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  • 1

    Innovations in Supply Chain Intermountain Healthcare – Brent Johnson

    March 14, 2013

    Discussion Agenda

    1. Intermountain Healthcare Supply Chain

    Organization Story

    2. Evidence Based Waste in the Healthcare

    Industry Supply Chain – Six Observations

    3. Opportunities to Connect Supply Chain to

    Clinical

  • 2

    Future of Healthcare has been compared to

    a demolition derby – competing incentives

    Clinicians

    Hospitals

    Supply

    Chain

    Payors

    Suppliers

    Intermountain Healthcare

    Supply Chain Organization

    Ranked #4 by Gartner in 2012 for

    all of healthcare

    Passionately finds and adopts

    best practices

    Actively involved in the best industry organizations –

    SMI, HTG, AHRMM

    New Intermountain Supply Chain

    Center

    Opened in mid-2012

    Investing into Supplier

    Relationship Management

    Integrating

    Supply Chain with Clinical

  • 3

    2012 Gartner Top-Ten

    Healthcare Supply Chains

    1. Cardinal Health

    2. Mayo Clinic

    3. BD

    4. Intermountain

    Healthcare

    5. Owens & Minor

    6. Abbott

    7. Johnson & Johnson

    8. Novartis

    9. Sisters of Mercy

    (Roi)

    10. Geisinger Health

    System

    Intermountain Supply Chain Gartner rankings provide validation that we are focused on the right things

    Critical Success Factors

    How?

    • Supply chain became a strategic

    focus by senior leadership

    • $3 Million initially investment and 25 new

    FTEs – skilled & talented

    • Centralized buyers and reporting

    relationships of the warehouse

    • Added couriers, travel services,

    publishing and central laundry

    • Ongoing investments in our people

    • Earned trust of stakeholders –

    management, clinicians & physicians

    • Implemented effective strategies

    • Deliver on commitments

    5

    Intermountain Supply Chain Center - 2012

  • 4

    Everything Supply Chain

    Sourcing, Contracting, Analytics, Systems, Purchasing, Accounts Payable,

    Couriers, Logistics, Warehousing, Distribution plus 12-15 programs

    327,000 sq ft – Distribution Center & MUCH MORE

    Supply Chain Center Objectives

    Enhanced Responsiveness

    Improved Fill Rates

    Value-Added Ancillary Services

    Supports Standardization

    Deliver in Right Unit of Measure

    Single Shipment to Each Location

    One-Stop-Shop Customer Service

    Lower Unit Costs

    Lower Transportation Costs

    Streamlined Processes

    Productivity Gains

    Better Use of Hospital Space

    New Revenue from Third Parties

    Enables Product Standardization

    Enables Sustainability

    Emergency Preparedness

    Reduce Product Variation

    Expiration Date Mgmt

    Improved Traceability

    Recall Management

    Enhanced Controls

    Mitigate Product Shortages

    Lower

    Cost

    Improve

    Service

    Reduce

    Risk

  • 5

    Healthcare Non-Labor Spend Summary

    13 Categories – Should be managed as a system

    Clinical Services

    Medical Equipment

    • Gen Med equip, parts & service

    • Lease/rental

    • Imaging, Lab, Oncology, Surgical,

    Mobility

    Pharmaceuticals

    • Pharmacy

    • Therapeutics

    Medical Supplies

    • Imaging, Lab, Pharmacy

    • Medical gases

    • Respiratory

    • Surgical

    Non-Medical Equipment

    • Non-medical equipment

    • Parts/service

    • Vehicles

    Food

    • Food

    • Nutrition

    Clinical Commodities

    • General medical supplies

    Implants

    • Orthopedic

    • Spinal

    • CRM

    • Other

    Real Estate

    • Construction services

    • Facilities services

    • Energy services/utilities

    • MRO

    IT Products & Services

    • Computer hardware

    • Output hardware

    • Software

    • Telecommunications

    There is room for improvement!

    Evidence based waste

    in supply chain in

    healthcare

    Six observations

  • 6

    Evidence based waste

    in supply chain in healthcare

    Inefficient

    Costly Inconsistent

    Best

    Practices

    No

    Bar Codes

    Why? 1. Not-for-profit presence 2. Focus on clinical quality at all

    costs 3. Industry dependence upon

    GPOs 4. Lack of supply chain talent –

    pay & strategy 5. Hospital executives haven’t

    viewed traditional Materials Management as strategic – left in basement

    Non

    Standardization

    Preference

    Based

    Decisions

    There is a wide gap in

    cost performance between

    the best and the worst!

