How NorthShore—Edward-Elmhurst Health is merging four supply chains into one while tackling warehouse use post-pandemic.
Editor's note:This article appears in the March 2023 edition of HealthLeaders magazine.
Dealing with the COVID-19 pandemic was tough enough for a health system supply chain. But combine the pandemic with three mergers during this time frame, and it’s even tougher. That’s what Brian M. Washa, senior vice president, supply chain management got to do at NorthShore—Edward-Elmhurst Health in Illinois. In the past three years, NorthShore doubled in size and revenue, going from a four-hospital system to nine hospitals. Washa oversees supply chain strategy, operations, logistics, and procurement for them all, plus around 300 clinics.
Washa came to supply chain from a circuitous route, at various times working in healthcare consulting, revenue cycle management, insurance/provider implementation projects, managed care contracting, and value-based care. In 2021, he landed in supply chain full time, though he previously had some supply chain responsibilities at NorthShore, and he was promoted to the system leadership role this year.
Tackling COVID-19 supply chain changes
The supply chain for most businesses and health systems got a lot more complicated in early 2020, NorthShore included. Now a $6 billion organization in net revenue, NorthShore “needed to have that spoke of the supply chain fully designed out with accountability to one person,” Washa said. He is responsible for $1.2 billion in supply and service contract spending.
NorthShore did not have a warehouse prior to the pandemic, instead relying on Medline’s facilities and relationship as its primary distribution partnership. “In Chicago, we have the opportunity to be near Medline’s amazing facilities,” Washa said. However, with the pandemic surge, NorthShore needed additional personal protective equipment (PPE) storage and began leasing a 70,000-square-foot warehouse to store that inventory. It is deciding how to design a consolidated service center (CSC), partly since its supply chain now serves more facilities. NorthShore is researching ways to build out a CSC to potentially house logistics, medical group inventory, sterile processing, mail and document destruction, and pharmacy compounding and/or other pharmacy opportunities.
Brian M. Washa, senior vice president of supply chain management at NorthShore—Edward-Elmhurst Health in Illinois. Photo courtesy of NorthShore—Edward-Elmhurst Health.
Merger brings a new organizational structure
With more facilities under the NorthShore umbrella, Washa said the organization is aligning and centralizing the corporate supply chain. He is now working with an expanded team. “The mergers helped an incredible amount in building the talent bench around me,” he said. Finding supply chain talent was challenging before, but with the mergers, all the talent is rolling up into the organization and he said it is working well. He is proud of the integration and new supply chain organization.
The merged health system facilities are all in the Chicagoland area, though the supply chain teams are currently in different locations. They’re not yet sure where staff members will work in the future, whether at corporate headquarters in Evanston, remotely from home, at some of the nine hospitals, or at corporate centers. “I encourage my team to be open-minded and optimistic while we figure things out,” he said.
The system has settled on a group purchasing organization (GPO) strategy. It is using Vizient and its Captis aggregation group, where members access a portfolio of contracts and supply chain, pharmacy, and other programs for supply chain needs. NorthShore also shifted all facilities to Medline as a single primary distributor.
The facilities are also all moving to one enterprise resource platform (ERP), which will help with integration. “Imagine four different ERPs, four different policies, between HR, finance, and supply chain, four different ways of doing things,” he said. He describes this as a massive project that will go live in September.
Washa considers this integration work and team development as one of his biggest accomplishments.
Another focal point is building up category management. “I am passionate about this,” Washa said. He is working closely with his right-hand person in procurement who recommended building up a strong category management team a few years ago. The category managers are the business arm liaisons to operations, managing business relationships with operations and negotiating contracts, he said. NorthShore has a combined team of 20 category managers, specialists and leaders in this area.
The supply chain team is also working through the contract approval policy system to bring structure to the policies that will then flow through the contract lifecycle management (CLM) system. This should lead to savings and spending discipline across the organization.
With the newly merged organization, leadership expects revenue cycle management and supply chain efficiencies to help NorthShore fund its future, he said. “I think supply chain has stepped up in identifying cost savings,” Washa said. Some changes were immediately implemented, and some are in the pipeline for 2023. That includes vendor consolidation, contract alignment, and product consolidation from the combined facilities’ medical staffs.
Washa noted that the supply chain team relies on the operating room (OR) clinicians and seven different value analysis teams (VATs). Category management partners with them to get buy-in, “with a lot of finessing, a lot of explanations about what is the GPO, what is Captis, what is aggregation, and how this impacts how decisions are going to be made,” he said. They are in the formative stage of this process, but it is showing early good results.
He is trying to do the same with service spending, which eclipses supply spend. The supply chain team approached large service providers to help consolidate vendors for areas such as nutrition, patient transport, facilities, clinical engineering and a few others to get bids. Based on that, the team chose a vendor and now are in the implementation stage.
Making a difference through leadership
Washa does not see his role as creating a new corporate mission, vision, or values, but reinforcing the existing NorthShore messages in staff conversations.
He is proud of the mentorship role he’s had since beginning his tenure at NorthShore in 2002. Many of those he’s mentored at NorthShore have been promoted, and Washa enjoys watching his staff members grow and evolve, moving up the ranks at NorthShore and elsewhere. “I’m proud of promoting from within, building the team, and setting the structure. I’m proud of how we operate, setting goals,” he said. And he tries to make work fun while still taking on significant projects and working toward best practices. “I give my team a lot of latitude to practice their craft under their own style. A diversity of style is important to me.”
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.
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.
Judy Webb-Hapgood brings her clinical and military experience to UW Health supply chain work.
Judy Webb-Hapgood did not set out to work in supply chain. This nurse's winding and complicated career path ultimately led her to be named system vice president of supply chain and support services at University of Wisconsin (UW) Health System in September 2021. Given that she came from another large academic setting, the University of Oklahoma (OU), she was surprised what a huge change it was, she says. Getting to know the UW Health System, where she oversees supply chain for about 85 clinics and seven hospitals, mostly in the greater Madison area, wasn't easy.
"You have to be cognizant of the culture," says Webb-Hapgood. "You have to try to understand not only your leadership, but everyone's uniqueness. Every campus has a personality."
An unconventional path to supply chain
Webb-Hapgood planned to stay in nursing after finishing her studies at OU Health Sciences Center. As a new graduate, she was a first responder at the Oklahoma City bombing site in 1995, working a triage station. "As a brand new nurse, you think you’re going to change the world. I wanted to be out there making a difference," she says. Webb-Hapgood later followed in her father's military footsteps. She joined the Air Force as a nursing officer, signing a four-year contract but staying for 20 years.
It was in the miliary that Webb-Hapgood gained experience in leadership positions. She was named the Air Force's medical contingency planner after 9/11 for part of Southern California, and later moved to Washington, DC, acting as chief of staff to the Air Force surgeon general. Later she worked for the secretary of the Air Force, and subsequently became a military hospital administrator. During the war in Iraq, she began doing medical procurement domestically, to cover for those who were deployed. Finally, this was her start in supply chain. "I did too good a job, and took over almost all the medical contracting," she says.
