hospitals▫ 4 month lead time▫ Allows maintenance of current system service levelsy▫ Increases overall holding and shipping costs

Team 15

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Global Health Proposed Supply Chain

Copenhagen Distribution Center Hospitalsp g Center p

• Copenhagen services central Gombalan DC▫ 4 month lead time

• DC services hospitalsp▫ 1 day Lead time

Revised supply chain would improve ev sed supp y c a wou d p ove current service level by 53%!

Team 15

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SMS Pull-System Inventory Analysis

• Net savings maximized with daily SMS inventory updates▫ Higher frequency not optimal due to 1-day shipment lead time▫ Lower frequency requires higher local safety stock

Team 15

▫ Lower frequency requires higher local safety stock

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Centralization Analysis$3,500,000

70 0%

80.0%

90.0%

100.0%93%

Supply Chain Costs

Drug Availability

$2,500,000

$3,000,000

$3,5 ,

40.0%

50.0%

60.0%

70.0%

$1,500,000

$2,000,000

0.0%

10.0%

20.0%

30.0%

$500,000

$1,000,000

Current State

Future State

Centralization allows:$0

Cycle Stock Safety Stock Annual Inventory

Holding Cost

Annual Transportation

CostsCurrent State

S

Centralization allows:• Lower cycle stock• Lower network transportation costs

• Improved drug availability1

Team 15

Future State

1 Analysis assumes supply chain spending is constant; efficiencies from centralization are used to increase service level

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Additional Recommendations

F ti• Focus on prevention▫ Improve drinking-water sources

21% of child deaths under-5 caused by diarrhea121% of child deaths under 5 caused by diarrheaMajor cause of diarrhea is dysentery caused by poor availability of drinking water (<50%)1

▫ Improve sanitation facilities▫ Improve sanitation facilities13% of child deaths under-5 caused by malaria1

Poor sanitation facilities (<10%)1 result in breeding d f i h d l igrounds for mosquitoes that spread malaria

▫ Installation cost = $40/family for clean drinking water2

Team 151 Source: WHO health profile: Sierra Leone2 Source: Rotary Peru project: Lima Sunrise — W05738

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Additional RecommendationsI f di• Increase funding▫ Every additional dollar coming in to Gombala can

reduce DALY by 0.0181

• Increase # of doctors:▫ There are currently 0.25 doctors per 10000 people in

Gombala. Gombala. Significantly fewer than the regional average of 1.22 and the WHO standard of 20

• Optimize pull system data:• Optimize pull system data:▫ Pull system data offers potential to better understand

demand and optimized inventory policies collecting sufficient datasufficient data

Team 151 - See regression in appendix2 - WHO health profile: Sierra Leone

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Other Implementation Considerations

i bl di• Focus on communicable diseases▫ Early treatment of communicable diseases will

slow spread of diseaseslow spread of disease▫ Communicable diseases account for 83% of YLL1

▫ Current state:Current state:Tuberculosis rate is 7 times the global averageHIV rate is 2 times the global average

Team 151 YLL = Years of Life Lost

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Q&A

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Appendix

Team 15

Copenhagen Direct Copenhagen to DCTeam 15

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Exhibit – Analysis of DC ImpactCope age ect Cope age to C

Europa Input $100,000,000 $100,000,000Monthly Demand Variation $2,500,000 $2,500,000Annual Cost of Capital 10% 10%# of Hospitals 100 100

Lead Time to DC, Months ‐ 4Shipping Cost (to DC) ‐ $3,500

EOQDC ‐ $2,645,751

DC Orders Per Year ‐ 37.8DC Orders Per Year 37.8DC Safety Stock ‐ $6,910,915.34

Annual Demand per Hospital $1,000,000 $1,000,000Monthly Demand Variation per hospital $250,000.00 $250,000.00Shi i C ( H i l) $250 $75Shipping Cost (to Hospital) $250 $75

EOQHospital $70,711 $38,730

Hospital Orders Per Year 14.1 25.8Lead Time (Months) 4.0 0.03Hospital Safety Stock $126,674 $63,088Hospital Safety Stock $126,674 $63,088

Average System Inventory $16,202,889.79 $16,479,056.37Inventory Cost $1,620,288.98 $1,647,905.64Annual Shipping Cost $353,553.39 $325,936.73O i C % 1 97% 1 97%Operating Cost % 1.97% 1.97%

Service Level 60% 92%Improvement in Service Level 53%

Global Health in GombalaGlobal Health in GombalaRound 1

Team 15Will ConradDavid DeSandreDavid DeSandreNick HowertonDeepak Ponnavolu

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Agenda

iI. Current State Overviewi. Gombala’s Healthcare Systemii Global Health (GH)ii. Global Health (GH)

