Memorial Hermann claims to operate the largest not-for-profit health system in southeast Texas. Formed in the late 1990s by the merger of the Memorial and Hermann systems, it currently encompasses 12 hospitals, seven cancer centers, three heart and vascular institutes, 27 sports-medicine centers, and a variety of outpatient and rehabilitation facilities. Needless to say, its supply chain is complex. In this interview, conducted at the Gartner Supply Chain Executive Conference in Phoenix, Ariz., Whisman discusses how he works with strategic suppliers and physicians to ensure the best possible results for Memorial Hermann's patients.

Q: How would you describe a "strategic partner"?

A: Whisman: A strategic partner understands the beginning and end of the supply chain within the provider's setting. They understand our culture, our people and, most importantly, our strategic mission.

Q: Do you think that in the healthcare sector generally, truly strategic partners are common? Or is this something that companies have to go a distance to achieve?

A: Whisman: We spend a lot of time ferreting out those strategic partners. [We ask:] Do they have the people, the technology and the resources to get us from point A to point B in our strategic goals?

Q: In no industry is it more important to have strategic partners than in healthcare. You're so highly regulated, quality is so important, and customer demands are so high. Would you agree that that is an essential element?

A: Whisman: I heartily agree. Quality was in the background for a while. Now it's been elevated to the board level within our organization. We might have 1,000 to 1,500 vendors in our facilities on any given day. We wanted to narrow that down to [identify the most critical partners].

Q: How many of your vendors are considered strategic partners?

A: Whisman: I would say seven. They are basically our distributor and service providers - those that deal directly with our physicians. We were very cognizant of risk-mitigation issues, but also what the physicians wanted as a tool. So we took those parameters and asked them, what do you want as a strategic partner, two or three years down the road, to make sure you have the right tools to perform at a high-quality level?

Q: What are your priorities in integrating partners within your strategy?

A: Whisman: That they understand what quality means - what a good patient outcome is. Price used to be the [most important] factor that we looked at. And while price and total cost of ownership are important, you have to have a good quality outcome. The whole continuum of care is what we look at today. We advise our vendors to look at our website and quality measures, so they have alignment with Memorial Hermann - and we can come together at the table and work more proactively.

The outcome of that is we're a lot more adaptable as an organization. If we're launching a new initiative or product line, we can work with those vendors and reposition ourselves a lot more quickly than other organizations can.

Q: In the past, a lot of vendors have viewed you - the hospital - as the customer. Do you think they fully understand that it's the patient at the end who really matters?

A: Whisman: I would agree that the patient is coming more to the forefront. We need to provide, not only the product, but the service that allows the patient to get better outcomes.

Q: When you sit down with one of these trusted vendors, what is topic A? Quality? Agility? Cost? All of the above?

A: Whisman: We have a pyramid. You have quality at the top, then cost and agility.

Our strategic partners have their own people within our supply chain. They're at the table when we're making strategic decisions. They understand where we're going as an organization. We're not divulging any confidential information, but they get a feel for where Memorial Hermann is going in the future. Some of their corporate organizations get a little leery of that - "They're our employee, but they're starting to act like Memorial Hermann." That's good for [both of] us. When we're making vendor rationalization or segmentation decisions, they have a voice at the table. I can't tell you how critical that is. We've been operating under that model for the last five to seven years.

Q: Any truly strategic partnership has to involve the exchange of sensitive business information. Was there ever any concern on either side about that issue?

A: Whisman: That's a good point. We are very sensitive about the use of confidential proprietary information. There's a high level of trust. Where other healthcare organizations probably have vendors at arm's length, we want to understand how they're designing the product - what their next strategic initiative is. We do plant visits at times - we want to see their quality metrics, and whether they're meeting OEM [original equipment manufacturer] standards. It's two organizations trying to work together.

Q: How are healthcare supply chains differentiating themselves these days, with the advent of the Affordable Care Act?

A: Whisman: The typical healthcare supply chain is hospital-delivered. In the [traditional] continuum of care, we focused on when the patient got sick. We've expanded the whole patient care continuum to include pre-treatment, treatment while patients are sick, post-treatment and maybe even for athletes who aren't sick but want [to achieve] a higher performance level. We look at the full scope of our patients.

Our distributors are used to dealing with a hospital. Now we have a different continuum of care. We have multiple locations. [We tell our suppliers,] when you deliver to these non-hospital locations, think of them as a retail Walgreens or CVS, and how you treat them. It's kind of painful, because they're used to working with a physician, and now they've gone to supply chain. The point of delivery has changed, as well as the resources that we get for patient care.

[We have to consider] the readmission penalty that we might incur once a patient leaves the hospital. We look at the technology solutions that are out there, to make sure that when the patient leaves, the treatment was appropriate. Are we giving them post-care? Are we following up? Are we doing high-touch? That's where we bring in the service providers. With home health or after-the-fact care, we want to make sure we're monitoring the patient's behavior. We need to know where the service providers are, and who can [support] post-care after patients leave the hospital.

Q: Do you sense a continuing trend in point of delivery? More home healthcare, home deliveries, more bypassing the hospital altogether?

A: Whisman: If you look at our mix of inpatients and outpatients, along with home healthcare, the inpatient volume is going down, and the outpatient volume is going up. We are seeing the need to manage that whole continuum of care, and do proper segmentation.

We're also looking at causal analysis - for example, how we can anticipate spikes in demand. We know that in the fall season we're going to have a lot of pneumonia - that's just a given. But can we get information from retailers about what preventive measures are being bought off the shelf? And how can we use that information to predict when someone's going to come in contact with our healthcare facility? That's very futuristic, but it's where we have to be, because it's not just about when the patient's sick. It's also about before and after.

Q: Do you see the healthcare supply chain further evolving, as companies and people get more involved in preventive and wellness care, as opposed to treating diseases after the fact?

A: Whisman: I think wellness is very critical. So is determining how supply chain fits into that. I'm a firm believer that supply chain is about relevant information, how you use that information to articulate how you serve a wellness patient, and how you get involved with healthy athletes who might want to increase their performance.

On the front end, it's about how you get people to change what they eat. We worked with our foodservice provider - it already had some wellness programs in place, so we brought that expertise in. We're not trying to create it [from scratch]; we're trying to partner with people who have already done the research. As a result, we're more apt to service the whole patient care continuum.

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Memorial Hermann

Keywords: supply chain, supply chain management, healthcare supply chain, supply chain planning, sourcing solutions, supply management