After moving 15 times in 20 years and wanting to raise her three daughters in one place, she retired from the Air Force. But obviously Webb-Hapgood didn't retire for good. She took an entry level contracting job in the private sector for a payer. "I liked contracting. It's fun to negotiate," she says. Webb-Hapgood's portfolio grew and she began negotiating more complicated contracts. Then she was offered her dream job, moving back home to Oklahoma to be in charge of procurement for all OU campuses. "I really got to work across a large scope," she says, including buying and selling aircraft and working with athletics. "I was doing contracts that generate money rather than paying."
One highlight was negotiating with Fortune 500 companies on a regular basis. "It was like Christmas if you could go back to the president of the university to say, 'Hey! Look what I got for us!'" She planned to stay at OU and had to be convinced to interview for the UW Health role when a recruiter came calling.
"As much as I loved the academic operational side, I missed interacting with doctors and nurses, and getting them what they need to take care of the patients," Webb-Hapgood says. She now oversees the health system's supply chain, including contracting and sourcing, supply chain analytics, process improvement, and clinical quality value analysis. She also oversees support services, including culinary and dietary services for inpatient and outpatient, mailroom, transportation, courier services, sterile processing, and health technology management.
Pictured: Judy Webb-Hapgood is system vice president of supply chain and support services at University of Wisconsin Health System. Photo courtesy of University of Wisconsin Health System.
Taking a broader view and focusing on partnerships
Given the supply chain disruptions that occurred with COVID-19, Webb-Hapgood notes that the environment is now incredibly volatile, changing almost daily. "I read auto manufacturing articles," she says. "Those items used to never truly affect the healthcare supply chain." But now things like chip shortages can impact health systems. "You now have to know what's happening in supply chain outside your purview and keep up with it."
Webb-Hapgood is also tracking the ports and doing a better job staying in close touch with vendors and other partners. "We're working closer with them than we ever had to before," she says. She works with her distributor, Medline, on port issues, when supplies need to be diverted to a different port then trucked to Chicago and Madison. "We are coordinating and talking through that and reassuring my providers that we are mitigating or putting emergency plans together," she says. The supply chain didn't do that before the pandemic. "Working closely with partners is not a luxury anymore. You have to if you're going to survive and have flexibility."
A forced reset for processes
The pandemic forced the supply chain out of its fixed ways. Previously, processes were always done a certain way. "The pandemic pushed us to reevaluate our processes," she says. The supply chain teams got complacent or stagnant, thinking inventory would just show up. There were no back-up plans. The pandemic encouraged the supply chain to get creative, she says. If a part couldn't be procured, the supply chain team looked into making it on campus.
While the early days of COVID caused health systems to fend for themselves to survive, the second round of COVID allowed systems like UW Health to look around and help others, including partners, small suppliers, and other hospital systems. They worked with a local Madison-based coffee vendor that was experiencing trouble with shortages and inflation. The vendor said they needed to raise their prices as a result. Webb-Hapgood asked how UW Health could help. To keep prices down, the coffee vendor wanted to purchase beans in bulk but needed warehouse space, which was hard to find and not affordable. Only needing enough for a few pallets, Webb-Hapgood offered them space in UW Health’s new warehouse.
When she was at OU, Webb-Hapgood offered help to community hospitals 100 miles away. "We had enormous buying power. They couldn't get anything," she says, and what they could get was more expensive than what OU was paying. Webb-Hapgood started a consortium so smaller facilities could piggyback on OU's buying power. That increased OU's volume and drove pricing down even more. It was a win-win.
Little projects can make a big difference
Webb-Hapgood is trying to make ordering easier for staff members. One laboratory found the process to order regents they used daily or weekly time-consuming and cumbersome. Someone would place a requisition, get it approved by multiple people, then finally order it. The process was delayed if someone was out of the office. The supply chain team worked with the vendor to get SKUs for the regular orders, including for bundled items, so that when the lab wanted to place its regular order, it could happen in one click. The team included IT and accounts payable staff on the project. "The entire lab department thought we were the greatest thing since sliced bread," she says, and they now get these supplies in 48 hours.
"We have to remember that there are staffing shortages everywhere. All staff is being asked to do more with less," she says. By making it easier to order, and having it delivered directly from the vendor to the clinic, bypassing the warehouse, "imagine the time I've given back to staff," including the transportation and warehouse teams.
"As a nurse, I used to hate supply chain," says Webb-Hapgood. "Now, I look back and laugh that I'm in supply chain."
As one of the country's largest public hospitals, Parkland must make every dollar count, with a high percentage of uncompensated care and a large patient volume.
"Just-in-time works when just-in-time works, but it doesn't work a lot in the healthcare space," says Pamela Bryant, senior vice president and chief supply chain officer at Parkland Health. This was one of the lessons Bryant took from the COVID-19 pandemic, a disruption that permanently changed some of this public health system’s processes. While Parkland Hospital was established in 1894, its current facility is relatively new, built in 2015. It was designed with a just-in-time supply chain model, which was not working well even prior to the pandemic. "We had inventory everywhere, in different locations," she says.
The health crisis accelerated Bryant's plan to build a distribution center and consolidate the inventory. As one of the top 20 public hospitals in the country by size, Parkland Health in Dallas has close to 1,000 beds and 15 outpatient clinics. Bryant is responsible for all aspects of the Parkland supply chain, including procurement, strategic sourcing, logistics, distribution, vendor management, equipment and asset management, and informatics. She does so in a system that collected $2.8 billion in revenue last year but provided $1.2 billion in uncompensated care. Bryant shared four ways that she approaches the Parkland Health supply chain.
1. Creating new processes due to the pandemic
Bryant came to Parkland in 2018 with a vision to build a distribution center at some point. COVID expedited that process. "We needed somewhere to put the volume because we needed so much," she says. The distribution center is the main inventory hub for bulk supplies, where staff breaks them down into the lowest unit of measure (LUM). They have smaller supply rooms which Bryant calls "clean rooms" on each hospital floor or unit, like the emergency department (ED). She wanted a system that would streamline inventory and not duplicate it.
Staff requisitioning more specialty products no longer store those items separately. The global supply now manages it all. "People are more aware of supply chain because of the pandemic," she says, making it easier to get approval for initiatives like this.
Bryant is increasing the department's use of information technology, with analytics informing her staff of product utilization and to help understand if the periodic automated replenishment (PAR) levels are set correctly. They use analytics for hospital floor utilization to understand when to restock the clean rooms, and they also monitor stock levels with radiofrequency identification (RFID) technology. Parkland will also be adding a warehouse management system soon to better manage inventory levels at the distribution center.
