CHRISTUS Supply Chain targets teamwork as No. 1 aim

Historically, supply chain simply is known for moving stuff — you know, just as life is all about breathing.

Yet some periscopic organizations see well beyond this artificial boundary. For them, supply chain is more about corporate alignment, departmental facilitation, organizational influence, relationship-building and maintenance, resilience, and strategic and tactical vision — essentially service over support, the latter of which hints more at the back office realm rather than the front line.

CHRISTUS Health, an Irving, TX-based international, faith-based health system, figured this out about four years ago and spent a great deal of time since then buttressing the corporate organization with a team-based framework to accomplish all those goals, connected by collaboration. For CHRISTUS, collaboration means knowing how to achieve a balance between centralization and decentralization — when to direct and expect, when to delegate and empower.

In fact, Supply Chain Management’s corporate office operates a bit like an air traffic control tower, acutely creating, directing, facilitating and managing councils and groups of internal and external professionals to make optimal supply and service decisions for the organizations. Depending on the topic, those involved can include doctors, department heads, C-suite executives and even supplier representatives.

“There’s a saying amongst the Supply Chain Management (SCM) team,” said Ed Hardin, CHRISTUS Health’s System Vice President of Supply Chain Management. “‘We’re building the plane as we’re flying it.’ That takes boldness and tenacity but we’ve found that chartering a group — committee, council, team, task force, etc. — is as much about pulling people together who share a vision and understand that doing something new oftentimes means it won’t be perfect, but we don’t let perfection get too much in the way of progress.”

Using a version of the health system’s values-based decision-making process that Hardin defined as a “methodical, mission and Lean Six Sigma-inspired approach,” CHRISTUS’ SCM team enables employees and physicians to gain ownership in decisions and share best practices among facilities and throughout its regions.

“It’s a two-phase, six-step process that begins with uncovering all the facts, identifying stakeholders, and getting the perspectives of these stakeholders,” Hardin explained. “Used in the most critical of situations, we’ve modified the [process] for the express purpose of applying it to supply chain decisions, including but not limited to decisions around supplies.

“Our job is to facilitate/coordinate the decision-making process, and it is stakeholders that make these decisions, typically in a democratic way,” he continued. “If the right facts and figures are put to clinicians, they make the right decisions and they do so in an expeditious manner. Do they always agree? Heavens no! But they recognize that in all instances their voice is heard and in most instances the decision goes their way. Only in a rare occasion have we reached an impasse and in this case we take the same set of facts and stakeholder perspectives to our system Chief Medical Officer or Chief Nursing Officer.”

Hardin’s team applies the same cultural and operational philosophy to its supplier relations, which, he insists, suppliers value.

“Frankly, it’s an honorable and profitable thing to do business with CHRISTUS Health,” he told HPN. “Allowing a third-party into a position that gives them a genuine voice is to be coveted and, as such, we find few instances where the ‘tail wags the dog.’ Yes, it happens at times — and all too frequently back in 2012 [prior to process improvements] — but today third-parties seek the privilege to work with an organization that is highly collaborative, keeps their word, and rewards high-performing suppliers with more business. Not only is it a privilege, but we also find a willingness from these third-parties to provide value-adds beyond our agreements. Violating our trust, doing the end-run around supply chain has consequences.”

Through its values-based decision-making process, CHRISTUS Health’s SCM team reinforces an integrated supply chain, which it defines as “a standard methodology for making decisions that incorporates the inclusion of different perspectives yet ensures that once a decision is made there is assurance it will be carried out so as to ensure greater standardization across the system,” according to Hardin.

Even so, CHRISTUS Health’s SCM team maintains the delicate balance between the centralized and decentralized natures of the organization — from the collaborative decisions of the corporate office to the direct customer service and logistical decisions managed by the individual facilities — to the point that they have controlled expenses via product and service standardization.

SCM also has developed a data analytics program via a single database as part of a “master data management” platform that links supply chain with revenue cycle and billing, paving the way for increases in electronic transactions and full standards adoption and implementation over time.

The team also is learning from and sharing intelligence with its colleagues in CHRISTUS-owned Latin American hospitals.

Lavonda Wall, Ifechi Umeh and
Dieshia Gibson — Procurement member cross training.

Back in late 2011, CHRISTUS Health’s supply chain operation was “vulnerable,” according to Hardin who joined the faith-based organization the following year. And “a vulnerable supply chain makes for a vulnerable healthcare provider organization,” he added.

At the time CHRISTUS Health operated as more of a loosely knit regional provider (9 regions at that time, but 8 today) with each managing its own supply chain function. At the corporate level, the System CFO worked with the group purchasing organization, which was MedAssets.

