Medline also has its own fleet oftrucks, so they do not have to rely onthird-party trucking companies todeliver our supplies where and whenwe need them.

FUTURE OPPORTUNITIES

• Maximize Medline’s logistics servicesto reduce distribution fees from otherdistributors.

• Continue to review Medline’s offeringof self-manufactured products.

• Future price notification changes.

• Utilize Medline’s clinical team toassist in driving costs out of thesupply chain process.

• Utilize the program offerings fromMedline to assist in meeting thenew CMS guidelines.

Our HospitalThe Daughters of Charity HealthSystem (DCHS) is a regional health-care system of six hospitals spanningthe California coast from the BayArea to Los Angeles. Our sponsorsare the Daughters of Charity ofSt. Vincent de Paul who, for morethan 370 years, have been servingthe sick and the poor throughhealing ministries around the world.

DCHS was formed on January 1,2002, but our history in Californiareaches back more than 150 years.DCHS local Health Ministries(LHMs) encompass some of thefinest physicians, nurses, staff andfacilities in the state. LHMs includeO’Connor Hospital, San Jose; SetonMedical Center, Daly City; SetonCoastside, Moss Beach; St. FrancisMedical Center, Lynwood; SaintLouise Regional Hospital, Gilroy;St. Vincent Medical Center,Los Angeles and Caritas BusinessServices, Redwood Shores, whichprovides support services to theNorthern California LHMs.

Our ChallengeAs a healthcare system with sixdifferent facilities spread out all alongthe coast of California, our challengewas on several fronts.

HOW A PRIME VENDOR PARTNERSHIPHELPED US SAVE MONEY ANDSTREAMLINE OUR SUPPLY CHAINby Mark Ramirez

Centralized Contracting and ItemFile Management –We also centralizedour medical and surgical contractingfrom six different item files and loca-tions down to one standardized file tobe used throughout the system. Thishas helped with negotiating lowerprices based on greater volumes andstandardizing products and protocolsacross DCHS.

Regular On-time Deliveries – One ofthe demands we had of our supplypartner was regular on-time deliveries,and Medline has met that criterion.Medline has a distribution center inSan Bernardino to meet the demandsof our Southern California facilitiesand one in Lathrop to distributeproduct to our facilities in the northernhalf of the state.

TRUE STORIESTRUE STORIES

Saint Louise Regional Hospital is one of six hospitals in the Daughters of Charity Health System.

• First, our goal was to achieve savingsof at least 3-5% on a supply budgetof $153.1 million dollars of medicaland surgical products. Decliningreimbursements and rising commodityprices were putting stress on oursupply budget.

• Second, consolidate the contractfunction among our facilities intoone central location. The goal is tohave one shared item file among allthe hospitals. The individual facilitiescan still place orders, but thiswould enable us to standardize ourproducts, negotiate better pricesas a result of our combinedhigher volumes and streamlinethe contracting process.

• Third, and this goes hand in handwith the second challenge, was to“clean” our item file, which meanseliminating duplicate items, updatingpricing and descriptions and ingeneral reducing or eliminating allerrors when we place orders with our

vendor partners. We knew this wouldbe no easy task, as we were consoli-dating thousands of line items fromthe six different facilities into onecentralized file.

• Fourth, we needed to find a singlesupply partner who had the capabili-ties, experience and the willingnessto work side by side with us toaccomplish all of these challengesand more.

“The decision to select Medline occurred quicklyand clearly as Medline proposed the best savingprogram…to date,we have saved over $2 million.”

Category

National Brand Spend

Medline Brand Spend

Overall Savings

2006-2007

$4,620,976

$4,275,681

$1,122,036

2007-2008

$10,284,504

$7,807,536

$928,121

DCHS Annual Savings Achieved with Medline

“Medline has grown intoone of the preeminentdistributors to thehealthcare marketoffering many creativeand proven supplychain managementprograms.”

“We developed an itemfile that has resulted in98% pricing accuracy.This means that wehave virtually noprice discrepancies oritem number issueswhen ordering andreconciling invoices.”

ABOUT THE AUTHOR Mark Ramirez has been in healthcare supply management for more than 20

years. He has been the Corporate Director, Supply Chain Management for The Daughters of Charity

Health System since 2004. In his position, he negotiates, assists and supports DCHS efforts to improve

quality and reduce costs by leveraging the system’s size, scope of services and strengths. He works

collaboratively with each of DCHS’s six facility-based materials management departments to support and

implement negotiated contracts. He also communicates and provides strategic advice and best practices

in support of collaborative supply chain operations. A key aspect of his position is to monitor and

report cost-saving initiatives by hospital and measure the impact by predefined unit of service.