The prime lesson Bryant learned from the pandemic was that relationships were important, and if you didn't have relationships, you would be left behind when you needed something. The department formed more local relationships with small business vendors that were able to pivot, be flexible and create new products for them. Parkland maintained those relationships, like with local vendors that began providing gowns during the health crisis. Relationships with staff are also important, ensuring they are fully engaged. She frequently shares with staff why their roles are important and how their actions fit into the bigger picture. The pandemic also made Bryant think more about not using sole source sourcing and the risks of procuring all products internationally.
2. Moving past COVID: Top priorities going into 2023
As the health system moves out of the pandemic phase, Bryant is looking for ways to gain efficiencies and see which processes from the pandemic are sustainable. During COVID, federal funding helped cushion them, but that funding ended. "The question now is how to drive savings again," she says, noting that savings is a small component of what the supply chain function brings to the table. "We bring an efficient supply chain that is well run and allows you to reduce costs by eliminating waste, and ensuring you have the right thing at the right time and the right price point." Her goal is to maintain efficiency gains and incorporate them by managing inventory, and finding cost savings opportunities in reasonable ways.
Most health systems have already captured the low hanging fruit in cost savings, she says, but she still sees opportunities to standardize and incorporate technology to improve the system. Most commodities like bandages are already standardized, but physicians are learning how to standardize through value analysis teams.
Bryant is also broadening her view in hiring, given the difficulty finding new staff members. "Now, you may have to look at different type of staff," she says, and that means looking outside of healthcare to other industries. "If you're working in logistics, if you're a leader at UPS or FedEx, that translates over. If you’re in a retail operation at CVS, it translates over into this space," she says. "Looking for different industries can be beneficial in the healthcare setting."
3. Managing patient volume spikes
Parkland Health sees a lot of patients. That includes almost 1.2 million outpatient visits in 2021, 205,548 ED patients and 32,239 adult in-patients (which excludes those observed but not admitted to the hospital). Bryant says that the hospital is often filled 99% to capacity. The facility treats large homeless and uninsured populations, and is a Level 1 trauma center, treating the most serious trauma injuries.
With a fluctuating volume, staff may have to open additional units or "pods" sometimes twice a month, servicing them with supplies. They may double the floor capacity to treat more patients, so the clean rooms must double their contents as well. "I have to logistically move my folks around to cover any space that's opening [to provide enough supplies for the clinicians]," she says. These volume spikes impact inventory management, procurement, logistics, and backfilling supplies.
Their enterprise resource planning (ERP) system has PARs built in to replenish stock levels and reorder. To manage the spikes, the department built templates to help staff quickly and accurately know what stock to deliver to the clean rooms.
In the warehouse space, Bryant's team is looking into adding robotics to work more efficiently and reduce labor costs. "Labor is hard to find and this will help us ease the worker shortage and make us more efficient."
4. Diversity, equity, and inclusion efforts
Bryant runs the supplier diversity efforts and has a supplier diversity team, to bring in small businesses and minority- and women-owned business enterprises (MWBE) into the procurement and bidding process. Vendor information is collected in the supplier portal detailing their capabilities, so when Parkland needs a request for proposal (RFP), they can send it out automatically to qualified vendors.
Even the non-minority businesses must set up parameters around MWBE, with a plan for how they incorporate MWBE into contracts. Most vendors subcontract parts of the work, and this requirement ensures vendors know that inclusion is expected. Parkland provides contractors with a list of MWBE subcontractors during pre-bid meetings. They also introduce MWBE subcontractors to suppliers for construction projects, allowing all parties to interact and understand the project. Her department works with Hispanic, Black, Asian and women's business councils, chambers of commerce and the national Minority Business Development Agency. Twice a year, Parkland trains small and MWBE companies how to do business at Parkland, detailing what to include in the supplier portal registration, sharing what they need to know about working with Parkland, and reviewing upcoming projects.
Bryant's supply chain team has a goal for the percentage of spend per project with MWBE suppliers, and they track each project. They also track group purchasing organization (GPO) spend in the MWBE area. Her director of supplier diversity sits on the GPO council for this. As a public institution, the state requires competitive bids. "We want to make sure small and minority-owned businesses are at the table," she says.
Calvin Wright leads the cancer center's supply chain efforts, which also includes ramping up use of technology and data analysis to better support high reliability care.
Resiliency planning is an exercise all health systems should have done before the COVID-19 pandemic, but it is especially important now. MD Anderson Cancer Center, based in Houston, continues to engage in this process, with scenario planning and involvement in a healthcare industry resilience collaborative that works with suppliers on end-to-end supply chain resiliency. That includes understanding where manufacturers' plants are located. The health system can develop backup plans in case of disruptions in places such as China or Puerto Rico, temporarily losing some suppliers.
With the potential for hurricanes in Houston, this type of planning is important. "At any time, one of our suppliers could be knocked offline. We need to put things in place to allow us to continue to provide care," says Calvin Wright, MD Anderson's chief procurement officer, who oversees the entire supply chain.
MD Anderson is unique as a facility treating mostly immunocompromised patients. While all health systems clamored for personal protective equipment (PPE) during the early months of the pandemic, MD Anderson felt the need acutely. They were already contracting for masks with a historically underutilized business in Texas, a company that received a lot of attention during the crisis. At the time, the company was only selling to a few hospitals, Wright says. Though the mask crunch ended, "we've stuck with them because we felt it was the right thing to do. Some other suppliers were cheaper because they were manufacturing offshore." MD Anderson did not invest in the manufacturing company as some other large health systems did, but the cancer center continued showing its support through purchase orders. "I think we will start to invest in suppliers where we think it's appropriate. We do with efforts in pharmacy," he says.
Technology challenges at a large health system
Prior to joining MD Anderson in 2018, Wright worked at a health system with 23 hospitals and 26,000 employees. But these hospitals were small or medium-sized. In comparison, MD Anderson has one hospital with 743 beds and 23,000 employees. Its five outlying clinics are also large. "We're full most of the time," Wright says, and the system's annual gross patient revenue is $10 billion. "You don't find many hospital organizations like that."
During COVID, Wright's team put together dashboards to show inventory of days-on-hand for vital PPE. They also held daily briefings across the organization. Now that the crisis is over, the supply chain department is focusing on its operating model and technology. "People, process, and technology. We have to align all those components if we're going to be effective," he says. They hired a consultant to help them start this modernization process, which includes information systems upgrades.
Wright says they are also looking at different skillsets when hiring staff members, to ensure they are aligned with this operating model. They will hire more analysts trained in data and visualization tools and predictive analytics, which came in handy during the pandemic. "They will have to be more analytical, use more technology," he says, as the executives prefer charts and other visual aids. As more technology is integrated into the operating model, its supply chain will increasingly be technology-driven.