“As a holding company in a world of consolidation, we were being handed our lunch on the cost front,” Hardin recalled. “It was very apparent that suppliers didn’t respect us. Yes, they thought we were nice folks but we didn’t have the supply chain acumen that many of our competitors did. Our supply costs were excessive and, within the CHRISTUS organization, our respect was at a level commensurate with the respect outside the organization. Once more, we didn’t own our supply chain, having abdicated much of our responsibility to our GPO — not because the GPO wanted the responsibility but because we weren’t in a position to own it. By vulnerable, we mean that we weren’t competitive and we were growing less competitive each year.”

But could a Catholic organization that delivered considerable charity care with limited resources stanch the flow of red ink, turn the tide and broaden its appeal and credibility among suppliers and providers alike? Hardin thought so. And the corporate SCM team launched into overdrive, recruiting facility-based SCM leaders, clinicians, C-suite executives from Finance and a select group of suppliers to develop a comprehensive strategic plan that called for procurement consolidation (six procurement centers down to one) and a new operating model by early 2013. That clarion call spiraled from there.

“We had just completed our consolidation/centralization to Irving and with a very new contingent of staff and leaders — a smaller percentage of legacy staff moved to north Texas than we would have liked — it was very apparent we’d not realize our vision without collaboration with suppliers,” he said. “We had to do more with less and high-performing suppliers who shared our understanding of what could be accomplished through meaningful collaboration offered resources we didn’t have.”

CHRISTUS Health SCM embarked on a variety of projects they classified into two categories. The first, Vendor Relationship Management, ranged from developing its Vendor Balanced Scorecard to standardizing its vendor credentialing guidelines to redesigning the way they conducted business reviews. The second, Cost Reduction Initiatives, invited the organization’s best performing suppliers to identify and implement cost savings initiatives themselves or join them in initiatives that CHRISTUS identified and approve through its annual budget process.

Regaining stature

SCM created four groups addressing topics within its five divisions — Administration, Informatics, Procurement, Logistics & Operations, and Contracting and Resource Utilization.

The SCM Staff Council focused on opportunities for employee satisfaction and improving the work environment. Its recognition efforts and performance programs led to a nearly 91 percent satisfaction score last year from nearly 75 percent in 2012.

The SCM Leadership Council recruited SCM managers and directors from CHRISTUS Health’s eight regions and three Latin American countries to share best practices and improvement opportunities for acute and non-acute operations with routine participation from Finance, Accounts Payable, Information Management and executive leadership. From this group emerged the decision to consolidate and centralize procurement, business analytics and contracting at the corporate/system level with facilities directly management distribution and customer service.

The Resource Utilization Group (RUG) focuses its efforts on stewardship and value analysis programs under service line headings mirrored by its GPO (at press time, Vizient, which acquired MedAssets), including surgery, medical, cardiology, pharmacy, radiology and laboratory. The RUGs base decisions on a one-region-one-vote approach against the backdrop of clinical leadership expertise and evidence. Since fiscal year 2012, actual savings achieved by the RUGs outpaced savings targets year-over-year, netting more than $90.3 million in savings, compared with more than $74.4 million in anticipated reductions.

Through the RUGs, CHRISTUS Health SCM standardized a host of capital equipment with single suppliers for beds, linear accelerators, magnetic resonance imaging (MRI) units, computed tomography (CT) units and patient monitoring devices, according to Hardin.

“Because we’re large and allowed our sole suppliers to conduct their own evaluation of our 3-5 year spend in these areas, we believe our negotiations with these suppliers generates pricing that is on par with bulk buy pricing,” he said. “So far our purchase patterns in these spaces have held pretty true to the suppliers’ estimates, allowing them a level of certainty in CHRISTUS spend.”

On the non-clinical side, CHRISTUS Health standardized to single suppliers in a number of areas, including clinical engineering, food and nutrition services, housekeeping, waste management, furniture and print management, Hardin added.

The Partner Advisory Council (PAC) represents the lynchpin of CHRISTUS Health’s supplier-customer relationship collaboration. This group developed the Vendor Balanced Scorecard that quantitatively evaluates and measures supplier performance based on criticality to operations, product/service performance and customer satisfaction. Through this group CHRISTUS Health SCM consolidated supply spending by funneling more than $1.5 billion through 35 of the highest performing PAC suppliers, fostering a level of process ownership by them to participate more. A Diversity Supplier Council also branched out from the PAC to promote inclusion and share performance data. The PAC also concentrates on vendor access, credentialing, recognition and relationship management, as well as application development.

