1. Maximizing Cost Savings Through Effective Process, System, and Contract Management

2. Melissa Amell Director, MMIS and Value Analysis Brian Mikel Director, Materials Management Saint Thomas Health Services Nashville, TN

3. Overview  Saint Thomas Health Services Background  Organization Structure  Materials Management Information Systems (MMIS) Background  Value Analysis Background  Relationship and System Management

4. Saint Thomas Health Services (STHS) System Structure  St. Thomas Health Services  4 hospitals in middle Tennessee  $200 Million supply budget  Over $1 Billion annual revenue  Baptist Hospital  600 beds  6,500 babies delivered each year  Largest total-joint hospital in the area  Official healthcare provider for the Tennessee Titans and Nashville Predators

5.  St. Thomas Hospital  571 beds  One of the top five cardiac programs in the nation  More than 245 heart transplants  52,000 open heart procedures performed  Middle Tennessee Medical Center  286 beds  30 different medical specialties  Over 55,000 patients visit the ED  2,500 babies delivered each year Saint Thomas Health Services (STHS) System Structure

6.  Hickman Hospital  Critical Access Hospital  Senior Care program  Local home health program  Nursing home

7. STHS Previous State  System-level value analysis teams did not exist  Each facility operated independently  Separate materials management systems  Limited corporate sponsorship  Limited accountability for cost savings and contract compliance

8. Previous Value Analysis Team (VAT) Structure  Prior to development of current structure, VAT program made little progress  Prior structures allowed for little interaction between hospitals  Limited Clinical Representation  Representation in the past restricted the ability to “standardize” across all hospitals

9. Supply Chain Structure

10. Materials Management Information System (MMIS) Structure

11. MMIS Structure Responsible for maintaining these master files:  Item  Vendor (AP and PO)  Location  Vendor item  Contracts  Approval Process and  Requesters

12. MMIS Through the establishment of MMIS:  Data is standardized and accessible  Item, vendor, and contract master files are only accessed/maintained by the MMIS group (changes are logged in audit trails)  Contract pricing is evaluated (audited) against actual purchases  Contracts and/or purchasing patterns are modified as discrepancies are identified

13. Value Analysis Team (VAT) Structure

14. Value Analysis Team (VAT) Structural Importance  Current structure promotes system standardization  Multi-disciplinary participation  Clinical representation is key to selection/implementation success  VAT priorities supported by senior leadership (i.e., system CEO, COO, CFO)  Appoint key clinical leaders and ask leaders to select operational representatives (clinicians are required for success)

15. VAT Purpose  Reduce non-wage expenses while providing quality products and services  Create a structure that supports product and service utilization  Standardize vendors, products and services  Manage new products and technology  Identify and convert to best practices and protocols

16. VAT Objectives  Provide a strong, system-wide VAT framework  Increase management, employee and physician awareness, while increasing participation and accountability for decision making and management of non-wage costs  Communicate product utilization guidelines

17. VAT Objectives  Communicate system-wide policies and procedures  Assure timely, consistent processes for vendor selection, product introduction, trial/evaluation activities, and conversion  Monitor and measure product and service utilization  Document and track savings

18. VAT Meeting Structure  Meetings are facilitated by the MMIS/VAT Director, and initiatives/topics are updated via the assigned task leader  Each VAT meets monthly or as determined necessary by the group (e.g., bi-monthly)  Meeting minutes are recorded, published, and reviewed by team members  Initiatives/topics identified during meetings are assigned to hospital representatives

19. VAT Meeting Structure  New initiatives are added/discussed as required  Contract expiration  Corporate direction  GPO decisions  Clinical preference (physician/nursing)  Product effectiveness/quality  Conversion timing, buy-outs, and obstacles  Safety

20. VAT Meeting Structure  Executive Sponsorship/ Leadership from the C-Suite  Future agenda items include updating the team on initiatives/topic progress  Meetings are scheduled for 2 hours  MMIS/VAT Director reassigns tasks as required and follows-up with contracted vendors

21. VAT Process  Identify opportunity  Discuss product requirements  Identify vendors  Conduct cost comparison  Evaluate/select products  Convert  Document savings

22. Cross Reference Cost Analysis

23. Standardization  Standardization examples  Orthopedic implants (3 vendors) over $1 million savings on $15 million spend  CRM/CRT products (2 vendors) $859,000 savings  Spinal implants (3 vendors) $400,000 savings  Cochlear implants (2 vendors) $291,000 savings  Peripheral Products (2 vendors) $462,000 savings

24. Standardization  Limited vendor benefits include cost savings and reduced O.R. time (e.g., setup)  General medical supplies – 90 percent contract compliance – single distributor  Moving to direct shipments where appropriate  Current direct conversion will result in $60,000 annual savings (one vendor)

25. Savings Documentation  A project sheet is maintained by the MMIS/VAT Director for each team (templates can be sent upon request)  After conversion, savings are tracked for 12 months  Potential opportunities are listed  Realized savings are reported quarterly to VAT and system leadership

26. VAT Project Sheet

27. VAT Success  Annual Savings:  FY2005 - $12.8 million  FY2006 - $10.15 million  FY2007 - $14.5 million  FY2008 (Projected) - $11.2 million

28. VAT Success  FY07 (by VAT):  Cardiac - $1.260 Million  General Medical - $1.552 Million  Pharmacy - $2.310 Million  Surgery - $1.841 Million  Lab - $430,736  Support Services - $6.979 Million  Imaging - $213,455

29. Managing Relationships  MMIS works with the vendor community and inventory managers to insure  Proper cross-referencing  Adherence to contracts  Coordination of buy-outs  MMIS maintains conversion schedules and communicates timeline/manages project plans  MMIS team reminds inventory managers when conversions have not been completed

30. Managing Relationships  Hospital leadership must support VAT decisions (even if physicians disagree)  C-suite involvement from system president to department managers  Physician liaison required  Vice President of Logistics for STHS  Meets with physicians  Coordinates initiatives with senior leaders  Participates on each VAT  Works through issues between vendors, VAT, and physicians

31. Contract Management  Centralized contract management provides tools for pricing resolution  Purchasing agents can research confirmations against contract pricing, but cannot update contract prices  Properly maintained contracts are compared to actual purchase orders to determine pricing discrepancies  Centralized maintenance provides the ability to examine contract compliance with each vendor

32. System Requirements  Systems must be able to support centrally managed contracts, masters, audit trails, and security  System security restricts access within master files, contracts, and other functions  Restrict accounts payable and purchasing from master file maintenance

33. System Requirements  STHS allows access to the MMIS group (8 associates)  Purchasing/AP associates must also submit requests for new items/vendors  Contract start/end dates and related pricing must be maintained

34. Keys To Success  Establish policies and procedures for system processes (MMIS and customers)  Restrict access to systems and master files  Make effective use of audit trails  Obtain organizational leadership support  Ensure research is performed on each vendor, item, and contract addition (reduce duplicates)

35. Vendor Master Form

39. Item Master Form

43. Contact Information Melissa Amell mamell@stthomas.org (615) 222-3030 Brian Mikel bmikel@stthomas.org (615) 222-6864