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Uniformity enhances supply chain management.

Reducing operating expenses has never been more of a priority for hospitals and health systems than it has this past year. The economic downturn has forced many organizations to be even more diligent than they may have been years prior. Catholic Health Initiatives, a Denver-based nonprofit healthcare system with 77 hospitals in 18 states, knew that it had huge variances in pricing for supplies among its hospitals. But it took too long to capture that pricing data to effectively manage the process. So in 2003, the health system purchased an enterprise management system from Minneapolis-based Lawson Software to help centralize key business functions.

The system, CHI Connect, includes HR, finance, payroll, and supply chain. CHI finished its initial implementation in January 2009, which brought more than 55 facilities online. "We are still about two to three years away from having everybody on," says Joni Rittler, vice president of supply chain information services.

But CHI Connect is already yielding significant cost savings. In the first three years of the implementation, CHI reduced supply chain costs by $125 million. "Our goal was to have about $43 million in sustainable savings per year over five-year period," says Rittler, adding that in FY09, which ended June 2009, the health system had more than $36 million in savings just on the supply side.

CHI had been generating reports from 38 different data sources, which has been reduced to one data source with the new software. Now it can easily query which hospitals are paying different rates for supplies and more effectively manage supply contracts. Hospitals also have a standard inventory tool with protocols to order supplies, and the technology provides actionable reports to managers in the form of dashboards. If there is a red light on the manager's dashboard, then action is required. With a single click, the manager can either address the problem or place an order for an item that is running low, for example. And all of the information needed to place an order pops up on screen automatically.

Rolling out the entire suite of services to individual hospitals at the same time did present some challenges, however. The health system rolled out CHI Connect in seven waves—every three months it brought on five to seven hospitals.

Staff members' whole world was turned upside down the first day of the go live, says Rittler. "It was traumatic." CHI tried to ease that trauma for employees by connecting hospitals that were already using the system with those who were implementing it so they could share best practices and lessons learned. It provided five to six weeks of training on the system. And after the go live, CHI held weekly conference calls with the hospitals for about six weeks to check in, see how it was working, and address any concerns. Calls still occur on a monthly basis.

Getting consensus on the unit of measure was also a challenge. Some hospitals wanted to give out trash can liners by the each and others by the case. "By the third wave of the implementation, we had huge conflicts," says Rittler. "We had to pull hospitals together to resolve the items that were causing the conflicts. Overall, the experience brought us together as a system and yielded significant benefits."

Carrie Vaughan

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