Sean Poellnitz and Sandee Schoby — Planning for the application of price benchmarking data to the Project Moneyball efforts.

John Mazzoli, Stephanie Borden and Felicia Donald — Learning how data can be readily extracted to expedite decision making and enhance customer service.

Clockwise from bottom-right: JP Issom, Sharon Oyedeji, Curt Evans, Azim Haque, Patricia Brown and Marketa Willis — Reviewing results of annual associate satisfaction survey.

Redirecting expertise

For benchmarking and sourcing efforts, SCM works with Broadjump for medical devices and supplies and Valify for non-clinical purchased services, reducing analytical time to minutes from months, according to Hardin. In fact, as part of CHRISTUS Health’s “Project Moneyball” campaign, which Hardin describes as “value analysis on steroids with the express intent of bringing our costs in line with organizations with similar volumes and market share,” they were able to achieve $6 million in annualized savings in 90 days. “We’ve been pleasantly surprised that clinicians want to know what we’re paying for supplies, particularly as it relates to how we compare with other organizations,” he indicated. “Over time we expect both technology providers to expand their benchmarking offerings to include other supply categories as well as clinical services.”

Moving to a single pharmacy formulary, favored by clinicians, resulted in nearly $8 million in annual savings, which has led to several formulary and sole-source initiatives emerging for supplies, he added.

Rather than duplicate their GPO’s efforts, SCM’s Contracting group closes gaps left by their GPO, according to Hardin.

“There isn’t a formula but essentially we try hard to stay away from already negotiated agreements by our GPO and instead expend our efforts on categories we know aren’t covered by the GPO,” he said. “Our contracting team is relatively small, so there’s still much not addressed by our GPO that our contracting team can be responsible for.”

Meanwhile, Operations & Logistics provides advisory services, supplemental staffing and interim management to member facilities. This includes deploying subject matter experts to assist with any special projects or performance improvement initiatives at the facility level. Typically, O&L staffers embed themselves in the facility, conduct comprehensive operational reviews, work side-by-side with the local SCM or Finance staff, making recommendations and helping to implement them. Travel-related costs for this well-traveled group totals nearly $100,000, according to Hardin, but that’s more than offset by the more than $4.7 million in value analysis savings they help identify.

SCM’s Informatics group works with CHRISTUS Health’s MicroStrategy data management tool that is linked with the various enterprise resource planning (ERP) systems and the electronic health record (EHR) system. Through Informatics and MicroStrategy reporting, facility-based SCM leaders can track supply utilization at a micro level with custom reporting, as well as forecast usage patterns, according to Hardin. They are working to use this tool to monitor supply expense and outcomes at the physician, patient and supplier levels, too, he added.

SCM’s Informatics group not only links with Information Technology but also Finance as it created a standard budget template that includes an automated savings tracker to monitor baseline projected vs. actual savings.

“In the past we had struggled to accurately convey to the CFOs our goals for the next fiscal year, which led to distrust of the process and the numbers,” Hardin said. “In the fiscal year 2016 budget cycle we worked very hard to validate the save totals and ensure that the numbers reflected were true save and not cost avoidance. This was populated in a standardized template that allowed all parties to easily see that data that made up the savings totals, including products and utilization. Through vetting the numbers and initiatives beforehand we were able to have a streamlined budget process that created trust and built relationships. The savings tracker is connected to the budget template and allows for us to track all of the numbers that we reported during the budget process to validate that we are meeting goals.”

Mastering data

Maintaining nearly a dozen supply databases covering 36 geographically dispersed locations using three different ERP systems may elicit some eyeball rolling and audible gasps. Just not from CHRISTUS Health’s SCM.

To reduce any redundancies when updating three ERP systems, SCM launched a master data management (MDM) platform from Informatica that allows all supply chain data to be compiled into a single database for data mining and productivity for SCM’s Informatics analysts.

“Standardizing to a single MDM platform was a minimal challenge,” Hardin insisted. “Milestones were achieved by a collaboration between Supply Chain and IT’s Business Intelligence that engaged key players, which included MDM Hub designers, Data Architects, Interface Designers and Supply Chain ERP experts. All players met for three hours two times a week to break down every source system, identify the most labor-intensive areas, and design an easy-to-use-and-understand Informatica Data Directory (IDD). Interfaces were then created to update source systems from the MDM platform.” SCM’s item master data file contains fields that currently are integrated to revenue cycle and billing.

“In the ever changing world of healthcare suppliers, mergers and acquisitions, users can now perform tasks, such as catalog number changes, supplier merges, etc., in a single database that were previously done in three different ERP systems or via a keystroke script, which was very labor intensive and time consuming,” he said.

