Seeking Visibility and Control

With today’s challenge to do more with less, organizations like Wheaton Franciscan Healthcare are looking within. As a department, we have to consider how we can contribute to improving the business health of our organization. The hospital supply chain is an area where efficiencies in operations and cost control can yield real results to the bottom line.

Maintenance of item masters has become increasingly time-consuming and costly for healthcare organizations to manage. Content may be outdated or contain conflicting information from multiple sources, misleading vendor pricing or confusing product descriptions.

The problem was especially acute for us. We are a mid-sized, multi-site, regional healthcare system that serves Iowa, Illinois and Wisconsin. We needed a solution that would improve visibility into our supply spend, offer a more user-friendly requisitioning system, help us improve our departmental efficiencies, and enable us to better manage clinician spending and control costs.

Finding a Game Changer

We turned to McKesson’s cloud-based, strategic supply sourcing solution to enhance our healthcare supply chain. This innovative requisitioning tool creates a customized formulary that gives us visibility and control over all of our supply chain spending. Already, we’ve identified multi-million dollar savings opportunities in our supply chain, dramatic workflow improvements and key staffing efficiencies. Once the system is fully deployed throughout our enterprise, we anticipate even larger gains.

Comprehensive, Empowering Data

This sourcing solution is different from anything we’ve seen in the healthcare supply chain. It enables us to ensure the right product is in the right place, at the right time, and at the right price. Following are some of the features we find most valuable:

It’s in the cloud! McKesson currently provides access to 1.7 million items that are available in the e-commerce marketplace, including photos and full-length product descriptions. Every time we buy an item or add one to a contract, the system pulls it into our virtual item master (VIM), so we always see fully attributed, detail-enriched data. The items in our VIM are accessible only to our staff and have our pricing and purchase history for each item.

It compares apples to apples. Using artificial intelligence technology, the system enables us to identify groups of products that are functionally equivalent or similar, work with clinicians to determine which one is best, standardize it, put it on contract, drive savings and improve quality. Additionally, if a product is backordered, the system quickly identifies similar items that may be good substitutes.

It promotes formulary-based control. We have less variation and more control over price through contracts. Once we identify preferred formulary items, clinicians will automatically gravitate to them at the point of requisition. This improves contract compliance, reduces cost and makes us more efficient as an organization.

It supports value analysis and standardization. Information that used to take days to pull in, wade through, digest and tie to a contract is now readily available to us. End users simply type in a word or two to identify the product, and can immediately see vendors who offer the product and how they compare in price and value.

It enables contract compliance. A special icon identifies the contract products within our formulary and directs end users in the right direction. If they pick a non-contract item, they must receive special approval before the order proceeds to purchasing. We can see when we are going off our formulary and address it immediately – not six months later when we review our records.

It empowers employees. Powered by Amazon Web Services™, the system creates an experience that is just like shopping at home. This enhanced, consumer-based method makes it much easier for clinicians to search for, and find, the right product.

Saving Time and Money

In eight short months, we’ve already identified preliminary price line/product variance and contract price variance savings of $3.64 million per year. This amount will certainly increase as we build more data into the system. Savings on contract price variance could be more than $1 million, which alone would give us a positive return on investment for the entire project.

Workflow is much more streamlined. What used to take three to four weeks now takes just a couple of hours.

  • Buyers don’t have to approve orders.
  • Data cleansing won’t be necessary, nor will we need staff to create item files or ensure product descriptions are consistent.
  • We no longer have to limit the size of our item master. We had approximately 70,000 items. This now has grown to 150,000 in our VIM and will grow larger.
  • Once our staff is trained on the value analysis process, we anticipate they’ll be ten times more productive.

We’ve already restructured our purchasing department to support these new processes and eliminated one FTE position.

A Paradigm Shift to Transparency

This is the most significant change we’ve seen at Wheaton Franciscan since we went from paper to electronic requisitioning. Now we have the key information at our fingertips to make informed decisions. It’s a real game changer that will help us do our part in helping Wheaton address the financial challenges from reform that we are faced with tackling over the next decade.

Wheaton Franciscan Cost Savings Identified to Date:

Total projected annualized savings – $3,620,931

  • Price line/product variance – $3,081,655
  • Contract price variance – $539,276

Non-file items – $1.4 million
Staff Reductions:

1-2 FTEs in purchasing; 4-5 once fully deployed

Wheaton Franciscan Healthcare expects these figures to increase as the project is implemented throughout its enterprise.

Joe Volpe

About the author

Joe Volpe is corporate vice president of Supply Chain for Wheaton Franciscan Services, Inc., which has facilities in Wisconsin, Iowa and Illinois. His responsibilities include purchasing, logistics, central laundry, print shop and fleet management. Previously held supply chain positions were at the Medical College of Virginia Hospitals in Richmond, Va., and Miami Children’s Hospital in Miami, Fla. Mr. Volpe has an MBA/HA from University of Miami’s School of Business Administration and an MS from Barry University, both in Miami, Fla. He has 40 years of health care experience and 33 years of supply chain experience.