How new partnerships transform the supply chain

September 08, 2020
by Valerie Dimond, Contributing Reporter
Healthcare merger and acquisition activity continues to teeter this year, but among organizations that shook hands before COVID-19 rocked the supply chain, some have cause to celebrate. In 2018, Georgia-based Navicent Health joined forces with Atrium Health in North Carolina — not exactly a merger or acquisition, but a solid partnership that continues to thrive.

“The term M&A may not be accurate for our situation,” asserted Charles Platt, director of supply chain services at Navicent. “Navicent Health is in a strategic combination with Atrium Health.”

One thing is certain: when two major health systems come together, big changes are bound to happen, especially in supply chain, as each organization brings something to the table — strengths, weaknesses, commonalities, and redundancies. Upholding shared goals throughout the process can pave new avenues to success.

Embracing change
Since Atrium already had experience performing a high-level review of new partner systems and processes, the collaboration was off to a good start, albeit major adjustments were in store.

After a thorough assessment of their purchase order (PO) and accounts payable (AP) data, numerous areas for improvement were identified, including physician preference items (PPI), commodities, med/surg distribution, pharmacy, capital, food service and other purchased services.

“I think the biggest challenge was change,” Platt said, noting most major modifications were made in 2019. “We changed GPOs (national and regional) and med/surg distribution. We changed nearly every item in our system. We converted PPI to Atrium Health Supply Chain Alliance (AHSCA) contracts. This involved loading dozens of contracts with almost 45,000 items with new pricing.”

The effort paid off, having saved the organization nearly $5 million last year.

“We converted the remaining non-PPI items, [which] involved loading hundreds more contracts with over 15,500 items with new pricing, saving us hundreds of thousands of dollars in the back half of the year. Navicent was able to improve EBITDA (earnings before interest, taxes, depreciation, and amortization) by more than $100 million.”

Navicent also took an active role in AHSCA’s process enhancement and product standardization (PEPS) teams, which led to increased focus on clinical integration.

“Navicent Health has clinical representation on all of the PEPS teams and the clinical leaders make the decisions, not supply chain,” Platt said. “The PEPS teams aid in our value analysis process and reduce the work we were previously expending. After only two quarters with AHSCA — and a lot of work — we reached a 90% compliance level to AHSCA monitored agreements. All of the AHSCA PEPS teams are achieving savings in contract negotiation and product standardization and alignment, even during this pandemic.”

Integrating data
Successful data integration is key to achieving such goals, although it’s often considered one of the trickiest or most time-consuming processes to master. Good analytics that offer keen insight and visibility can definitely help.

“We had cleaner data than most, which allowed for an easier transition,” Platt said, adding that the team is currently working on a cloud-based project they call CORE Connect. “Teammates from Charlotte and Macon are working together to develop the best-of-the-best processes to be used by multiple areas of the business, including supply chain, finance, and human resources. The plan is to have one supply chain data team and for all facilities to share one item master, one contract master, one charge description master, and much more. We will be on one finance system and this will simplify reporting and analytics significantly.”

Use of an automated process in the surgery department also allows supply chain to use clinical documentation to drive purchase orders directly out of the system, which they aim to implement in their new ERP (enterprise resource planning). And careful attention to product utilization, in tandem with clinical leaders, also yields positive outcomes.

“Sometimes a product is less costly, but you have to use twice as much for the same outcome; we must continue to look at the overall impact of the products that the clinicians choose,” Platt asserted. “Not only should we be looking at product cost and standardization, but we must look at product utilization. Product utilization will be the next frontier for supply chain.”

Charles Platt
A word of advice
“The cleaner and more complete your data, the easier it is to make the transition,” Platt said. “Use the services of your GPO, EDI provider, such as GHX, and any analytics tools, such as ECRI, to assist in cleaning your data. Look at all of your exception data—contract prices, part numbers, and units of measure. Work at reducing these exceptions. Part number and unit of measure exceptions are the easiest to work. Use data from your GPO to find any off-contract spend and try to standardize your products.”

Bottom line: new partnerships call for flexibility, resourcefulness, and willingness to work hard together.

“Spend time with your supply chain counterparts and get to know them,” Platt said. “The best part of our strategic combination with Atrium Health is the opportunity to work with and learn from other supply chain professionals.”