SCM’s daily electronic contract feed from its GPO contains approximately 7.5 million records, which used to hamper productivity and delay any pricing changes by three-to-four weeks, according to Hardin. By mapping those feeds into the MDM, contract pricing changes will be reviewed and updated daily. “This will basically perform a price check for every facility and every contracted item and update the ERP systems automatically on a daily basis,” he added.

Back in 2012, fewer than 65 percent of all requisitions were submitted electronically. Today, that total has climbed to 97 percent with only a few outlying clinics continuing to use the old paper-based form, according to Hardin. Further, roughly half of all electronic requisitioning orders are auto-generated with no manual intervention. He predicted that auto-generation of requisitions, specifically of lower-end, commodity items, may reach up to 65 percent during the next three years, but the primary determinant is the level of automation in their inventory management systems at the local level.

“Currently, we deploy a closed cabinetry system (Pyxis), which does ensure a level of automation, but only for supplies kept in these cabinets, and that’s proven costly,” he said. “As such, minimizing manual intervention is critical but the level of it must be balanced with the cost to automate. We’re undergoing a reevaluation of our inventory management and charge capture system to determine the proper balance of operational cost and revenue generation. With that consideration we’ll also need to evaluate how such a system will improve procurement productivity through the ability to minimize manual intervention.”

Hardin doesn’t anticipate complete electronic data interchange (EDI) because it may not be realistic.

“We’re not convinced that 100 percent (EDI) is achievable given the dynamic nature of vendors entering and leaving the industry,” he said. “Given our special interest in promoting supplier diversity, the goal of 100 percent is also made difficult since smaller suppliers often are not capable of doing business through EDI. As for more complex requisitions, more lines, more locations per requisition, need for expedited delivery, sourcing directly or through a distributor or from another facility, all add to the complexity of requisitions. We see these complexities growing as Procurement personnel are increasingly called upon to make determinations that cannot practically be put through EDI.”

SCM also has implemented GS1 standards, including Global Location Numbers (GLNs) for all of its facilities and assigned each of its more than 20,000 lines in the item master a Global Trade Identification Number (GTIN). This replaces supplier catalog numbers, which has eliminated most ordering errors.

JP Issom, Azim Haque, Tina Hanson, and Curtis Evans — Operations & Logistics team conducting monthly call with regions.

Ifechi Umeh, Felicia Donald, Justin Jobe, John Mazzoli, Michael Hinojosa, Ed Hardin, Dieshia Gibson, Sandee Schoby, Tim Martin and Alex Ayesu — A great team requires diversity of thought and competency from engaged members.

Supplier collaboration with the Becton Dickinson team, CHRISTUS Health’s recipient of their 2015 vendor of the year award.

Ed Hardin, Rachel Rork, Maggie Bay, Myra Thomas, Matt Jacobus and Jan Kenoyer

International flair

CHRISTUS Health SCM provides operational advisory services in the areas of process redesign, policy and procedure development, and contracting support for capital and purchased services to more than a dozen hospitals in Mexico, Chile and Colombia.

At these Latin American facilities, supplies overshadow labor as the largest business expense so they welcome CHRISTUS Health’s SCM expertise, according to Hardin.

“From a clinical perspective, you’ll find our [Latin American] hospitals on par with those in the U.S.,” Hardin said. “However, from a supply chain perspective their capabilities and infrastructure are not as advanced as our own in the U.S. nor is their consistency between countries. There are many things that can be attributed to this, including regulatory requirements, standardization bodies, no GPOs, no major distribution infrastructure and much lower cost of labor just to name a few.”

But CHRISTUS Health’s Latin American colleagues seem to have a better grasp on stewardship as it relates to supply usage, Hardin insisted.

“What we bring to them is more policy/procedure rigor, price benchmarking particularly for capital equipment, understanding of supply chain as a profession, best operational practices just to name a few,” he noted. “On the other hand, their standardization of products to minimize SKUs and suppliers is to be envied. Directly related is the level of inventory on floors, which is oftentimes one-fifth of what we have on ours in the U.S.”

Both groups see integration as a positive outcome, according to Hardin.

“Perhaps, though, the greatest benefit is that we’re integrating our resources, exchanging ideas, and, simply put, getting to know one another,” he said. “We’ve already begun to identify willing suppliers to view us as one CHRISTUS in their approach to contracting and, while the savings haven’t been huge on the U.S. side of the border, our [Latin American] facilities have come to benefit by being added to our agreements.” Hardin added that those suppliers that “upset their business model” by viewing CHRISTUS Health and these Latin American facilities as “One CHRISTUS” may be placing themselves in a “better position.”