The department will also focus on the process, demand planning, and how supplies are delivered. That includes changing how academic faculty and physicians send demand signals to the supply chain. The data will be used to determine the best time to replenish supplies, when they have enough on hand for surgery, procedures, and patient care. Technology will also help them continue to improve predictability in operations, concerning supplies and services.
"We have to work smarter," he says, as supply unpredictability is difficult to manage. "We're keeping up, but it takes an hour meeting with a multidisciplinary group every time we have a supply issue." They use manual efforts such as phone calls to discuss how many patients are scheduled and match this up with days-on-hand for inventory and expected delivery dates. "We feel we can do that more seamlessly."
The MD Anderson supply chain department is also evaluating the feasibility of building a consolidated service center (CSC). It would be the center of supply chain operations to modernize its supply chain and would include services such as medical/surgical distribution, distribution, regular/specialty pharmacy, some food distribution, and blood donor operations.
Wright would also like to implement a CSC warehouse management system to connect inpatient and research operations to send demand signals to the supply chain. This would use predictive analytics to anticipate supply needs for the upcoming weeks. It would also help with scenario planning, ensuring smooth operations if there is a delay in delivering needed items. "We will build that technology and process into our new operating model and make sure we have the people able to do that."
Partnering with clinical operations
The supply chain team is increasingly partnering with the clinical operations teams to support high reliability care, with an emphasis on providing safe care in all areas. "We partner with our clinical operations team to mitigate as much risk around supplies as possible," Wright says. That includes paying particular attention to expired and recalled supplies. His understanding is that MD Anderson gives more chemotherapy than any other health system in the country. The supply chain team works with the clinical team to eliminate or decrease the number of chemotherapy spills and has developed unique products with manufacturers to help prevent spills.
While the MD Anderson supply chain used to be transactional, they have made it more strategic in its partnership, using metrics to measure success. The organization has a daily readiness briefing that covers staffing issues to supplies to serious safety events, with each major segment of the organization reporting.
Departments such as diagnostic imaging, radiation oncology, pharmacy, procedures, and therapeutics report on a high level if they have what they need, then dive deeper into issues such as contrast media, where there has been a global shortage. They may discuss solutions, such as clinicians developing practice changes to reduce utilization. The department will also share when contrast shipments are arriving and discuss how many patients are scheduled who need contrast. "It helps give the supply chain department breathing room, so if we miss a delivery, we're not in terrible shape." Dashboards also help monitor the situation. "In my 30 years of experience, I have never seen a supply chain as integrated into operations as at MD Anderson," Wright says.
A broader look at DEI
Wright's biggest passion, he says, is using his responsibility and role to improve the economic well-being of the communities MD Anderson serves through diversity, equity and inclusion (DEI). "It goes beyond supplier diversity to economic inclusion, especially for underserved communities," he says. He began doing this in a previous role at Mercy Health in Ohio. When relocating the Mercy Health corporate offices, Wright's CEO challenged him not just to look at suburban neighborhoods, but to consider placing the office in an underserved community. The office with 1,000 employees ultimately moved to an economically depressed area that was 90% African-American, with a median family income below $30,000. Mercy Health spent 25% of the construction dollars with local minority and woman-owned businesses. "We didn't create many new jobs; however, 1,000 people had to find homes to live in and places to eat lunch every day."
He follows the mission of the Healthcare Anchor Network, in building more inclusive and sustainable local economies. "The premise is that healthcare organizations are normally the anchor of a lot of the communities they're in, but they're not optimizing their spend in a way to help the neighborhoods," he says. Directing spend toward local vendors creates opportunities that lead to jobs, health security, and caring for families. Allowing a local vendor to process laundry sounds simple, he says. But the laundry service employs 15 to 20 people who now have a salary, health insurance, and don't show up to the hospital needing their care written off. This can improve the hospital revenue stream as a result.
As a state-owned institution, MD Anderson must report on its goals for historically underutilized business programs to the state comptroller's office. The cancer center will spend $4 billion in construction over the next few years, and it is trying to direct a lot of that money to historically underutilized businesses. It also allocates $1.7 billion in nonlabor spend each year.
"I believe that if you really improve the economic well-being of the community, it improves everything, including the social determinants of health," he said.
The shared services model empowers clinicians with data and tools to make the right supply chain decisions, along with a new resiliency effort adopted just prior to the coronavirus pandemic.
Amanda Chawla has worked in healthcare her entire 20-year career, but she does not come from a traditional supply chain background. Her work in for-profit and nonprofit organizations, clinical trials, private practice, frontline patient care, and the operating room, and in operations, managing clinical and nonclinical departments, prepared her for the varied responsibilities in supply chain. "I settled in the supply chain field because of the impact it really had in healthcare and in any organization," says Chawla, the chief supply chain officer and vice president at Stanford Health Care, Lucile Packard Children’s Hospital and Stanford-Valley Care.
This varied background "adds a level of appreciation and value when you’re managing an organization. You can understand different points of interest," she says.
While the three hospitals are independent legal entities, the organizations rely on central shared services. Stanford's supply chain department influences $2 billion annually in nonlabor expenses for the three hospitals, 96 clinics, and about 2.5 million outpatient visits.
Focused on communications and relationships
Healthcare is a people business, she says, and "as supply chain leaders and executives, our job is to service our team members and ultimately the healing hands for the patients." The connection point is people, which is why communications is pivotal. "Communications is a fundamental pillar and a part of my strategy," Chawla says. Her team includes dedicated personnel whose primary job is to focus on communications, people development, and training.
The department publishes traditional newsletters, but also produces podcasts for the Stanford Health Care supply chain team. They’ve covered topics such as Stanford’s supply chain vision, what category managers do, what the receiving staff does, women leaders in supply chain, Black Lives Matter, and other topics impacting the workforce or society. "The response is overwhelmingly positive," she says. "When you think about the frontline staff member, at least in the warehouse, they may not have the time or ability to go online and read news articles or emails. This is another avenue in how we communicate with our team members." It’s one reason for the department’s high employee engagement scores, which are assessed quarterly, she says.
To foster good communications, Chawla meets regularly with other top executives at the three Stanford hospitals, the adult, pediatric, and community hospitals. With her peers, such as the chief medical officer, chief financial officer, and chief nursing officer at each organization, the informal agenda varies based on the stakeholder and supply chain needs. "They are my customers," she says. "It’s an equal opportunity to hear from colleagues about what is important to them, what keeps them up at night." Her staff conducts regular check-ins with their peers at the hospitals as well.
Developing a resiliency team
Just prior to COVID-19 hitting, Chawla's department began a risk matrix and disruption mapping process to anticipate possible bumps that could impact the healthcare supply chain. The pandemic accelerated that process and the creation of a resiliency program. The department developed a resiliency model that included traditional warehouses, strategic stockpiles, and a dedicated team to review market developments using internal and distributor data to understand supplier liabilities.