II. Recommendationsi. Supply Chainpp yii. Other

III. Suggested Implementation Timeline

Team 15

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i. Gombala’s Healthcare System

Team 15

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Gombala’s Healthcare Issues

l h i d f d d• Healthcare system is 90% donor funded• Child mortality rate at 25%

DALY f 6 6 M f th t• DALY of 6.62M years for the country▫ Highest (worst) DALY rate in the world1

▫ Life expectancy of 49 years2▫ Life expectancy of 49 years2

• Decentralized ordering and inventory management

Team 151DALY Rate for Sierra Leone = 82,444 (Source: WHO)2 Source: WHO (Sierra Leone data , 2007)

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ii. Global Health (GH)

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Global Health (GH) Issues

i d b l• 5 primary donors to Gombala▫ Each contributes ~20% of total funds

Overall fund availability has high variability▫ Overall fund availability has high variabilityDonation timing is not coordinated across donors

▫ Restricted fund deploymentRestricted fund deploymentDonors require funds to be used only for specific diseases, areas of the country, supply channels

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i. Supply Chain

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RecommendationsW k i h d li h h

Impact

Fund Availability • Work with donors to accomplish smooth funding levels throughout the year

Fund Availability Service Level:90% 99%

• Implement SMS inventory data collection and pull system for inventory allocation

Drug Availability Service Level:60% 93%

• Centralize regional warehouses into one consolidated warehouse located in or Cycle Inventory

d bnear the urban center of Gombala

decreases by 40%

Team 15

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Healthcare Impact of Donations• Tracking donation Impact on

RODC with

Doses Delivered Drug availability, fund availability, drug quality

geffectiveness can be linked to one primary metric:▫ RODC1

Function of…

RODC with factor increase

+ΔDALY

Cost / Dose Delivered

Purchase Cost

T i C

-

RODC1

Transportation Costs

Drug Inventory

ΔDonations * 0.018 = ΔDALY2

-

-

Donated Capital

Working Capital

Temporary Funding

(Line of Credit)

SMS Pull System / QA System

-

Team 151 Return on Donated Capital2Based on a local approximation Sierra Leone’s current DALY rate (Source: WHO data, team analysis)

Overhead SMS Pull System / QA System Investment -

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GH Funding Trends1,2

$15 000 000$15,000,000

$10,000,000

Funding

$5,000,000

End of Month Fund Balance

Team 151Based on case data2Assumes level demand throughout year

$0

1 2 3 4 5 6 7 8 9 10 11 12

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Donor Funding ImplicationsB d l i• Based on our analysis…▫ Highly variable monthly fund availability allowed only

a 90% funding service levelThat is, 10% of drug unavailability is due to lack of funds

Implies that supply chain availability ~60%▫ Smoothed donations would allow for 99.9%1 funding 99 9 g

service levelPossible solutions:

Coordinating donor contributionsgRequesting equal contributions throughout the year

Smoothed donations at 90% of current annual level would provide the same funding service levelp g

Team 15

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SMS-Based Pull System

i f i h i i• Inventory information sharing via SMS▫ Hospitals feed daily inventory updates to central DC▫ Enables optimal shipping quantity/frequency/contentEnables optimal shipping quantity/frequency/content▫ Annual Cost: $25,550▫ Hospital-level inventory drops to $3.3M

A l N S i f $ k1Annual Net Savings of $270k1

• Enables Service Level increase from 60% to 93%2Enables Service Level increase from 60% to 93%

Team 15

1Based on assumption of 1 month average inventory carried at hospitals before implementation2In combination with warehousing centralization

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Pull-System Inventory Analysis

• Net savings maximized with daily SMS inventory updates▫ Higher frequency not optimal due to 1-day shipment lead time▫ Lower frequency requires higher local safety stock

Team 15

▫ Lower frequency requires higher local safety stock

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Inventory Centralization

R i d t li d i t t • Reversing decentralized inventory management policy will improve efficiency of supply chain▫ Cycle inventory will decrease by ~40%y y y 4

Funds previously tied up in cycle inventory can instead be used for safety stock at the central warehouse

▫ In combination with SMS inventory management & pull system, total supply chain transportation costs will decrease by 50%total supply chain transportation costs will decrease by ~50%

Drug availability will increase from 60%1 to 93%

• Availability is optimized while keeping supply chain Availability is optimized while keeping supply chain costs constant

Alternatively, at the current service level (60%), supply chain savings from centralization = $2.4M

Team 151 Includes the effect of smoothing donor funding

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Centralization Analysis$3,500,000

