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Achieving Results through a Multiple Hospital Material Management Model. Jerrold Maki Vice President, Clinical Services Stanford Hospital and Clinics Stanford, CA Ryan Siemers Manager PricewaterhouseCoopers LLP Chicago, IL. Agenda. The Goal Structure to Support Change - PowerPoint PPT Presentation
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Achieving Results through a Multiple Hospital Material Management Model
Jerrold MakiVice President, Clinical Services
Stanford Hospital and ClinicsStanford, CA
Ryan SiemersManager
PricewaterhouseCoopers LLPChicago, IL
Agenda
The Goal
Structure to Support Change
The ORC (Offsite Reprocessing Center)
Maintaining IT Infrastructure
Business Partners
Key Performance Indicators
The Goal
Enhance and optimize the Supply Chain across the four Bon Secours hospitals in the Richmond market through:
Maximization of Offsite Reprocessing Center
Effective use of MMIS & other technology
Partnering with Distributors and GPO
Cost Management
Performance Measurement
V.P. Materiel Management
Materiel Management Organizational Structure
SMH Mat Dir
SFMC Mat Dir
MRMC Mat Dir
ORCAdmin Dir
Purchasing Manager
Central Sterile Admin Dir
Clinical Resource Analyst
Lawson Systems Analyst
Chief, Network Operations
Admin Asst
Clinical Engineering
Pharmacy Admin Dir
SFMC Phar Dir
RCH Phar Dir
SMH Phar Dir
MRMC Phar Dir
Receptionist
Admin Asst
Admin Asst
Senior Buyer
4 Buyers
2 P.O.U. Analysts
Contract Specialist
Procurement Specialist
ORC Overview
What is the Offsite Reprocessing Center (ORC)?
The ORC was created in order for Bon Secours Richmond Health System (BSR) to be proactive toward a projected increase in surgical procedures and supply utilization across the local market.
To offset the financial and operational demands of this increase, the BSR Executive Management Team, along with CVHN, approved the creation of the ORC.
ORC Benefits
The consolidation of 4 hospitals and all ambulatory surgery centers’ sterile processing departments (SPD) to an off-site location resulted in:
Improved quality for end-users
Greater speed of service
Freed-up much needed space at the hospital campuses
Consolidation of hospital storerooms and full movement to a just-in-time (JIT) hospital environment utilizing a bulk inventory facility at the off-site location resulted in:
Avoidance of vendor JIT service fees (ValueLink), which were increasing due to increased surgical services volumes and the opening of a new hospital
Reduced inventory and carrying costs at hospitals
Future opportunities of utilizing the ORC as a revenue generating entity by selling services to other regional health care providers
Case Cart Process Flow
Dirty Case Carts arriving at ORCDirty Case Carts arriving at ORC
Dirty Case Carts get scanned into Decontam
Dirty Case Carts get scanned into Decontam
Carts are emptied and trays prepped for washCarts are emptied and trays prepped for wash
Dirty Case Carts get washed
Dirty Case Carts get washed
Trays exit the washer and techs pickup for Assembly
Trays exit the washer and techs pickup for Assembly
Trays get assembledTrays get assembled
… … and count and count sheets printedsheets printed
Trays are Sterilized
Trays are Cooled
Trays are Cooled
Trays are scanned to locationTrays are scanned to location
Trays are scanned to locationTrays are scanned to location
Trays are pulled for Case Cart assemblyTrays are pulled for Case Cart assembly
Case Carts are Assembled
Case Carts are Assembled
Case Carts are pre-staged for deployment
Case Carts are pre-staged for deployment
ORC driver logs in and scans Case Carts to truck
ORC driver logs in and scans Case Carts to truck
Case Carts are loaded onto truck for deployment
Case Carts are loaded onto truck for deployment
Case Carts are transported to different hospitals
Case Carts are transported to different hospitals
Case Carts are scanned to hospital clean dock
Case Carts are scanned to hospital clean dock
Case Carts are pre-staged for ORCase Carts are pre-staged for OR
OR Nurse scans Case Cart to room
OR Nurse scans Case Cart to room
OR Nurse scans any additional instruments needed for
procedure
OR Nurse scans any additional instruments needed for
procedure
OR Nurse sprays with Pre-Klenz and places instruments back in container.
OR Nurse sprays with Pre-Klenz and places instruments back in container.
