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How Managing Supplier Relationships Reduces Revenue Cycle Costs

Karen Minich-Pourshadi, for HealthLeaders Media, April 14, 2011
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For instance, by working with a sterilization vendor for six years to improve outcomes, Intermountain reduced costs by $2 million per year plus reduced medical waste. Both companies developed opportunities to share information and tracked monthly performance metrics against annual goals. “This trusting relationship has provided excellent benefits for both parties,” Johnson says. 

Another instance where mutual goal setting is paying dividends developed over a four-year period of working closely with a manufacturer of smart infusion pumps: Intermountain reduced costs, increased quality, and reduced medication errors. Both companies committed resources to develop an improved pump featuring more advanced technology. 

In addition, Johnson says that Intermountain has been working with GE for six years to develop an electronic medical record system. More than 160 employees from both organizations are working collaboratively to develop what he describes as a “next level” tool to help clinicians document efficiently and have fast access to relevant information. The mutual goal is to provide even safer, higher-quality care. “This has been a partnership in all aspects of the definition, with vested, long-term commitment, shared resources, and dedication to outcomes measured carefully against vision and goals,” he says. A finished product is expected in the next year or two. 

 Across the country, at 79-staffed-bed York (ME) Hospital, John Phylis, leader of pharmacy services and materials management at the $155-million-net-revenue facility can relate to what Johnson experienced at Intermountain. Phylis already had been head of pharmacy services for about seven years when, six years ago, he added materials management to his responsibilities. Then two years ago the hospital centralized and began to really dig in to its processes.

As with Intermountain, the first order of business was a spend analysis of the purchase order system to determine which vendors were being used the most. It revealed that York was spending 10% to 15% above the industry average for its cath and surgical supplies. It was time to negotiate.

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