    14.1%

    17.0%

    20.0%

    High-Performance

    Quartile

    Median Low-Performance

    Quartile

    Supply Expense as % of Total

    Operating Expenses

    $1,249

    $2,250

    $2,306

    High-Performance

    Quartile

    Median Low-Performance

    Quartile

    Supply Expense per Adjusted Discharge

    Source: The Advisory Board, Introducing the Supply Benchmark Survey, © 2007

    One

  • 7

    Inefficiency of

    healthcare supply chain

    National

    GPO

    Contracting

    Manufacturer Distributor Provider

    Tracing Fees

    (3-4%)

    Payment Term

    Discount (2%)

    Channel Fees

    (4-6%)

    Distribution

    (4-12%)

    Additional

    Markup

    (4-8%)

    Volume Rebates (1-2%)

    Two

    40,000 SKUs

    10,000 Suppliers

    Complex

    Costly

    Data Chaos

    Transparency Through the Entire

    Supply Chain is Critical

  • 8

    Source: Average of group as per public company financials.

    SG&A costs are significantly more for

    suppliers in healthcare than retail

    14.1%

    HEALTHCARE RETAIL

    27.6%

    Opportunity

    (13.5%)

    Supply chain distribution

    is inefficient

    Med/Surg Dist.

    Dietary Dist.

    Lab Dist.

    Radiology Dist.

    Pharma Dist.

    Member Hospital

    Member Clinics

    Other Hospitals

    Other Clinics

    Retail Pharmacy

    Home Health

    Retail

    Mass Merc.

    Linen Service

    Lab Mfg.

    Pharma Mfg.

    Film Mfg.

    Med/Surg Mfg.

    Dietary Mfg.

    Linen Mfg.

    Other??? Direct

    Suppliers

    EVS Dist EVS Mfg

    MRO Dist MRO Mfg

    Raw Material Supplier

    Raw Material Supplier

    Raw Material Supplier

    Raw Material Supplier

    Raw Material Supplier

    Raw Material Supplier

    Raw Material Supplier

    Raw Material Supplier

    Three

    http://www.apple.com/retail/onetoone/ http://www.hospira.com/ http://www.kimberly-clark.com/ http://www.jnj.com/index.jsp http://www.gsk.com/index.htm http://www.ge.com/index.html http://www.dell.com/content/default.aspx?c=us&l=en&s=gen http://www.motorola.com/ http://www.google.com/imgres?imgurl=http://www.specpage.com/stuff/contentmgr/files/28/794ebfacf3c32c467c1bc8dfc658bb5b/logo/1108.gif&imgrefurl=http://www.specpage.com/specpage/products.php?mfr=50050&page=7&h=300&w=600&sz=5&tbnid=uqcKN_Kog78J::&tbnh=68&tbnw=135&prev=/images?q=International+paper+logo&hl=en&sa=X&oi=image_result&resnum=1&ct=image&cd=1 http://www.google.com/imgres?imgurl=http://www.supersibs.org/images/kraft_logo.gif&imgrefurl=http://www.supersibs.org/aboutUs_partners.html&h=621&w=1562&sz=43&tbnid=IAz3Ea7c5OQJ::&tbnh=60&tbnw=150&prev=/images?q=kraft+logo&hl=en&sa=X&oi=image_result&resnum=1&ct=image&cd=1 http://www.brandsoftheworld.com/download/brand/145398.html http://www.brandsoftheworld.com/download/brand/8865.html http://www.brandsoftheworld.com/download/brand/21009.html http://www.brandsoftheworld.com/download/brand/46988.html http://www.brandsoftheworld.com/download/brand/1750.html http://www.brandsoftheworld.com/download/brand/2358.html http://www.brandsoftheworld.com/download/brand/23186.html http://www.brandsoftheworld.com/download/brand/24407.html

  • 9

    Lab Mfg.

    Pharma Mfg.

    Film Mfg.

    Med/Surg Mfg. Hospital

    Hospital

    Hospital

    Hospital

    Hospital

    Hospital

    Medical Group

    Home Care

    Dietary Mfg.

    Linen Mfg.

    Other???

    SCC

    Mfg. Direct

    Ancillary

    Services

    Pharmacy

    Packs &Kitting

    3PL Services

    Simplicity is Better:

    Why Intermountain opened

    Supply Chain Center (SCC)

    Transportation

    Logistic Cost

    Per Industry Segment

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