Healthcare Supply Chain Strategy in NSW Australia INTERNATIONAL HOSPITAL FEDERATION CONGRESS MAY 2001 INTERNATIONAL HOSPITAL FEDERATION CONGRESS MAY 2001

NSW Health Profile l Australian Healthcare>40% l Budget> $6.5 Billion l Goods & Service> $1.4 Billion l Salaries & Wages> $4 Billion l Staff> $78K l Beds> 22K l Healthcare Facilities> 224 l Geography> 802,000 km2 l NSW Population6.34 Million l Legal Identities18

The Supply Chain The health care supply chain covers all supplies and support services required to support the operation of Health services, including such items as Medical and Surgical Supplies, Pharmaceuticals, Food, Support Services, Maintenance Services and Capital Equipment. The set of technologies, such as electronic document/data interchange (EDI), electronic mail ( ), electronic funds transfer (EFT) and work flow automation via EAN / Barcoding, combined with business processes that enable users to conduct business electronically. eCommerceeCommerce

OUR VISION To be the leader in innovation and total cost management of the healthcare supply chain, utilising best practice supply chain management systems, that connect and reduce costs for all supply chain members OUR MISSION To provide best value products and services to the community by effectively managing the total cost of the healthcare supply chain for NSW Health OUR DRIVERS To act as one Public Health OrganisationTo act as one Public Health Organisation To deliver benefits to our staff, patients and the public in line with NSW Health Charter and Codes of ConductTo deliver benefits to our staff, patients and the public in line with NSW Health Charter and Codes of Conduct To provide a quality logistic service which optimises the value from dollars spentTo provide a quality logistic service which optimises the value from dollars spent Basic Infrastructure innovation Network units, centralise supply management and provide basic electronic tools E-Commerce Implement electronic commerce philosophies that deliver a cost effective and efficient supply chain for NSWHealth. Electronic Catalogue Assist purchasing decisions, provide better knowledge to management on spending patterns, enhance negotiations with vendors & improve decision making. Procurement Practices Re-engineer tendering and contracting practices to enhance strategic focus and delivering products & services to health personnel at the lowest cost. Support Functions Develop adequate, secure IT & telecommunications infrastructure, provide networking and training opportunities, communicate outcomes and overcome regulatory limitations. Improved systems and practices Lower pricesLower inventory Simple ordering systems Automated processes Lower costsReduced lead time Key measures of our success will be: Our breakthrough strategies will be:

Functional Areas for Strategies l Inventory and logistics management (Processes) l Information management l Procurement/supplier management (Supplier relationships)

l NSW Health spends ~ $1.2bn pa on goods and services ~ This amounts to 40% of national expenditure. l KPMG estimate national savings potential of $220 million from supply chain reform l NSW Health share of potential savings amounts to $90 million pa. [8% of current spend] Financial Incentives

Implementation Plan - Step (6 mths) InitiativeFunction u Review status of AHS’ procurement andProcesses inventory management systems u Establish unique product identifier (EAN)Suppliers u Build systems to accept EAN/Bar codesProcesses u Review current audit proceduresProcesses u Lobby regulatory changesProcesses u Develop change management andProcesses/ benefit realisation strategySuppliers u Develop a reform communications strategyProcesses u Define IT&T shortfallsIT Underline = Activity commenced

Implementation Plan - Step (12mths) InitiativeFunction u eCatalogue development Processes/IT u Web site enhancement Processes u Online updates of State Contract infoIT u Review the process for awarding StateProcesses contracts (fewer vendors, better value, performance measures) u Explore further opportunities for stateSuppliers contracts u Develop AHS best practice logistics/Processes/ distribution model incl. BarcodingIT u Secure communications infrastructureIT/Suppliers u Clinician based product standardisationProcesses Underline = Activity commenced

Implementation Plan - Step (2 years) InitiativeFunction u Supply chain reforms included in AHS’ andProcesses NSW Health business plans u eCatalogue linked to suppliers ERP’s and IT AHS’ FMS u Explore benefits of prime vendoring & third Processes/ party logistics arrangementsSuppliers u Implement electronic automated supplyIT system solutions (Oracle 11i?) u Record clinical supply chain costs inProcesses Trendstar/HIE and monitor performance Underline = Activity commenced

The EAN Way l PPC EAN/BAR Coding Working Party l Analysis of Options  Need for common solution across products groups  Size and mass of EAN Worldwide l National/International Research/Case Studies l Industry Directions  Retail / Grocery  PeCC / NOIE  MCCA (Medicines Coding Council of Australia)  HIC (Health Insurance Commission)  DPWS “Electronic Procurement – Taking up the Challenge”  Australian Defence Force  Healthcare EDI Coalition (USA)  Health Industries Distribution Association (USA)  HCOA  Pharmaceutical Benefits Branch  Australian Standards (AS4700-2) Electronic Prescription Messages

EAN/Bar Code Functionality in Healthcare l Short Term  Ward Imprest  Receiving from Vendors  Payment on Receipt  Logistical Activities in  Warehouses  Picking and Dispatch l Phase III  Episode funding requirements  Vendor managed inventories  Full E-Catalogue Integration  Commitment to volumes/forecasts  Strategic partnerships  Batch coding and tracking l Phase II  Supply Chain Visibility  Procurement Transactions  E-Catalogue / EAN Net  Identification of Products / Vendors / Trends  Improved Supply Chain Processes  Full Contract compliance

NSW Health Peak Purchasing Council