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Faith-Based Health System Takes on PPE Manufacturing

Analysis  |  By Deborah Abrams Kaplan  
   November 30, 2022

OSF HealthCare brings mask-making to its network, providing protection for 15 hospitals and jobs for the local community.

For OSF HealthCare, the pandemic brought opportunities for self-sufficiency and greater digitization. Some pivots, such as centralizing pharmacy distribution, were born out of necessity when a distributor closed shop without much notice. But others pivots, such as manufacturing personal protective equipment (PPE) and increasing supply chain visualization through digitization, do not help the immediate situation but address resiliency going forward.

OSF HealthCare is now one of the few health systems directly in the business of PPE manufacturing. Early nationwide shortages led Pinak Shah, senior vice president and chief supply chain officer of OSF HealthCare, to bring production in-house while also offering jobs to the health system's local community. "With Peoria being an engineering town, with Caterpillar and others, we saw an opportunity for manufacturing," Shah says.

Focus on supply chain: Making masks and other PPE

In spring 2021, the health system imported machinery to make face masks and in February 2022 imported more to make N95 masks. The face masks recently received FDA approval for sales, and Shah anticipates receiving approval for the N95 masks soon. The FDA allows the health system to use masks internally under emergency use approval until receiving FDA final approval.

"Everyone struggled during the lockdown," Shah says. Prices were exorbitantly high, with airlift costs. "That's where ROI came in." OSF HealthCare currently runs one run production shift, producing 5 million surgical masks annually and using 3 million to 3.5 million of them. It plans to sell initial surplus through members of its Pointcore Supply Chain Services business. They may add a second shift to produce more masks.

The machinery took 12 to 18 months to design and begin production. "For the community, it's been uplifting," Shah says. The Peoria production shop is in an economically challenged area, and it offers a training program. OSF HealthCare provided the capital investment and raw materials, and the plant provides the property and labor.

OSF HealthCare also became an equity holder in isolation gown manufacturing with Premier and DeRoyal. On the pharmacy side, OSF HealthCare invested in Exela Pharma Services, also with Premier, to mitigate risks with drug shortages, and to bring pharma manufacturing onshore.

Headquartered in Peoria, Illinois, the faith-based health system includes 15 hospitals (10 acute care and five critical access), with more than 2,000 beds. It also has more than 400 clinics, primarily in rural Illinois and Michigan. The OSF HealthCare supply chain uses a centralized model with close to $1 billion in spend, handling procurement, contracting, analytics, and a new distribution center serving the entire hospital system.

OSF HealthCare also owns Pointcore, with several healthcare-related businesses. While some of these businesses are for-profit, including its construction, facilities, and IT services, the supply chain business is not a money-making venture. "The supply chain side is aggregation and lowering the cost," Shah says. Pointcore Supply Chain offers regional contracting services and is an authorized reseller of Premier's enterprise resource platform (ERP) system.

Pinak Shah, senior vice president and chief supply chain officer of OSF HealthCare. Photo courtesy of OSF HealthCare.

New focus on pharmaceutical and med/surg distribution

Since 2019, OSF HealthCare has operated an integrated distribution center (IDC) for medical/surgical supplies. It is now centralizing all pharmacy for its integrated delivery network (IDN) as well. During the pandemic, the pharmaceutical distributor OSF HealthCare used for physician offices filed for bankruptcy protection and closed. "We had to bring up an entire pharmacy distribution center to an IDC in less than a three-week period," Shah says.

The IDC pharmacy distribution will roll out in December, centralizing all hospital pharmacy there. OSF HealthCare will also begin specialty pharmacy operations in 2023. It will run the health system's durable medical equipment (DME) project for supplies going to patient homes. Previously, it was in a separate building.

Eventually, OSF HealthCare will maintain all distribution and logistics, including couriers and fleet services in one facility, moving to total logistics management within a few years. This will make deliveries more efficient, reducing freight and shipping costs.

Digitization projects

In the past few years, the OSF HealthCare supply chain team has been creating "digital towers" to capture supply chain signals and use automation to handle them. The pandemic brought on product shortages, not just with PPE. "We were needing to spend a lot of time with clinicians to make sure we were getting the right products, so our patients were cared for," says Matt McGraw, vice president of supply chain procurement operations at OSF HealthCare.

The first application they're creating is a product conformity tower. "In the past, we would spend hours of analyst time looking through rows and rows of data to determine if we were using this widget, but we were supposed to be using that one," he says. The new digital application pulls in real-time product data from the system, telling them if, when, and where the wrong item pops up in their hospitals, "instead of us spending a lot of time trying to find that needle in a haystack," McGraw says.

The system has not been live long enough to share data, but they aren't looking for hard dollar labor savings. Instead, they anticipate saving on faster product conversions. The system will allow them to see the days of inventory on hand so they can accurately determine the conversion date when changing from one product to another. If they can do that conversion faster as a result, they can save on those costs.

The second tower in development is a periodic automatic replenishment (PAR) digital application that will be used at the hospital floor level, to restock supplies in the storage room. Rather than counting items in each supply room daily, the PAR system will make real-time quantity adjustments, so they need restocking less frequently. This will save on labor costs. The tower is still in development and will be rolled out in 2023.

A third digital OSF HealthCare project is a computer reading of purchase orders coming in via email or fax. This is traditionally completed manually, but the supply chain team is converting it to a machine learning process. The computer will read the emails, obtaining confirmation of when product is coming in.

Clinical integration and standardization in the supply chain

With higher costs in healthcare right now, from labor to products, the supply chain's main focus now is keeping costs to current levels or with minimal inflation price increases. Both Pointcore and OSF HealthCare are trying to lower prices through consolidation. It may be mostly a single source or two-source scenario. They plan to commit 90% to 95% of their inventory to single source products. They are looking for price variabilities and benchmarking with Premier's Service Line Analytics tool.

An OSF HealthCare clinical integration group meets weekly. Traditionally, this group has been comprised of nonpracticing nurses with a business focus, who liaise with clinicians and the OSF HealthCare business side. "We strengthened that group just in the last two months by adding a physician into a full-time role there," McGraw says. He thinks this will help with peer-to-peer surgeon conversations to decrease product variability.

OSF HealthCare is also changing from using value analysis teams at each of the 15 hospitals to having one value analysis team at the overall ministry level. "I think a recession is coming and we need to prepare," Shah says.

Deborah Abrams Kaplan is a contributing writer for HealthLeaders.


Lower shipping and transportation costs by consolidating medical and surgical supplies, along with pharmacy, in one distribution center.

Onshoring and manufacturing PPE ensures greater availability and supply control.

Include clinicians on value analysis teams to decrease supply variability and promote buy-in.

Digitizing visibility into supply levels decreases the manual labor involved with counting stock.

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