70 0%

80.0%

90.0%

100.0%93%

Supply Chain Costs

Drug Availability

$2,500,000

$3,000,000

$3,5 ,

40.0%

50.0%

60.0%

70.0%

$1,500,000

$2,000,000

0.0%

10.0%

20.0%

30.0%

$500,000

$1,000,000

Current State

Future State

Centralization allows:$0

Cycle Stock Safety Stock Annual Inventory

Holding Cost

Annual Transportation

CostsCurrent State

S

Centralization allows:• Lower cycle stock• Lower network transportation costs

• Improved drug availability1

Team 15

Future State

1 Analysis assumes supply chain spending is constant; efficiencies from centralization are used to increase service level

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ii. Other

Team 15

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Additional Recommendations

h• Pharmasecure QA Program▫ Recommended for remedy of epidemic diseases

At 93% service level demand for drugs in outside At 93% service level, demand for drugs in outside market will drop significantlyExcluding epidemics

▫ Annual system-wide cost = $2 million▫ Drug companies may be willing to absorb costs to

t h l l d t t f iti 1counter heavy annual losses due to counterfeiting1

Team 15

1 “>50% drugs in parts of Africa & Asia are counterfeit.” - R. Jones, FDA spokesperson, E-mail statement, 18 November 2004

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Additional Recommendations

F ti• Focus on prevention▫ Improve drinking-water sources

21% of child deaths under-5 caused by diarrhea121% of child deaths under 5 caused by diarrheaMajor cause of diarrhea is dysentery caused by poor availability of drinking water (<50%)1

▫ Improve sanitation facilities▫ Improve sanitation facilities13% of child deaths under-5 caused by malaria1

Poor sanitation facilities (<10%)1 result in breeding d f i h d l igrounds for mosquitoes that spread malaria

▫ Installation cost = $40/family for clean drinking water2

Team 151 Source: WHO health profile: Sierra Leone2 Source: Rotary Peru project: Lima Sunrise — W05738

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Additional RecommendationsI f di• Increase funding▫ Every additional dollar coming in to Gombala can

reduce DALY by 0.0181

• Increase # of doctors:▫ There are currently 0.25 doctors per 10000 people in

Gombala. Gombala. Significantly fewer than the regional average of 1.22 and the WHO standard of 20

• Optimize pull system data:• Optimize pull system data:▫ Pull system data offers potential to better understand

demand and optimized inventory policies collecting sufficient datasufficient data

Team 151 - See regression in appendix2 - WHO health profile: Sierra Leone

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Team 15

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Implementation Timeline

2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4Implement cash‐flow smoothingImplement SMS inventory managementCentralize inventory & purchasing using pull systemFocus spend on communicable diseasesLobby drug companies to implement PharmasecurePartner with NGO for drinking water & sanitation facilities

• Prioritize supply chain recommendations

Partner with NGO for drinking water & sanitation facilitiesCollect data & optimize pull systemIncrease funding & medical personnel

• Prioritize supply chain recommendations

Team 15

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Other Implementation Considerations

i bl di• Focus on communicable diseases▫ Early treatment of communicable diseases will

slow spread of diseaseslow spread of disease▫ Communicable diseases account for 83% of YLL1

▫ Current state:Current state:Tuberculosis rate is 7 times the global averageHIV rate is 2 times the global averageMalaria is responsible for 13% of child deaths

Team 151 YLL = Years of Life Lost

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Q&A

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Round 1 Appendix

Team 15

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Historic Donor Funding

• Estimated total funding = $75 M• Average periodic funding = $6.25 M• Variability of funding (σ) = $5.3 M

Team 15

y g ( ) $5 3

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Pull-System Inventory Analysis1Inputs Urban Rural

Cost of Capital 10% $1,500,000 $600,000Total Annual Demand $75,000,000 $75 $175# f H it l 100 $212 132 $84 853

Overall Demand VariationShipping CostP H it l D d V i ti# of Hospitals 100 $212,132 $84,853

Annual Demand per Hospital $750,000 $33,541 $51,235

SMS Rate $0.70 22.4 14.6Service Level 93% 6.1 4.0

Frequency of Inventory Check Lead Time Safety Stock Avg Cycle Stock Total Average Inventory$ $ $

Per Hospital Demand Variation

EOQHospital

Orders/yearSystem‐Wide Orders/Day

Urban Hospitals

4X Daily 1 $16,386.44 16,770.51$                     $33,156.952X Daily 1 $16,386.44 16,770.51$                     $33,156.95

Daily 1 $16,386.44 16,770.51$                     $33,156.95Every Other Day 2 $23,173.93 16,770.51$                     $39,944.44

Weekly 7 $43,354.45 16,770.51$                     $60,124.96Bi‐Weekly 14 $61,312.46 16,770.51$                     $78,082.97Monthly 30 $89,752.24 16,770.51$                     $106,522.75

R l H it lFrequency of Inventory Check Lead Time Safety Stock Avg Cycle Stock Total Average Inventory

4X Daily 1 $6,554.58 25,617.38$                     $32,171.952X Daily 1 $6,554.58 25,617.38$                     $32,171.95