©2009 Medline Industries, Inc. Medline is registered trademarks of Medline Industries, Inc.MKT209163 / LIT747 / 3M / ZPN18

TrueStory_DCHS:Layout 1 4/14/09 1:41 PM Page 1

2. Medline’s manufacturing strengthalso helps in reducing our distributionfees on the other national brandproducts. Medline is not reserved intelling us that their margins arenaturally higher on their Medlinebrand than on the national brandproducts, so they can afford to reducetheir distribution fees to us. The trade-off is purchasing more Medline brandproducts. Our savings on distributionfees thus far have averaged $267,885per year or $535,770 over two years.

3. Medline gives us additional cost-saving incentives to move ourpurchases to the Medline brand bygiving us a rebate based on the totalpurchases of Medline products.

So, as we purchase more Medlinebrand product and less national brandproduct, the rebates get larger. To datewe are purchasing about 46% Medlinebrand and 54% other national brands.In our first year, we received savingsof $179,912 and in 2008 we received$297,051. This year, we are trendingat $432,714. It is important to notethat we receive these savings year afteryear rather than as a one-time benefit.

OPERATIONAL IMPROVEMENTS“Clean” Item File – One of our mainchallenges stated earlier was “cleaning”our item file so that we had up-to-dateinformation and pricing when weordered products from Medline. Withgreat teamwork and diligence from

both DCHS and Medline’s salessupport, we developed an item file thathas resulted in 98% pricing accuracy,which means we are well on ourway to our goal of 100% accuracy.This means that we have virtuallyno price discrepancies or item numberissues when ordering and reconcilinginvoices. For healthcare systemsor larger hospitals, this is no smallachievement.

Identifying and correcting item fileinconsistencies and mistakes isextremely time-consuming for thehospital as well as the supply partner.By virtually eliminating this task,everyone’s time has been freed to workon more productive assignments.

“Medline is also large enough to have twodistribution centers in California – one inNorthern California and one in SouthernCalifornia – that are located in closeproximity to our facilities, enabling productsto be delivered on a timely basis and in acost-efficient manner. ”

Why We Chose MedlineIn early 2006, we were searching fora new prime vendor with whom topartner to help us achieve the abovegoals. The decision occurred quicklyand clearly as Medline proposedthe best savings program. In additionto manufacturing its own productline and delivering it direct to themarketplace, which takes costs outof the supply chain, Medline couldreduce our cost-plus distributionfees, an important factor that otherdistributors were unwilling orunable to do.

Another key reason we chose Medlinewas that it has grown into one ofthe preeminent distributors to thehealthcare market, offering manycreative and proven supply chainmanagement programs.

Medline is also large enough to havetwo distribution centers in California –one in Northern California and one inSouthern California – that are locatedin close proximity to our facilities,enabling products to be delivered ona timely basis and in a cost-efficientmanner.

Finally, Medline has a very strongand experienced sales force, customerservice team and infrastructure to

handle the needs of our health system.At the same time, Medline hasmaintained the feeling and personalservice of a small company, specificallywhen it comes to reaching seniormanagement and having my questionsand concerns handled quickly andto my satisfaction. This atmospherealso fosters a healthy cooperationbetween Medline and our staff whendeveloping new ideas or suggestionson ways we can do things better andmore efficiently.

Results to DateCOST SAVINGSSo far, in the two years of our partner-ship, we have saved over $2 million withMedline. The savings portion of theprogram focuses on three main areas.

1. Medline offers a “GuaranteedSavings” program when convertingfrom the products our health systemwas originally using to the Medlinebrand products. These savings averageabout 10% when switching to theMedline brand. Medline makes thispromise because these are productsthey manufacture and deliver directto our hospitals, eliminating the addedcost of a pure distributor. So far, wehave achieved $540,000 savings overtwo years by using the Medline brand.

“Medline has a very strong and experienced salesforce, customer service team and infrastructureto handle the needs of our health system.At the same time,Medline has maintained thefeeling and personal service of a small company.”

St.Vincent Medical Center, Los Angeles, CA

Seton Medical Center, Daly City, CA

Healthcare System:Daughters of CharityHealth System (DCHS)

Location:California

Size:Six hospitals

Challenge:Reduce supply budget andstreamline supply chain

Savings to Date:$2,050,157

TRUE STORIESTRUE STORIES

��� �

�

��

�

�� DCHS Hospital Location �� Medline Distribution Center

TrueStory_DCHS:Layout 1 4/14/09 1:41 PM Page 3

2. Medline’s manufacturing strengthalso helps in reducing our distributionfees on the other national brandproducts. Medline is not reserved intelling us that their margins arenaturally higher on their Medlinebrand than on the national brandproducts, so they can afford to reducetheir distribution fees to us. The trade-off is purchasing more Medline brandproducts. Our savings on distributionfees thus far have averaged $267,885per year or $535,770 over two years.

