The megatrend in healthcare today is a focus on home care, bypassing the hospital and clinic. So it only makes sense that a Canadian health network would be looking to transform its supply chain toward that end.
In fact, the very purpose of the Erie St. Clair (ESC) Local Health Integration Network (LHIN) is to provide home and community care within Ontario. (It’s one of 14 LHINs in the province.) But the old, paper-bound processes weren’t geared toward fulfilling that mission efficiently.
ESC lacked the internal resources necessary to install modern-day inventory controls and end-to-end automation throughout its supply chain. For that task, it turned to TransForm Shared Service Organization (SSO), a non-profit founded by five hospitals in the Erie St. Clair region of southwestern Ontario.
TransForm SSO undertook an intensive review of ESC’s operations, examining data, interviewing various stakeholders and scrutinizing processes. What it found was an organization that couldn’t keep up with the demands being placed upon it.
ESC was relying on manual processes for managing multiple tasks, from order entry to invoice payment. Hours were being wasted on redundant activities; for example: receiving information provided by community nursing agencies, then rekeying that data into the LHIN Client Health and Related Information System (CHRIS). In addition, because it lacked an enterprise resource planning (ERP) system, ESC had to manually validate orders against the receipt of goods and invoices for payment. The result was duplication of effort and many data-entry errors.
Inventory management was primitive and entirely unsystematic. ESC was basing replenishment decisions on a visual review of supplies on hand. It had no reliable means of determining actual items in inventory, so was unable to respond effectively to recalls or product alerts. The result was wasted and expired product, in addition to stockouts.
ESC also lacked a coherent strategy for managing contracts with suppliers. Two distributors might be contracted for the same product list, charging different prices based on location. Items weren’t being put out to competitive bid. And purchases weren’t consolidated through a group purchasing organization (GPO) or SSO like TransForm.
A Call to Action
The need for supply-chain transformation was clear. TransForm SSO stepped up with a framework that tracked with Health Quality Ontario’s (HQO’s) vision for the province, based on six “dimensions of quality”: safe, patient-centered, timely, effective, efficient and equitable. In all instances, principals say, the goal is to improve the patient experience, whether at the clinic, doctor’s office, hospital or home.
With the help of TransForm, ESC could draw on the resources and expertise of a large organization serving multiple hospitals. The model can be easily scaled to encompass all healthcare organizations with ESC LHIN, throughout the province of Ontario.
TransForm set up an interface between the LHIN CHRIS system and its own ERP, which allowed for the tracking of all supplies back to the patient. In tandem with an e-commerce platform, the ERP system also enabled order automation, exception tracking, contract price validation, inventory management and visibility of all supply data. No longer did ESC have to manually input data into the CHRIS system, saving time and eliminating errors caused by rekeying.
At the warehouse and within clinics, ESC’s inventory and supply levels are now managed electronically, based on actual use of product. The e-commerce platform provided by TransForm validates orders for price and contract exceptions, using electronic data interchange (EDI) message formats for purchase orders, advance ship notices and invoices.
A three-way matching system automates payments and manages any discrepancies electronically, creating a complete audit trail for finance. And by achieving visibility of all data and transactions, ESC can apply business analytics to measure its historical supply usage, product selection and overall supply-chain performance.
Benefits of Group Purchasing
ESC saw further savings through tapping into TransForm’s group purchasing contracts. LHIN’s clinicians can also participate in future requests for proposals. The model ensures contract compliance in line with the Ontario Public Service (OPS) Procurement Directive, while providing standardized pricing for supplies regardless of where they’re purchased. The old distributor agreements have been replaced with GPO and TransForm supply contracts, and products are selected through competitive bidding.
New warehouse space managed by TransForm on behalf of ESC allows for higher volumes of supplies to be kept on hand, while reducing inventory levels at service-provider locations. Clinicians no longer need to search out product in onsite storage rooms; instead patient orders arrive at the clinic prior to the appointment.
Phase one of the implementation focused on cutting costs and introducing automation without the need for extensive change management. It involved optimizing pricing through the use of a GPO, TransForm and other SSO contracts. First-year cost savings, based on nine full months of operation and two partial months, were nearly US$680,000, on approximately US$2.2 million in total spend. The principals project annualized savings of about US$980,000, a 30-percent reduction based on current volumes.
Phase two shifted warehouse operations from the ESC LHIN to TransForm, while integrating CHRIS with the latter’s ERP system. The third and final phase enables end-to-end automation of ESC’s supply chain, with supply usage data flowing directly into the CHRIS system and TransForm’s ERP, which generates a pick list for replenishment at the service provider’s location.
ESC and TransForm believe the new supply-chain model has implications extending beyond Erie St. Clair. “The ability to scale a solution that can lower supply costs, implement leading supply-chain practices, incorporate e-commerce, provide full transparency to data and accountability throughout the supply chain presents an innovative model that can be expanded across the province of Ontario,” the principals say.
“This model demonstrates that supply chain plays a strategic role in delivering value to patient care and to the broader health system,” they add.
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