The resiliency program included a plan for a clinically integrated supply chain. The goal was to gather and analyze information proactively, to avoid needing to be reactive. The supply chain team often joins daily nursing or operating room huddles to understand the organization's day-to-day details.
For the resiliency program, Chawla formed two groups: a clinical equivalency work group and a clinical utilization practice work group.
The clinical equivalency group is cross-functional, proactively and reactively looking for acceptable alternative products for those that are disrupted. The clinical utilization practice group looks at products that are disrupted without good market alternatives; they develop alternate conservation and utilization practices. "It’s not like I get advanced notice that this product is going to run out in 60 days," she says, "so you have to have that part of your supply chain streamlined and continuously improved. We’ve done a lot of work with performance improvement of our business practices to make this part of the supply chain more agile and more responsive."
The resiliency program now has two funded medical directors of supply chain, staffed by a surgeon and an interventional radiologist. They chair the committee providing value analysis for physicians. A nursing and ancillary central committee is run by the assistant chief nursing officers. "We want clinicians to be empowered to make the right decisions," Chawla says. "Our job in supply chain is to provide the research, the perspectives, the analytics, the tools, and the data to be able to make informed decisions."
The other clinical leadership unique to Stanford is the supply chain research group, she says. It sometimes engages residents and students to work on supply chain research projects such as a cost-savings initiative or operating room supplies effort.
Leaning on technology and data to optimize the supply chain
Another Stanford focus is accelerating technology transformation work that was not driven by the pandemic. Since opening the new adult hospital in 2019, Stanford has used robots to deliver products throughout the hospital. The department also introduced an radio frequency identification (RFID) system to monitor supply usage. The RFID readers are on the hospital floor cabinets and in the operating rooms. Rather than placing individual tags on commodities, the bins or Kanban cards are tagged, generating a reorder when the bins reach the midpoint of supply use. Nursing time for supplies is now only needed for quality control, rather than reordering.
The system gives the supply chain department location-based data to know the nursing unit experience for percentages and timing for products with empty bins. "We've got good data from a clinical user standpoint of what's going on there, with the RFID technology. This not only helps with automation, but it also gives us greater intelligence to be able to service our customers," Chawla says.
They are taking the technology to another level with clinical integration in the OR. Chawla uses the self-checkout at the grocery store analogy. The scanner in the operating room means the nurses can scan rather than transcribe product inventory numbers to charge them to a patient account.
With analytics, they are working on periodic automatic replenishment (PAR) health and PAR management, to actively adjust inventory levels based on hospital trends. "It's very hard. I don't think any hospital has necessarily figured out how to manage consumption of commodities," she says. Commodities aren’t charged to the patient, but rather to a floor or a cost center. This data is used for demand planning and forecasting, and the team is working on reports and tools to provide insights on not only inventory on hand, but also to project when the inventory will run out. By connecting that to the inventory coming in, this gives insights to the resiliency team and supply shortages team.
"We are very passionate about taking the hunting and gathering out of supply chain and being able to understand and automate the supply chain to make it easier for our frontline staff members," she says.
Mark Welch has been on the Novant Health supply chain team since 2005, and he was able to make several changes such as lowering procurement staff turnover and achieving higher savings levels after rising to the senior vice president of supply chain role in 2015. Welch continues juggling a number of initiatives while overseeing the entire health system’s supply chain functions, with more than 800 locations, including 15 hospitals in North Carolina.
Here are five ways that Novant Health is innovating its supply chain.
1. Supplier diversity
Novant’s supplier diversity program is not new – it's been around since 2006. But it received a boost in the past few years after adding an executive-level position to oversee it. "It took from 2006 to 2019 to surpass $1 billion in expenses with the supplier diversity program, which seems like a long time but is actually pretty good," Welch says. They have already crossed the next half billion mark, which took around three years. This year, they will likely spend $180 million with diverse suppliers.
Sourcing managers have goals for supplier diversity spend for tier 1 suppliers, which are direct suppliers. Team members speak to outside organizations such as the Latino Chamber of Commerce or Black, Asian, veteran, and LGBTQ business resource groups (BRGs) on how they can support Novant's diversity sourcing efforts. Last year, they asked the BRGs to each recommend several vendors that Novant could use.
One reason for the growth in spend is that Novant no longer requires vendors to serve the entire health system. This allows Novant to use smaller regional vendors, which can help build the businesses. Novant also asks their vendors to report their tier 2 spend, if they know it. "What good does it do the community if we have a tier 1 supplier who doesn't use diverse suppliers?" Welch says. He wants the Novant suppliers to also help grow the business community.
This approach isn't just altruistic. Novant hopes it engenders consumer loyalty to the organization. "With our demographics, it makes sense," he says. "The majority is the minority in most of our markets. We try to represent the population that we serve."
2. Changing delivery patterns
About 80% of Novant's inventory is stock items and most goes directly to the warehouses. Some specialty nonstock items that aren't typically carried in the warehouses due to low volumes such as knee implants may go directly to the hospitals. Novant is starting to bring a higher percentage of all supplies through the warehouses, both stock and nonstock, to free up the congested hospital loading dock area. The loading docks also receive food, mechanical parts, office supplies, and other items. "There are just too many people running around and things are not being handled correctly," Welch says. Plus, there is a lot of employee turnover in this area. "It doesn't stop. It's like water dropping on the forehead, it's torture in my mind," he says.
He wants to organize it for better flow, providing a sense of calmness for those in delivery and receiving. This won't necessarily reduce staff numbers, but some might be transferred to the warehouse, and they will all enjoy their jobs better. "They can structure their day differently," Welch says. By creating a more controlled environment for product handling, Novant can better track products, receiving, tagging, and deliver them to the floors.
He also slowed the order frequency to decrease the constant deliveries and stress levels. With the Amazon mentality, staff members were frequently ordering small quantities of items based on clinician demand, overwhelming the staff. "Stop ordering stuff and it will stop coming in," Welch says. "We were creating our own problem." They have three-, five- or seven-day periodic automatic replenishment (PAR) systems for stock items. "Now, we just have to build that in the formula on our reorder points." Nonstock items might now take an extra day to receive, but they have not received complaints from the end users. Making this change was initially a hard sell, but it's worked out. Even Amazon has switched, so that Amazon Prime deliveries are not necessarily guaranteed for the next day, he says. Amazon realized it was efficient to do this, he says.
3. Value-based thinking
Welch went from a priced-based mentality when working with vendors to value-based thinking. "It's what we can we do within our supply chain channels to reduce cost to have better value," he says. He commonly asks vendor sales executives about their goals and how they get rewarded, whether it's based on revenue, profitability, or a product line. In turn, he tells them how he's compensated, based on savings and quality. The sales executives are often surprised Welch shares this information. He then tries to work with them to make their sales goals while doing what is best for Novant. "You can be open and transparent with your vendor community, and they'll give you a win."