3. Medline gives us additional cost-saving incentives to move ourpurchases to the Medline brand bygiving us a rebate based on the totalpurchases of Medline products.

So, as we purchase more Medlinebrand product and less national brandproduct, the rebates get larger. To datewe are purchasing about 46% Medlinebrand and 54% other national brands.In our first year, we received savingsof $179,912 and in 2008 we received$297,051. This year, we are trendingat $432,714. It is important to notethat we receive these savings year afteryear rather than as a one-time benefit.

OPERATIONAL IMPROVEMENTS“Clean” Item File – One of our mainchallenges stated earlier was “cleaning”our item file so that we had up-to-dateinformation and pricing when weordered products from Medline. Withgreat teamwork and diligence from

both DCHS and Medline’s salessupport, we developed an item file thathas resulted in 98% pricing accuracy,which means we are well on ourway to our goal of 100% accuracy.This means that we have virtuallyno price discrepancies or item numberissues when ordering and reconcilinginvoices. For healthcare systemsor larger hospitals, this is no smallachievement.

Identifying and correcting item fileinconsistencies and mistakes isextremely time-consuming for thehospital as well as the supply partner.By virtually eliminating this task,everyone’s time has been freed to workon more productive assignments.

“Medline is also large enough to have twodistribution centers in California – one inNorthern California and one in SouthernCalifornia – that are located in closeproximity to our facilities, enabling productsto be delivered on a timely basis and in acost-efficient manner. ”

Why We Chose MedlineIn early 2006, we were searching fora new prime vendor with whom topartner to help us achieve the abovegoals. The decision occurred quicklyand clearly as Medline proposedthe best savings program. In additionto manufacturing its own productline and delivering it direct to themarketplace, which takes costs outof the supply chain, Medline couldreduce our cost-plus distributionfees, an important factor that otherdistributors were unwilling orunable to do.

Another key reason we chose Medlinewas that it has grown into one ofthe preeminent distributors to thehealthcare market, offering manycreative and proven supply chainmanagement programs.

Medline is also large enough to havetwo distribution centers in California –one in Northern California and one inSouthern California – that are locatedin close proximity to our facilities,enabling products to be delivered ona timely basis and in a cost-efficientmanner.

Finally, Medline has a very strongand experienced sales force, customerservice team and infrastructure to

handle the needs of our health system.At the same time, Medline hasmaintained the feeling and personalservice of a small company, specificallywhen it comes to reaching seniormanagement and having my questionsand concerns handled quickly andto my satisfaction. This atmospherealso fosters a healthy cooperationbetween Medline and our staff whendeveloping new ideas or suggestionson ways we can do things better andmore efficiently.

Results to DateCOST SAVINGSSo far, in the two years of our partner-ship, we have saved over $2 million withMedline. The savings portion of theprogram focuses on three main areas.

1. Medline offers a “GuaranteedSavings” program when convertingfrom the products our health systemwas originally using to the Medlinebrand products. These savings averageabout 10% when switching to theMedline brand. Medline makes thispromise because these are productsthey manufacture and deliver directto our hospitals, eliminating the addedcost of a pure distributor. So far, wehave achieved $540,000 savings overtwo years by using the Medline brand.

“Medline has a very strong and experienced salesforce, customer service team and infrastructureto handle the needs of our health system.At the same time,Medline has maintained thefeeling and personal service of a small company.”

St.Vincent Medical Center, Los Angeles, CA

Seton Medical Center, Daly City, CA

Healthcare System:Daughters of CharityHealth System (DCHS)

Location:California

Size:Six hospitals

Challenge:Reduce supply budget andstreamline supply chain

Savings to Date:$2,050,157

TRUE STORIESTRUE STORIES

��� �

�

��

�

�� DCHS Hospital Location �� Medline Distribution Center

TrueStory_DCHS:Layout 1 4/14/09 1:41 PM Page 3

Medline also has its own fleet oftrucks, so they do not have to rely onthird-party trucking companies todeliver our supplies where and whenwe need them.

FUTURE OPPORTUNITIES

• Maximize Medline’s logistics servicesto reduce distribution fees from otherdistributors.

• Continue to review Medline’s offeringof self-manufactured products.

