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Q&A with Michael Darling, VP Supply Chain, St. Luke’s Health System

by John W. Mitchell, Senior Correspondent | May 17, 2019
Business Affairs
From the May 2019 issue of HealthCare Business News magazine

So that complication turns into an opportunity to manage total landed cost. Instead of being demand-driven, its velocity driven as to what channel (compliance, formulary and inventory control) we need to bring in. For the next four to five years channel selection is going to be where a significant amount of cost is going to come out of the system. The silver lining in all of this is that as we consolidate, we bring more groups together. We do a much better job in the marketplace to provide financial and clinical impact. This allows us to maintain 97 percent contract compliance across acute and nonacute locations.

We can decide what the best way is to get items to the individual locations. So instead of having physicians and clinicians try to manage the supply chain, we can do it and actually provide desktop delivery. By reducing inventory more efficiently, our costs go down because everything the clinician needs comes packaged together. The delivery can be sorted and packed by patients, practice or physician. We expedite specialized products, so the nurses don't have to order. It gives them that time back for patient care.

HCB News: What are some of the first questions a hospital should ask itself with regard to the efficiency of its supply chain?
MD: They need to move the chain supply on four major vertical fronts. These are data, procurement, advanced logistics, and procedure sourcing. With these four verticals, they need to develop key performance indicators. They should ask themselves, “How does what we’re doing — and why, and when — compare regionally, nationally and even internationally?”

St. Luke’s has a system for supply chain services, and there are 64 primary key performance indicators that we measure every month. That’s so all of our teams can see how we’re doing. It also gives us an opportunity to share that information with all the individual hospital and non-acute locations.

HCB News: To what extent is St. Luke's making data-based automated decisions regarding supply chain?
MD: We have a formulary, and because we set up inventories in our main storerooms, we're able to automate 84 percent of our procurement without human touch. Each of our products and services has a direct contract associated with it, which means the most current pricing is attached to the item. With automation, we also know which contracts are due for renewal.

We can also use prior year data, for example in October, to know what kind of flu product we’ll need for the coming months. We also need to be aware of recalls to know what product to pull, and that process is automated too. Automation is going to continue to be something on which we’re very focused.

John Masini

Single Vendor Contract

May 20, 2019 09:28

Very interesting and insightful read. As hospitals consolidate and health systems grow, I understand how administratively a decision may be made to create consistency with 1 vendor on products. Idea being - higher volume of orders with 1 vendor to leverage lower cost per unit...... But the issue this creates is that new technologies are blocked from evaluation. Health systems go into multi-year agreements with 1 vendor, but finding this agreement is reached without bringing competition into the mix. Not evaluating other's prices or clinical capabilities and not knowing if there is a better option out there. I've never understood why any department would want to eliminate competition altogether - in the end, competition is ALWAYS BEST FOR THE CUSTOMER.... And I do believe St. Luke's is exclusive with some capital equipment companies.

Not to challenge, but I've always been interested in understanding the other side's rationale. How do you know that what you order is best for patients and department if you only look at 1 option every time you buy?

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