Executive Briefings

In The World of Medical Procurement, Good Isn't Good Enough

The Medical University of South Carolina, in a bid to slash more than $64m from its budget, embraces procurement automation. In the process, the facility goes from survival mode to ranking among the nation's top medical centers.

In The World of Medical Procurement, Good Isn't Good Enough

The Medical University of South Carolina has been a fixture in the state since 1824. Over the years, it has grown into a large complex with a thriving medical center and six colleges. Recently, though, MUSC ran into a fiscal crisis that threatened its operations.

The facility was faced with the need to slash $64.4m from its budget. A prime target for cuts was the cost of supplies, which was out of control.

MUSC's purchasing program was rife with duplication and inefficiency. The center was unable to enforce contracts, many of which were expiring. The wrong products were being bought at the wrong time. Meanwhile, an unhappy clinical team was voicing concerns about not getting the supplies they needed.

"We were in dire need of bringing our processes forward and closer to the current century," says Regine Honore Villain, corporate director of supply chain management for MUSC. "We didn't have a lot of automation, outside of a materials-management system. We were doing a lot of things manually."

Many of the supplies in question were basic items, like surgical gloves and gauzes. There was also a need for securing physician preference items (PPIs) in areas such as operating rooms and labs.

That last category is representative of the unique nature of the medical supply chain. Other industries can essentially dictate which vendors will be used, and which items will be purchased, throughout the organization.

In an operation like MUSC's, however, physicians and surgeons are given a certain amount of leeway as to where they get their supplies. Often they will seek ties with favored vendors that amount to "an unbreakable bond," says Villain. Hospitals will challenge those relationships at their peril.

Villain's task was further complicated by the fact that cost isn't necessarily the main criterion in selecting vendors and products. While it's an important factor, "getting the best pricing is not the way we're going to be successful," she says. "I also need clinical efficacy for my product, if the outcome for the patient is going to be favorable."

Striking a Balance

Villain had to strike a balance that took into account the needs of both the center and its individual doctors. While she strove to accommodate their preferences, she offered input as to what other medical centers around the country were doing in terms of pricing and technology.

"They don't necessarily know what is out there," she says of the center's doctors. "Building a bridge of communications is key."

Unable to squeeze vendors on cost, Villain nevertheless had to dramatically increase the efficiency of MUSC's purchasing program in a short time. The answer lay in automation. The center needed a software provider who could bring order and discipline to the process.

Finding the right partner was the easy part. Villain turned to Global Healthcare Exchange LLC (GHX), a specialist in the medical sector. It was her only candidate. "I did not hesitate even for a minute when I started to think about whom I wanted to bring on board," she says.

GHX's experience in the industry - the vendor is focused solely on the healthcare sector - was key. Even the most basic supplies are vital parts of a system that is dedicated to the health of patients. "You don't want to waste time bringing in solutions that adversely affect that," Villain says.

GHX's role in the industry is a complex one. According to Rammi Gill, consulting director for the business solutions team, the vendor's platform serves as an electronic intermediary between the purchasing organization, hospital, manufacturer and distributor. The order-automation module sits between MUSC's enterprise resource planning (ERP) system and the center's army of suppliers.

MUSC's particular challenge was multifaceted. It needed to automate the procure-to-pay lifecycle, and eliminate time-consuming manual processes. It wanted to maximize contract compliance. And it lacked a consolidated vendor-management strategy that could be deployed throughout the hospital.

A Smooth Implementation

Implementation of the GHX software went smoothly, says Villain. "It was one of the best I've ever been involved in." From the start, she had buy-in and active participation from top executives, with a clear mission that was communicated throughout the center. All participants were made to feel a part of the process.

Villain took care to phase in the various modules, beginning with those that affected relationships with vendors. Gill says the 15-month project focused on four areas: content and price management, procurement, order automation and invoice automation.

As with all of GHX's implementations, much of the work focused on business-process change, rather than the underlying technology. Many hours were devoted to training MUSC employees, as well as the implementation of metrics to measure the system's performance along the way.

Each workstream was paired with key performance indicators, which allowed MUSC to see precisely where it stood in relation to other medical facilities. Equally critical was the reining in of "non-formulary" procurement - purchases that strayed from the center's standardized catalog of items. That category decreased by 42 percent, according to Gill. MUSC was able to enforce purchasing discipline, while still allowing for a measure of physician preference. Price exceptions are now a mere 1.2 percent, Villain says.

MUSC's level of invoice automation soared to 94 percent. (Previously, automation was limited to the invoices of a single vendor.) MUSC now leads all other GHX users in that metric, Villain says - the next highest medical center is in the 70 percentile. The industry average in healthcare is between 30 and 40 percent, says Gill.

The GHX implementation is nearly complete, says Villain. Still to come is the adoption of NuVia, GHX's module for scrubbing the item master and ensuring a standardized definition of products. "Getting physicians to agree on nomenclature is a bit of a challenge for us," admits Villain.

Procurement automation was key to achieving Villain's goal of being among the top 25 medical centers in the country. "In the era of the Affordable Care Act, we do not have the luxury of being anything less than excellent," she says. "Excellent is average. Extremely good is now just par for the course."