By giving a requested discount, Welch might agree to ask his sourcing team to promote their product to grow the company's market share, if it's a good fit. In turn, he wants the sales executives to go back to their company's pricing committee and fight for Novant's ask.
Welch also promises the vendors contract integrity. He will agree not to ask for contract changes while it’s in effect, and he will then ask for a lower price up front. Some health system executives will ask for discounts soon after a contract is signed, if another vendor offers a lower price. By sticking to his commitment, Welch gains trust and a better relationship.
4. Turning supply chain staff into SMEs, and clinicians into advocates
Before Welch took over as the top supply chain leader, about half of the 10 sourcing managers would leave each year. That was because they would constantly be taking over new service lines or product categories, learning them, trying to identify savings, and then getting switched to a different one. Now the sourcing managers have portfolios such as cardiology, and they become and remain subject matter experts. He hasn't lost a sourcing manager since, other than to promotions or other internal moves.
Welch then introduced the physician leaders to the sourcing managers to form a relationship. "Now, we have a physician partner in every one of those service lines," he says. When a physician is trying to buy supplies that aren't on contract, the sourcing manager can ask the physician leader to talk to the doctor about it. The supply chain team also shares data with physicians such as the cost of supplies per case, using physician names. They started off doing it anonymously, but the physicians asked for the identities. "They know who they're competing against, if they're competing," Welch says. They also ask what they need to do to lower their costs, which can lead to a preference card discussion. The physicians ultimately make the supply decisions based on data.
Welch created a clinical variation reduction team to look at how variation affected spending. He worked with the chief medical officer (CMO) to assign different physicians to the team, and they created a strategy based on data. With 1,800 affiliated physicians, they have plenty of talent to choose from for the teams. There is risk in reducing the number of vendors. While there's the potential to save millions in one category, eliminating a vendor could result in physicians leaving if they can't use their preferred products. This can lead to a revenue loss instead of savings.
Welch may involve the CMO to deliver the message when making higher stakes vendor changes, especially for doctors who are not employed by Novant. The CMO can explain that even if the hospital savings don't benefit the doctor, the hospital buys capital equipment for them, keeps the doors open, and saving money is the right thing to do for the community. He shows how the savings will be spent to benefit clinical care.
Novant just announced it is beginning to use long-range drone deliveries to deliver products from its Kannapolis, North Carolina, distribution center. It is working with drone company Zipline. They're doing research on drone capabilities and how the service can help the health system. "The issue is you have to get beyond the visual," Welch says. "Zipline is now able to do longer distances and not have a visual during the entire flight, not having someone watching the entire time."
Novant conducted a pilot project in 2020, and the health system received Federal Aviation Administration approval for contactless delivery of personal protective equipment and emergency supplies. They plan to use drones now to deliver specialty medications to patients.
After overseeing the 2019 BSMH merger, Dan Hurry built Advantus Health Partners in 2021 to run the health system's supply chain, adding a nontraditional revenue stream offering the service to others.
With 50 hospitals and 1,200 nonacute locations, Bon Secours Mercy Health (BSMH) has struck out on its own for supply chain solutions. Its goal when forming Advantus Health Partners was not just saving money and adding value to its own health system, but adding a nontraditional revenue stream by bringing these services to other health systems. After a soft launch in 2021, and an official launch this year, Advantus is doing just that.
Dan Hurry has been an integral part of the transition. He was chief supply chain officer at Mercy Health for two years before it merged with Bon Secours, taking over the leadership role for the new organization. And he is now president of Advantus and chief supply chain officer of the Cincinnati-based health system, which is the fifth largest Catholic health system in the United States and in the country's top 20 largest health systems. The ministry includes hospitals in four states, with nonacute facilities in additional states.
Why launch a supply chain solutions company?
Advantus is a supply chain solutions or healthcare solutions company, which includes a group purchasing organization (GPO), Hurry said, and it wholly runs the BSMH supply chain. Before the Advantus launch, BSMH worked with Premier. "Everything was locally managed, which is not a bad thing, but the optimization was not really there for how to leverage the system," Hurry said. After the merger, the supply chain team standardized 12 product categories, reducing SKUs by 44% and decreasing the number of product manufacturers from 250 to 48. They then began focusing on the technology, standardizing the enterprise resource planning platform across the full ministry, Hurry said, providing clinical integration and transformation. They also optimized the pharmacy solution to add a supply chain focus to how they managed that side of the business.
"Even pre-merger, we had discussions around whether we should be looking at supply chain solutions internally to optimize what we were already doing, rather than having another layer of support in a traditional GPO," he said. With the GPO, they paid fees but did not see the value, he said.
Advantus focuses on two strategies: taking full control of the supply chain to eliminate the middle layer and providing this service to other health organizations.
The first strategy revolves around gaining value. Hurry estimates that when working with the GPO, BSMH was still performing 75% to 80% of the work, including negotiating vendor pricing. The GPO offered a price, but Hurry said that BSMH could negotiate a lower price. The GPO provided contracts and agreements members could sign up for, including terms and conditions, which was helpful. But Hurry saw a gap in the industry's supply chain support model, and saw a way to align manufacturers with supply chain solutions operations.
"We knew we could make the switch [to their own solution] without any pain points. We could optimize the value equation by having good, strong partnerships in place, rather than the traditional model, which is to try to be everything to everybody," he said. "We lead with clinically-qualified decision but choose the right partners in those scenarios to drive more value for patients and caregivers in our business model."
For the second element, Hurry said Advantus is cascading what it does for BSMH to other healthcare provider organizations. Regulations required them to put a GPO in place to sell their services and extend the contracts commercially. "But we actually lead with our operational engine and ability to put FTEs in place, manage the business, transform models, and handle it," he said. Their back-office functions are modular and nimble by design. The leadership model remains constant, and new staff members will be added based on contracted health system needs.
So far, the Advantus model is performing well, and they are ahead of their goals and business plans. That plan did not include having any commercial agreements in 2022, but they have two live agreements now, and several more about to be executed. And there's another dozen in the pipeline, with all health systems coming to them via word of mouth, Hurry said.
Forming strategic relationships
Many health systems made big supply chain operational changes during the pandemic, as global sourcing, manufacturing, and logistics were upended. The pandemic reinforced Hurry's theory and belief that the future of the healthcare supply chain is operationally oriented. "From day one, we had operational alignment with finance, operations and clinicians, and we never missed a beat on how to manage through," he said. The pandemic was difficult and still has a painful ripple effect, but BSMH's structure did not create much of a challenge. "If anything, the pandemic highlighted the need for more sophisticated supply chain organizations."
Advantus is working directly with manufacturers and has a strategic relationship with its distributor, Medline. "Medline is the wheels under the product for us," he said. "They continue to use their channel consolidation expertise to move more product through their distribution." They provide operational efficiencies such as using fewer trucks, consolidated invoicing, and the procure-to-payment cycle.