Case Carts are scanned into Decontam
Case Carts are scanned into Decontam
GOES TO GOES TO ORCORC
St. Mary’sSt. Mary’s MRMCMRMC St. FrancisSt. Francis O R CO R C
STAYS AT STAYS AT HOSPITALHOSPITAL
Case Carts are inspected in DecontamCase Carts are inspected in Decontam
Scanning trays into DecontamScanning trays into Decontam
Scanning trays that go to ORC
Scanning trays that go to ORC
Pulling trays that stay at hospital
Pulling trays that stay at hospital
Dirty Case Carts are pre-staged in Decontam for pickup
Dirty Case Carts are pre-staged in Decontam for pickup
Performance Improvement
Performance Improvement Methodology
Team Leaders Chief, NetworkOperations
V.P., MaterielManagement
Bon Secours Richmond Team Members
V.P., Surgical Services
Directors of Operations
Finance
Hospital EVPs
ORC Supervisor
Purchasing Manager
Director, Internal Audit
Health Systems Office Team Members
Corporate IT Corporate MM
The following table depicts the Core Team structure:
Performance Improvement Methodology
Develop a work plan that incorporated all improvement initiatives including implementation steps, dates for completion, and responsible parties. The work plan was discussed and updated at each Core Team meeting.
Develop metrics that could be used to track progress. The fill rate of hospital supply requisitions was the high level indicator that was used to track progress. Other indicators were used to track progress of individual initiatives, e.g., killed line items, past due purchase orders, discontinued items ordered, number of temporary ORC employees, etc.
Performance Improvement Methodology
Examples of some of the initiatives in the work plan:
EDI 856 receiving interface
Shipping feedback interface
Receiving interface
Unit of Measure (UOM) adjustments
Inventory synchronization - Spectrum to Lawson
Physical inventory
Overflow resolution
Spectrum hardware and software maintenance
Cardinal item file review
Spectrum re-order point analysis
Performance Improvement Methodology
Work Plan Initiatives (cont.):
Instrument processing
Lawson kill list review
Past due PO list review
Product substitution process
Product return / credit process
Report access
Min / max reorder points
ORC staffing resource analysis and organization structure
Supply cabinet interface
ORC Staffing
ORC Staffing & Organizational Structure
V.P. Materiel Management
SMH Mat Dir
SFMC Mat Dir
MRMC Mat Dir
ORCAdmin Dir
Central Sterile Admin Dir
Clinical Resource Analyst
Lawson Systems Analyst
Chief, Network Operations
Admin Asst
Clinical Engineering
Pharmacy Admin Dir
SFMC Phar Dir
RCH Phar Dir
SMH Phar Dir
MRMC Phar Dir
Receptionist
Admin Asst
Admin Asst
Med / Surg Warehouse
Manager
Inventory Analyst
3 Shift Supervisor
14 Mat Mgmt Tech
ORC Staffing Analysis
An ORC staffing analysis was performed to identify the resource requirements needed to manage and run the operation
For the ORC Central Stores processes, the original Project Plan called for a Monday through Friday work week and two 8 hour shifts per day. Cardinal was required to deliver products Monday, Wednesday, and Thursday evenings, while Baxter would deliver on Tuesday and Thursday. The FTE resources allocated for this project were 6 FTE’s as seen below:
One ORC Manager
Five Materiel Management Technicians
Prior to the ORC going live, it was decided that, for the interim, Cardinal would deliver products Monday through Friday. Also, a third shift was added to breakdown and put away the products so that the first and second shifts could concentrate on picking. To facilitate these changes, 4 additional FTE’s were requested and approved. They are:
One Inventory Analyst
Three Shift Lead Mat. Mgmt. Tech’s
ORC Staffing Analysis (cont.)
Therefore, the new budgeted FTE allotment increased to 10 as seen below:
Budgeted Positions FTE’s
ORC Manager 1
Inventory Analyst 1
Shift Lead MM Tech’s 3
Materiel Management Tech’s 5
Totals 10
ORC Staffing Analysis (cont.)
In December of 2005, it was decided that further additional resources would be required to complete the staffing of the three shifts. PWC was asked to perform this analysis. The following table shows the results of this analysis:
Position Description FTE’s Required Buyer 1 Control Desk Tech 1 Materiel Management Tech’s 7 Totals: 9
The Shift Leads will support the picking process during periods of high volume.
ORC Staffing Analysis (cont.)
Below are the calculations on processed lines used to determine the required FTE’s:
• The average number of lines processed per day for the time period of Nov. 1, 2005 through Dec. 9, 2005, excluding the week of Thanksgiving, equals 4,418, or 22,090 lines per week
• The ORC has two carousels that are used over two shifts, equating to 32 hours of productivity per day (2 carousels x 2 shifts x 8 hours per shift)
• Each Carousel is rated at 150 lines per hour
ORC Staffing Analysis (cont.)
Carousel 1 is named zone 1, carousel two is named zone 2, and zone 3 is used for bulk items considered too large to be picked efficiently by the carousel. Data is not available on the breakdown of where the lines are filled. However, observations and interviews showed that the breakdown is roughly 40% from each of the carousels and the remaining 20% from zone 3.