Daily 1 $6,554.58 25,617.38$                     $32,171.95Every Other Day 2 $9,269.57 25,617.38$                     $34,886.95

Weekly 7 $17,341.78 25,617.38$                     $42,959.16Bi‐Weekly 14 $24,524.98 25,617.38$                     $50,142.36Monthly 30 $35 900 90 25 617 38$ $61 518 27

Rural Hospitals

Monthly 30 $35,900.90 25,617.38$                     $61,518.27

Total Hospital Inventory Implementation Cost Net Savings*$3,266,445.34 $102,200.00 $196,155.47$3,266,445.34 $51,100.00 $247,255.47$3,266,445.34 $25,550.00 $272,805.47$3,741,569.43 $12,775.00 $238,068.06$5 154 206 04 $3 650 00 $105 929 40

Every Other DayWeekly

Frequency of Inventory CheckOverall Impact

Daily

4X Daily2X Daily

Team 151Based on assumption of 1 month average inventory carried at hospitals before implementation

$5,154,206.04 $3,650.00 $105,929.40$6,411,266.21 $1,825.00 ($17,951.62)$8,402,051.45 $851.67 ($216,056.81)

WeeklyBi‐WeeklyMonthly

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Current Gombala Supply Chain1,2

Urban center has 50 hospitals

= 1 hospital

i l h

Team 15

1 Estimated Gombalan hospitals = 100; this figure was derived using Sierra Leone’s Dr./hospital data (WHO) and extrapolated based on Gombala’s population2Assumes hospitals are distributed proportionally to population

Regional Warehouses

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Future Gombala Supply Chain1,2

Urban center has 50 hospitalsConsolidated Warehouse

= 1 hospital

Team 15

1 Estimated Gombalan hospitals = 100; this figure was derived using Sierra Leone’s Dr./hospital data (WHO) and extrapolated based on Gombala’s population2Assumes hospitals are distributed proportionally to population

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Centralization Analysis1

Gombalan Demand  (Healthcare Spend) $69,197,500Annual Holding Cost 10%Annual Holding Cost 10%Shipping Cost from Manufacturer $10,000Lead Time from Manufacturer (Months) 0.50SMS Pull System Initial Cost $25,000z (60%) ‐ Current State 0.25

FUTURE STATECURRENT STATEUrban Center Rural Region 1 Rural Region 2 Gombala Total Centralized Warehouse

σDemand $1,500,000 $600,000 $600,000 $2,500,000

Inventory AnalysisCycle Stock $1,315,271 $930,037 $930,037 $3,175,345 $1,860,074

$ $ $ $ $Safety Stock $268,715 $107,486 $107,486 $483,687 $2,415,119 ‐‐> Service Level: 91.4%(Service Level = 60% in Current State)

Annual Inventory Holding Cost $158,399 $103,752 $103,752 $365,903 $427,519

Annual Transportation CostsMFR ‐‐> DC(s) $131,527 $93,004 $93,004 $317,534 $186,007DC(s) ‐‐> Hospitals $273,750 $228,125 $228,125 $730,000 $456,250

Shipments / Day 10 5 5 10Cost / Shipment 75 125 125 125

Hospital  ‐‐> Hospital $365,000 $182,500 $182,500 $730,000 $182,500X Ships / Day 20 10 10 10Cost / X Ship 50 50 50 50

Total Supply Chain Cost $2 512 662 $1 644 904 $1 644 904 $5,802,470 $5,527,470

Team 151 Analysis assumes supply chain spending is constant; efficiencies from centralization are used to increase service level

Total Supply Chain Cost $2,512,662 $1,644,904 $1,644,904 $5,802,470 $5,527,470

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DALY Impact RegressionSierra LeoneSierra Leone

Team 15

56

Calculating DALY

Daily Adjusted Life-Year

Years Lost of Life

Years Lost due to Disease+=

Years Lost due to

Disease=

# of Disease

Instances

Disability Weight

Average Duration of Case

* *Disease Instances

gof Case

*Years Lost of Life = # of

DeathsStandard Life Expectancy at

Age of Death (in Years)

Team 15

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Metric Reporting

hil i li i l i h i• While not implicitly reporting on the proportion of rural patients served using our RODC tree, this metric could be determined by leveraging this metric could be determined by leveraging SMS inventory system data to determine the proportion of rural patients by tying the SMS’s proportion of rural patients by tying the SMS s to the hospital to which they were assigned

Team 15

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Weather Disruption Contingencies

h i d f i l h i• To counter the periods of inclement weather in Gombala, we would recommend the following strategies:strategies:▫ For forecasted weather patterns, temporarily

increase safety stock at local hospitalsy p▫ Once the quality assurance system is in place,

utilize the public market as an additional source of l l f k b ilocal safety stock on a temporary basis

Team 15