Since the merger, Hurry also helped build a team of clinical supply chain leaders, led by Dr. Jimmy Chung, the new chief medical officer who partly focuses on supply chain optimization. Chung's clinical team includes 45 people, including surgical navigators with operating room experience, service line leaders, and clinical resource managers (CRMs) who help with governance, decision-making, education, development, deployment, and managing through changes.
This structure has brough tremendous physician alignment across the ministry, Hurry said, with better insights on how to optimize the supply chain. They used to use around 50 spine product suppliers, and now use fewer than 10 after a six-month review with the physicians across the organization. Involving the clinicians "gets rid of the stigma that supply chain are bean counters and they don't care about quality," Hurry said. They lead with clinician involvement on decision making and governance on supply choices, and the supply chain teams make the best deals based on clinician preference.
Looking toward the future
Hurry has been in the healthcare supply chain world for a decade, but in the general supply chain field much longer. Comparing supply chain in healthcare to other industries, he said that healthcare is very different, especially the digital aspect. "The technology is more robust outside of healthcare," he said. The healthcare supply chain does not use consistent language, which is a hurdle. Grocery and retailers have UPC codes adding to the consistency, but that is not the case with healthcare. "We have to optimize and trick the system to make the language feel consistent."
This makes it difficult to draw insights and actionable analytics from clunky and outdated data sets, he said. BSMH set up an insights team in 2021, which Hurry differentiates from analytics. "Many can run analytics, fewer can run insights." With the opportunity to use fully remote personnel, he has built a team across the country, complemented by the clinical team.
One project going forward is looking at the purchase service space, which Hurry said is "chaotic." It's not optimized or organized, and benchmarking is minimal in the United States and across that space. "We need to look at that world differently," he said.
Building a system-wide approach to supply chain operations requires data, technology, and good vendor relationships.
Motz Feinberg started his new vice president of supply chain role at Cedars-Sinai at an interesting time: June 2020, a few months into the pandemic. He not only had to jump in during the PPE crisis, but also as Cedars-Sinai was evolving as a larger, more connected health system.
"I was brought on to build out the health system-wide capability," Feinberg says, overseeing the end-to-end supply chain for four primary hospitals with more than 2,000 beds, and a medical network of more than 200 physician offices and 14 ambulatory surgery centers. Feinberg's team is charged with strategic sourcing to deliver patient care to all facilities and units, responsible for analytics, contracting, analysis, logistics, and warehousing.
While he came from Kaiser Permanente, Feinberg's prior experience was outside of healthcare, managing supply chains in industries ranging from aerospace to confections. "The supply chain in healthcare is probably where supply chain was in other industries 20 years ago," he says. "It hasn't matured at the same rate because there wasn't a need to."
The pandemic provided that need, and health systems nationwide pivoted quickly to meet the demand. "Across healthcare, we're all here for the same mission: to ensure patient care," he says. To keep eyes on the mission, Feinberg shares an aerospace analogy with staff: aircraft on the ground (AOG). When a plane is grounded and needs repair, it can't make its flight schedule or production delivery date until that repair is completed. The occasional missing parts cause a delay, and aerospace staff scramble to make sure that AOG is taken care of, he says.
In the hospital, the patient is the AOG. Missing supplies mean delayed care, and the need for these supplies is daily, not occasional. "We need to make sure we are doing everything to take care of them so they are not in the hospital longer than they need to," he says.
The scramble to ensure available supplies creates a different dynamic in healthcare, he says, one allowing the organization to innovate quickly. With supply chain problems "in other industries, the only thing you risk is revenue loss," while in healthcare the patient is at risk.
Looking at the big picture
The Cedars-Sinai supply chain's top priority is to "feed the beast," Feinberg says. If the hospital needs are not met, the supply chain team is not doing its job. "This whole process we developed, and the supporting infrastructure, data, and communications paths, they're all about ensuring we're feeding the beast."
He relies on guiding principles for his health system's supply chain transformation. That includes putting service at the forefront of every team member action, including emails and phone calls. It means leveraging data-driven decisions, and developing teams that can use these technologies and tools. The team should always deliver results and add value from a supply chain perspective. "It's not always about saving dollars," especially in this pandemic age, he says. It's now also about supply assurance. Lastly, the goal is to assure that supply across the entire medical network. This addresses the strategic goal of leveraging the system's scale and becoming a unified health system from a supply chain perspective.
Like many health systems, early in the pandemic, the media narrative focused on PPE, which only included a few dozen items. "The reality is there were over 200 different supplies [to treat COVID-19 patients] we had to secure early on that were not just masks," he says. The department is currently managing 20,000 to 30,000 individual items to support the health system, which is difficult in the currently challenging global supply chain.
Just before Feinberg arrived, Cedars-Sinai began reassessing and changing how they are using their logistics network and warehousing capabilities. They began transitioning from a bulk distribution model to a low unit of measurement (LUM) model right as the pandemic hit. This allowed the them to initially turn their warehouses into PPE storage. Some of those stockpiles remain, as California passed a law regulating how much PPE a hospital must maintain.
The LUM approach shifts inventory risk to the distributor, but it also means the health system lacks control over this inventory. Cedars-Sinai began sharing the warehousing space as a system-wide resource for back-up supplies. "It's not a hybrid [inventory] model," Feinberg notes, "but it's for all the high-risk items we're identifying." Compared to pre-COVID, the volume of these high-risk items has quadrupled, but the warehousing allows them to mitigate the LUM model risk by retaining their own inventory back-up. "It became a way for us to proactively manage the global supply challenges that are still with us."
Technology and visibility for inventory planning
During the pandemic, the Cedars-Sinai supply chain department developed several predictive models to proactively identify potential at-risk supplies. This allows them to source products sooner, to ensure patient care. "That model helped us maintain fill rate levels in partnership with our key suppliers," Feinberg says. If items are potentially unavailable, the staff can look elsewhere in their network or with other vendors. The staff looks at the signals daily, but built the algorithm rules so individuals can look at a few hundred of the most important supplies, rather than thousands of items daily. "That's still four to five times more than we were dealing with before the global supply chain challenges came to the forefront," in summer 2021, he says. "Before that, things were manageable with fairly simple tools."
Feinberg's department developed dynamic interactive dashboards to show spending across categories, departments, and vendors. This provides a better understanding to source things differently, and shows potential opportunities to consolidate spending across the health system. The technology also includes graphical tools showing fill rates and lead times. This can be used across all vendors to automatically show which supplies may have refill issues, so the staff doesn't have to scramble.