CarouselLines Processed Zone 1 Zone 2 Rating (Each) Zone 3
22,090 8,836 8,836 12,000 4,418
Carousel
ORC Staffing Analysis (cont.)
Final approved FTE’s:
Position Description FTE’s
Manager 1
Inventory Analyst 1
Buyer 1
Shift Leads 3
Zone Operators 13
Total FTE’s 19
ORC Organizational Structure Shift One: 8:00 a.m. – 4:00 p.m.
ORC Manager1 FTE
First Shift Lead1 FTE
Zone 1 Operator1 FTE
Zone 2 Operator1 FTE
Whites Control Desk1 FTE
Zone 3 Operator1 FTE
Buyer1 FTE
Inventory Analyst1 FTE
Positions shown are approved and budgeted.
Shifts one and two primarily perform picking duties.
Shift three performs breakdown and put away.
ORC Organizational Structure Shift Two: 3:00 p.m. – 11:00 p.m.
Positions shown are approved and budgeted.
Shifts one and two primarily perform picking duties.
Shift three performs breakdown and put away.
ORC Manager1 FTE
Second Shift Lead1 FTE
Zone 2 Operator1 FTE
Zone 3 Operator1 FTE
Zone 1 Operator1 FTE
ORC Organizational Structure Shift Three: 11:00 p.m. – 7:00 a.m.
ORC Manager1 FTE
Third Shift Lead1 FTE
Zone 2 Operator2 FTE’s
Zone 3 Operator2 FTE’s
Zone 1 Operator2 FTE’s
Positions shown are approved and budgeted.
Shifts one and two primarily perform picking duties.
Shift three performs breakdown and put away.
Final plan is to move to Monday, Wednesday, and Friday Cardinal deliveries, thus reducing the breakdown and storage coverage required. Scheduled implementation for first week of April, 2006.
Results Tracking
Tracking Mechanisms
The primary tracking tool is a Microsoft Access database which is populated by raw data from Lawson. The main tracking mechanisms are:
• Fill Rate Percentage
• The fill rate percentage at the ORC is calculated by taking the total lines killed during the ordering process and dividing by the total number of lines ordered and then subtracting this answer from 1. For example, 100 lines are ordered and 10 lines kill.
• Fill Rate Percentage = 1 – (10 / 100) = 0.9 or 90%
• Past Due Purchase Orders
• Past Due Purchase Orders are tracked due to their impact on receiving. A PO is considered past due if it has not been received after three consecutive business days from its order date. To elaborate on the impact of this report, if an item has a re-order quantity of 50 and 20 of those 50 are on a past due PO, the procurement system (Lawson in this case) will continually only order up to an additional 30 items (50 minus 20) because it knows that 20 are already on order. This has effectively reduced the on hand quantity (par level) to 30 instead of 50.
Tracking Mechanisms (cont.)
Repeat Killed Items Report
Report shows various levels of detail on items that are killing during the filling process, either in Lawson or the Carousel. Specific information available is:
Current weeks killed items with # of days item has killed
Previous weeks killed items with # of days item has killed
Items specific volume rank calculated from total lines ordered (i.e., the #1 ordered product in the ORC)
The total number of lines ordered for that specific item corresponding to the given date range
The total number of lines killed for that specific item corresponding to the given date range
Lawson Discontinued Items
When items are discontinued in Lawson (typically initiated by the HSO), the item description is modified by adding “(D)” at the beginning.
instead of 50.
Offsite Reprocessing Center – Tracking Mechanisms
Offsite Reprocessing Center – Tracking Mechanisms (cont.)
Offsite Reprocessing Center – Tracking Mechanisms (cont.)
Repeat Killed Items Report: Note that this is a condensed version of a full report. It has been condensed to better fit on to this page.
Supply CostManagement
Cost Reduction Opportunity Benchmarking
High-level Key Performance Indicators ($5M - $12M) Supply Cost per CMI Wt. Adj. Pt. Day
Supply Cost as % Net Revenue
Supply Cost as % Operating Exp.
Supply Cost per CMI Wt. Adj. Disch.
Detailed, item-level Benchmarking ($2.2M - $6.3M) 7 Months PO History Data (09/2005 – 03/2006)
121,608 lines of data represented (PO and drop ship purchases)
~$60M in total spend
56% of the lines were matched for benchmarking
Cost Reduction Initiatives
Contracting opportunities divided into Phases:
• Phase IA: Local Vendor Negotiations
Contact vendors and request pricing agreements
Execute agreements and upload pricing
• Phase IB: GPO Opportunities
Ensure correct tier pricing
Identify standardization opportunities
• Phase II: Further Savings on Phase I Products
Obtain better pricing from remaining vendors
Identify standardization opportunities
• Phase III: Smaller $ Opportunities
Pursue better pricing
Cost Reduction Initiatives (cont.)