• Future price notification changes.

• Utilize Medline’s clinical team toassist in driving costs out of thesupply chain process.

• Utilize the program offerings fromMedline to assist in meeting thenew CMS guidelines.

Our HospitalThe Daughters of Charity HealthSystem (DCHS) is a regional health-care system of six hospitals spanningthe California coast from the BayArea to Los Angeles. Our sponsorsare the Daughters of Charity ofSt. Vincent de Paul who, for morethan 370 years, have been servingthe sick and the poor throughhealing ministries around the world.

DCHS was formed on January 1,2002, but our history in Californiareaches back more than 150 years.DCHS local Health Ministries(LHMs) encompass some of thefinest physicians, nurses, staff andfacilities in the state. LHMs includeO’Connor Hospital, San Jose; SetonMedical Center, Daly City; SetonCoastside, Moss Beach; St. FrancisMedical Center, Lynwood; SaintLouise Regional Hospital, Gilroy;St. Vincent Medical Center,Los Angeles and Caritas BusinessServices, Redwood Shores, whichprovides support services to theNorthern California LHMs.

Our ChallengeAs a healthcare system with sixdifferent facilities spread out all alongthe coast of California, our challengewas on several fronts.

HOW A PRIME VENDOR PARTNERSHIPHELPED US SAVE MONEY ANDSTREAMLINE OUR SUPPLY CHAINby Mark Ramirez

Centralized Contracting and ItemFile Management –We also centralizedour medical and surgical contractingfrom six different item files and loca-tions down to one standardized file tobe used throughout the system. Thishas helped with negotiating lowerprices based on greater volumes andstandardizing products and protocolsacross DCHS.

Regular On-time Deliveries – One ofthe demands we had of our supplypartner was regular on-time deliveries,and Medline has met that criterion.Medline has a distribution center inSan Bernardino to meet the demandsof our Southern California facilitiesand one in Lathrop to distributeproduct to our facilities in the northernhalf of the state.

TRUE STORIESTRUE STORIES

Saint Louise Regional Hospital is one of six hospitals in the Daughters of Charity Health System.

• First, our goal was to achieve savingsof at least 3-5% on a supply budgetof $153.1 million dollars of medicaland surgical products. Decliningreimbursements and rising commodityprices were putting stress on oursupply budget.

• Second, consolidate the contractfunction among our facilities intoone central location. The goal is tohave one shared item file among allthe hospitals. The individual facilitiescan still place orders, but thiswould enable us to standardize ourproducts, negotiate better pricesas a result of our combinedhigher volumes and streamlinethe contracting process.

• Third, and this goes hand in handwith the second challenge, was to“clean” our item file, which meanseliminating duplicate items, updatingpricing and descriptions and ingeneral reducing or eliminating allerrors when we place orders with our

vendor partners. We knew this wouldbe no easy task, as we were consoli-dating thousands of line items fromthe six different facilities into onecentralized file.

• Fourth, we needed to find a singlesupply partner who had the capabili-ties, experience and the willingnessto work side by side with us toaccomplish all of these challengesand more.

“The decision to select Medline occurred quicklyand clearly as Medline proposed the best savingprogram…to date,we have saved over $2 million.”

Category

National Brand Spend

Medline Brand Spend

Overall Savings

2006-2007

$4,620,976

$4,275,681

$1,122,036

2007-2008

$10,284,504

$7,807,536

$928,121

DCHS Annual Savings Achieved with Medline

“Medline has grown intoone of the preeminentdistributors to thehealthcare marketoffering many creativeand proven supplychain managementprograms.”

“We developed an itemfile that has resulted in98% pricing accuracy.This means that wehave virtually noprice discrepancies oritem number issueswhen ordering andreconciling invoices.”

ABOUT THE AUTHOR Mark Ramirez has been in healthcare supply management for more than 20

years. He has been the Corporate Director, Supply Chain Management for The Daughters of Charity

Health System since 2004. In his position, he negotiates, assists and supports DCHS efforts to improve

quality and reduce costs by leveraging the system’s size, scope of services and strengths. He works

collaboratively with each of DCHS’s six facility-based materials management departments to support and

implement negotiated contracts. He also communicates and provides strategic advice and best practices

in support of collaborative supply chain operations. A key aspect of his position is to monitor and

report cost-saving initiatives by hospital and measure the impact by predefined unit of service.

©2009 Medline Industries, Inc. Medline is registered trademarks of Medline Industries, Inc.MKT209163 / LIT747 / 3M / ZPN18

TrueStory_DCHS:Layout 1 4/14/09 1:41 PM Page 1