Resource Links:
Medical University of South Carolina
GHX

Keywords: supply chain, supply chain management, healthcare supply chain, medical supply chain sourcing solutions, inventory management, inventory control, supply chain planning

The Medical University of South Carolina has been a fixture in the state since 1824. Over the years, it has grown into a large complex with a thriving medical center and six colleges. Recently, though, MUSC ran into a fiscal crisis that threatened its operations.

The facility was faced with the need to slash $64.4m from its budget. A prime target for cuts was the cost of supplies, which was out of control.

MUSC's purchasing program was rife with duplication and inefficiency. The center was unable to enforce contracts, many of which were expiring. The wrong products were being bought at the wrong time. Meanwhile, an unhappy clinical team was voicing concerns about not getting the supplies they needed.

"We were in dire need of bringing our processes forward and closer to the current century," says Regine Honore Villain, corporate director of supply chain management for MUSC. "We didn't have a lot of automation, outside of a materials-management system. We were doing a lot of things manually."

Many of the supplies in question were basic items, like surgical gloves and gauzes. There was also a need for securing physician preference items (PPIs) in areas such as operating rooms and labs.

That last category is representative of the unique nature of the medical supply chain. Other industries can essentially dictate which vendors will be used, and which items will be purchased, throughout the organization.

In an operation like MUSC's, however, physicians and surgeons are given a certain amount of leeway as to where they get their supplies. Often they will seek ties with favored vendors that amount to "an unbreakable bond," says Villain. Hospitals will challenge those relationships at their peril.

Villain's task was further complicated by the fact that cost isn't necessarily the main criterion in selecting vendors and products. While it's an important factor, "getting the best pricing is not the way we're going to be successful," she says. "I also need clinical efficacy for my product, if the outcome for the patient is going to be favorable."

Striking a Balance

Villain had to strike a balance that took into account the needs of both the center and its individual doctors. While she strove to accommodate their preferences, she offered input as to what other medical centers around the country were doing in terms of pricing and technology.

"They don't necessarily know what is out there," she says of the center's doctors. "Building a bridge of communications is key."

Unable to squeeze vendors on cost, Villain nevertheless had to dramatically increase the efficiency of MUSC's purchasing program in a short time. The answer lay in automation. The center needed a software provider who could bring order and discipline to the process.

Finding the right partner was the easy part. Villain turned to Global Healthcare Exchange LLC (GHX), a specialist in the medical sector. It was her only candidate. "I did not hesitate even for a minute when I started to think about whom I wanted to bring on board," she says.

GHX's experience in the industry - the vendor is focused solely on the healthcare sector - was key. Even the most basic supplies are vital parts of a system that is dedicated to the health of patients. "You don't want to waste time bringing in solutions that adversely affect that," Villain says.

GHX's role in the industry is a complex one. According to Rammi Gill, consulting director for the business solutions team, the vendor's platform serves as an electronic intermediary between the purchasing organization, hospital, manufacturer and distributor. The order-automation module sits between MUSC's enterprise resource planning (ERP) system and the center's army of suppliers.

MUSC's particular challenge was multifaceted. It needed to automate the procure-to-pay lifecycle, and eliminate time-consuming manual processes. It wanted to maximize contract compliance. And it lacked a consolidated vendor-management strategy that could be deployed throughout the hospital.

A Smooth Implementation

Implementation of the GHX software went smoothly, says Villain. "It was one of the best I've ever been involved in." From the start, she had buy-in and active participation from top executives, with a clear mission that was communicated throughout the center. All participants were made to feel a part of the process.

Villain took care to phase in the various modules, beginning with those that affected relationships with vendors. Gill says the 15-month project focused on four areas: content and price management, procurement, order automation and invoice automation.

As with all of GHX's implementations, much of the work focused on business-process change, rather than the underlying technology. Many hours were devoted to training MUSC employees, as well as the implementation of metrics to measure the system's performance along the way.

Each workstream was paired with key performance indicators, which allowed MUSC to see precisely where it stood in relation to other medical facilities. Equally critical was the reining in of "non-formulary" procurement - purchases that strayed from the center's standardized catalog of items. That category decreased by 42 percent, according to Gill. MUSC was able to enforce purchasing discipline, while still allowing for a measure of physician preference. Price exceptions are now a mere 1.2 percent, Villain says.

MUSC's level of invoice automation soared to 94 percent. (Previously, automation was limited to the invoices of a single vendor.) MUSC now leads all other GHX users in that metric, Villain says - the next highest medical center is in the 70 percentile. The industry average in healthcare is between 30 and 40 percent, says Gill.

The GHX implementation is nearly complete, says Villain. Still to come is the adoption of NuVia, GHX's module for scrubbing the item master and ensuring a standardized definition of products. "Getting physicians to agree on nomenclature is a bit of a challenge for us," admits Villain.

Procurement automation was key to achieving Villain's goal of being among the top 25 medical centers in the country. "In the era of the Affordable Care Act, we do not have the luxury of being anything less than excellent," she says. "Excellent is average. Extremely good is now just par for the course."

Resource Links:
Medical University of South Carolina
GHX

Keywords: supply chain, supply chain management, healthcare supply chain, medical supply chain sourcing solutions, inventory management, inventory control, supply chain planning

In The World of Medical Procurement, Good Isn't Good Enough