Physician Preference Initiatives
Continue to discuss opportunities at Clinical Utilization Committee meetings (Cardiology-Radiology, Surgical and Nursing) and control introduction of new products
Additional Initiatives: Reprocessing, Pharmacy, Dietary, Linen & Laundry, Instrument Purchase & Repairs, outstanding GPO Initiatives
Supply Cabinets Lease
Savings Matrix
SAMPLE
Sample Orders
Special Orders Issue
April 2006 Actual
3,352 Special Order Lines out of 14,242 PO Lines (23.5%)
$2,154,018 Special Order $ out of $6,047,147 PO $ (35.6%)
Target
10% of PO Lines
20% of PO $
Special Orders Issue (cont.)
Goal was to reduce the # of Special Purchases to 10% / 20% by:
• Identifying and adding items to the Item File and updating department templates accordingly (established criteria and policy)
• Educating requisitioners on importance of using Item File and not “free-texting” orders
• Monitor and track departments in relation to the target utilizing the Special Orders Database
Benefits of ensuring items are in the item file include:
• Ensure receiving contract pricing and compliance
• Identify products for which a contract needs to be negotiated
• Ensure accurate purchase history
• Reduce manual entry time required for ordering
Special Orders DashboardPO Lines
0
5,000
10,000
15,000
20,000
25,000
Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06
Total Lines Total X Lines Target at 10%
PO Dollars
$0
$3,000,000
$6,000,000
$9,000,000
$12,000,000
Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06
Total Dollars Total X Dollars Target at 20%
Received-Not-Invoiced
Received-Not-Invoiced Issue
41.7% of RNI Dollars are greater than 30 days
The oldest RNI transaction dates back over a year
Cath Lab and OR = 61%
190 Vendors have RNI transactions > 45 days
Standard payment terms – 45 days
Note: RNI as of April 2006.
100%100%4,904,6727,577Total RNI
41.7%38.0%2,046,2042,877>30 Days
58.2%62.0%$2,858,4674,700<30 Days
27.3%25.5%$1,337,2161,930April 1-15
31.0%36.6%$1,521,2512,770April 16-30
DollarsLinesTotal DollarsTotal Lines
Receiving Month
Percent of TotalMonthly Accruals
Note: RNI as of April 2006.
100%100%4,904,6727,577Total RNI
41.7%38.0%2,046,2042,877>30 Days
58.2%62.0%$2,858,4674,700<30 Days
27.3%25.5%$1,337,2161,930April 1-15
31.0%36.6%$1,521,2512,770April 16-30
DollarsLinesTotal DollarsTotal Lines
Receiving Month
Percent of TotalMonthly Accruals
RNI Reduction Improvement
Clean up RNI > 30 days old
• Establish plan and goals to clean up aged RNI transactions
• Identify resources to research RNI and determine resolution
• Obtain vendor statements for top vendors
• Establish procedures to clean RNI transactions in Lawson
RNI Reduction Improvement (cont.)
Establish goal to resolve RNI within 30 days
• Develop report to group RNI into <15 days, 15 – 30 days, and >30 days
• Run RNI report weekly to help ensure resolution of RNI
• Establish roles and responsibilities, processes and expectations to resolve RNI
• Institute vendor statement review
• Implement RNI Policy
RNI Weekly Dashboard
RNI Trending - BSR Market
$1,446,832
$2,772,782$2,403,982
$1,267,933$888,904
$1,390,073
$0
$1,500,000
$3,000,000
$4,500,000
$6,000,000
$7,500,000
05/01/06 06/01/06 07/01/06 08/01/06 09/01/06 10/01/06
$ < 30 Days $ > 30 DaysNOTE: Dollar values denote > 30 Days
Note: reported for each facility as well
Other Cost Management and Performance Improvement Activities
Implemented system-wide monitoring and tracking of Key Performance Indicators (KPIs)
Developed Vendor Access Policy
Established more rigor around introduction of new products and new technology
Enhanced effectiveness and process of Utilization Committees
Increased GPO involvement and services
Performed system-wide item file clean-up
Educated staff to better utilize Lawson reporting capabilities
Note: reported for each facility as well
Results/Conclusion
KPIs (high-level and departmental) Tracking Down
Special Orders Declining
RNI Decreasing
ORC Growing and Expanding
Speakers
Jerrold Maki, Vice President-Clinical ServicesStanford Hospital and ClinicsStanford, CA650-736-8962 jmaki@stanfordmed.org
Ryan Siemers, ManagerPricewaterhouseCoopers LLPChicago, IL312-298-3783 ryan.d.siemers@us.pwc.com
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