In addition, Cedars-Sinai adopted a concept common in retail: collaborative planning, forecasting and replenishment (CPFR). "That process is about taking an even longer view so you are helping your suppliers and distributors to better plan their inventories," he says. In general, the health system maintains little inventory in the care facilities. Some systems have their own warehousing, but they do not cover everything needed. Since distributors carry most of the inventory, it's vital to have accurate processes and data sharing to help the vendors plan, so they can better serve the health system.
While it's hard to find many positive things about the pandemic, as a supply chain professional Feinberg is encouraged that people now know what the role does, and they are listening. "Historically supply chain has not been and never will be at the forefront of healthcare," he says, "but it's gotten a lot more attention."
A rising tide lifts all boats. Chief Supply Chain Officer Charles Miceli believes in networking and long-term relationships with all healthcare industry stakeholders.
The supply chain word that came out of the COVID-19 pandemic is resilience. For good reason. But for Charles Miceli, network vice president and chief supply chain officer at the University of Vermont Health Network (UVHN), focusing on resilience is not a new concept. For him, the concept took hold in 2017, when Hurricane Maria upended the domestic healthcare supply chain.
"There are a substantial number of (healthcare) suppliers in Puerto Rico," he says, and he didn't realize the extent that UVHN, and other health systems, relied on the production there.
Miceli has overseen the UVHN supply chain since 2008, as it grew from one hospital to an integrated delivery network (IDN) with six hospitals, home health and hospice, and outpatient primary care services. The hospitals run the gamut: academic medical center, critical access, rural, and sole community hospitals. UVHN covers a population of one million in Vermont and northern New York. It began central contracting in 2014, though logistics and managed services are handled at the local level.
Resiliency requires tools
Miceli is a big believer in using tools to promote resiliency. He says UVHN was one of the first healthcare organizations to use Resilinc, an AI-based supply chain data monitoring service for risk management. After Hurricane Maria, "they became our observation post for disruption around the world," he says. The system shares supply chain vulnerabilities globally, providing a map detailing where the organization's supplies are produced, including tier 1 and tier 2 suppliers. Disruptions can include manufacturing shut-downs, strikes, government policies, pandemics, and natural disasters.
"If an incident occurs, we get a report. Supply chain risk leaders watch this." Miceli says that he was monitoring the Resilinc reports himself until UVHN created a supply chain risk manager role.
The chief supply chain officer uses other analytical tools to monitor supplier risk as well, "because you want to have different lenses," he says. The tools provide the same information about 90% of the time, Miceli says, but "I'm looking at the dissonance."
UVHN uses informatics tools and platforms to assess vendor financial risk and better understand its supply chain. SC Worx curates UVHN's item master, ensuring that the data elements and taxonomy are clear. The service identifies products in the FDA database, normalizing it in the electronic health record system.
UVHN uses Conductiv, which helps the health system look at purchased services spending and perform competitive market assessments. Rapid Ratings profiles UVHN's suppliers to help the health understand the financial health of vendors. UVHN works with Procurement Leaders, an organization covering many industries, to gain expertise in the procurement side of supply chain. "We were one of the first healthcare organizations to join," he says. And BroadJump analyzes UVHN's spend. "Analytic tools are core," he says. "Without that information, it's hard to ascertain where we stand."
UVHN also relies on information from ECRI, which Miceli describes as Consumer Reports for high tech medical equipment. And their toolbox includes Premier Connect ERP, with its procurement, accounting and inventory management functions, as well as reports and analytics. The tool is available even to those who do not use Premier as their group purchasing organization (GPO).
Analytical tools helped UVHN prepare for a recent shortage of crutches, as they received notifications about a bauxite disruption. Bauxite is used in aluminum production, and crutches are made with aluminum. Responding to that early warning, UVHN purchased what it needed before it became a problem. Another warning notified of a manufacturing fire at a plant making the resin used to manufacture sharps containers. "To have that surveillance and early warning allows us to prepare," he says, adding the information enables communication with suppliers, distributors, GPOs, and peers about problems.
Collaborating with other supply chain leaders
It is hard to monitor every supplier and it needs to be done in a standardized way. "That's why there are industry collaborations. We're working together to have that consolidated line of sight when something occurs," Miceli says.
Miceli believes in sharing information, not hoarding it, including information about pending shortages. "You have to buy rationally and reasonably," he says, "that's the whole purpose of collaboration." Also, distributors use allocation methods, so hoarding is more difficult.
Collaboration was helpful in January 2020, when supply chain leaders began seeing evidence of disruptions in Asia, tied to the newly emerging novel coronavirus. He learned from Medline, UVHN's distributor, that it was prepared with supplies for the seasonal flu, ordered in advance of the Chinese New Year. The product was already on boats, but the distributor said it would have a harder time supplying customers starting around May or June 2020.
Miceli began weekly discussions with Curtis Lancaster, Dartmouth-Hitchcock Health's vice president of supply chain, to share information about the continuity of the supply chain. He also worked with UVHN's GPO and suppliers, and Vermont Emergency Management to maintain supply chain preparedness in the face of disruptions.
Miceli serves as a board member of the nonprofit healthcare supply chain trade association Healthcare Industry Resilience Collaborative (HIRC), which meets twice monthly to share best practices and communicate about potential disruptions. He is also involved with the Strategic Market Initiative (SMI), another consortium of healthcare supply chain leaders, sharing information and tools to improve resiliency.
Supply chain leaders have always worked together, Miceli says, "but the crisis made us work closer together. We matured in the sense that we're not afraid to ask each other to help, or to share good things, and address risks and problems to collectively solve." Cost was always the top driver for the supply chain, "but resiliency is right up there now, for risk," he says.
Forming strategic supplier relationships
Though analytics play a big role in UVHN's supply chain, the department works closely with suppliers on a personal level. "They are strategic relationships we have to develop, and they go both ways," he says. The advent of so many digital transactions "forces us to be human again." While one might think that computer systems make things more transactional, it instead "gives us time to look at the relationship and develop the relationship, but have the transaction tools to become more efficient."
Miceli says that companies are in business to help; while there's an economic component, the companies are in business for the right reasons. UVHN develops high levels of trust with its GPO, suppliers and distributors. Especially in a changing environment, a mature and trusting relationship helps both parties.
One way UVHN solidifies these relationships is with long-term agreements. A typical distributor relationship is a three-year cycle, he says, with a two-year option to renew. He compares this type of shorter-term agreement to a presidential term. In the first year, the president is figuring out how things work. The next two years are spent doing the work, and then it's into reelection season. UVHN now uses an agreement that is at least seven years. "The longer we can work together, the better we get to know each other and help each other. It becomes more than just a transaction."
These longer relationships also help smaller companies, which in turn become big companies. This is part UVHN's strategy of having primary, secondary, and tertiary supplier relationships.
Miceli values the relationships inside and outside his organization. One reason he gets involved in regional and national organizations is to help with the industry's succession planning. "I'm in the twilight of my career," he says. "I need to be able to share with peers and those coming up who will be future leaders."