Bon Secours Mercy Health's GPO/Supply Chain Solution Creates Value, Revenue Stream

After overseeing the 2019 BSMH merger, Dan Hurry built Advantus Health Partners in 2021 to run the health system's supply chain, adding a nontraditional revenue stream offering the service to others.

With 50 hospitals and 1,200 nonacute locations, Bon Secours Mercy Health (BSMH) has struck out on its own for supply chain solutions. Its goal when forming Advantus Health Partners was not just saving money and adding value to its own health system, but adding a nontraditional revenue stream by bringing these services to other health systems. After a soft launch in 2021, and an official launch this year, Advantus is doing just that.

Dan Hurry has been an integral part of the transition. He was chief supply chain officer at Mercy Health for two years before it merged with Bon Secours, taking over the leadership role for the new organization. And he is now president of Advantus and chief supply chain officer of the Cincinnati-based health system, which is the fifth largest Catholic health system in the United States and in the country's top 20 largest health systems. The ministry includes hospitals in four states, with nonacute facilities in additional states.

Why launch a supply chain solutions company?

Advantus is a supply chain solutions or healthcare solutions company, which includes a group purchasing organization (GPO), Hurry said, and it wholly runs the BSMH supply chain. Before the Advantus launch, BSMH worked with Premier. "Everything was locally managed, which is not a bad thing, but the optimization was not really there for how to leverage the system," Hurry said. After the merger, the supply chain team standardized 12 product categories, reducing SKUs by 44% and decreasing the number of product manufacturers from 250 to 48. They then began focusing on the technology, standardizing the enterprise resource planning platform across the full ministry, Hurry said, providing clinical integration and transformation. They also optimized the pharmacy solution to add a supply chain focus to how they managed that side of the business.

"Even pre-merger, we had discussions around whether we should be looking at supply chain solutions internally to optimize what we were already doing, rather than having another layer of support in a traditional GPO," he said. With the GPO, they paid fees but did not see the value, he said.

Advantus focuses on two strategies: taking full control of the supply chain to eliminate the middle layer and providing this service to other health organizations.

The first strategy revolves around gaining value. Hurry estimates that when working with the GPO, BSMH was still performing 75% to 80% of the work, including negotiating vendor pricing. The GPO offered a price, but Hurry said that BSMH could negotiate a lower price. The GPO provided contracts and agreements members could sign up for, including terms and conditions, which was helpful. But Hurry saw a gap in the industry's supply chain support model, and saw a way to align manufacturers with supply chain solutions operations.

"We knew we could make the switch [to their own solution] without any pain points. We could optimize the value equation by having good, strong partnerships in place, rather than the traditional model, which is to try to be everything to everybody," he said. "We lead with clinically-qualified decision but choose the right partners in those scenarios to drive more value for patients and caregivers in our business model."

For the second element, Hurry said Advantus is cascading what it does for BSMH to other healthcare provider organizations. Regulations required them to put a GPO in place to sell their services and extend the contracts commercially. "But we actually lead with our operational engine and ability to put FTEs in place, manage the business, transform models, and handle it," he said. Their back-office functions are modular and nimble by design. The leadership model remains constant, and new staff members will be added based on contracted health system needs.

So far, the Advantus model is performing well, and they are ahead of their goals and business plans. That plan did not include having any commercial agreements in 2022, but they have two live agreements now, and several more about to be executed. And there's another dozen in the pipeline, with all health systems coming to them via word of mouth, Hurry said.

Forming strategic relationships

Many health systems made big supply chain operational changes during the pandemic, as global sourcing, manufacturing, and logistics were upended. The pandemic reinforced Hurry's theory and belief that the future of the healthcare supply chain is operationally oriented. "From day one, we had operational alignment with finance, operations and clinicians, and we never missed a beat on how to manage through," he said. The pandemic was difficult and still has a painful ripple effect, but BSMH's structure did not create much of a challenge. "If anything, the pandemic highlighted the need for more sophisticated supply chain organizations."

Advantus is working directly with manufacturers and has a strategic relationship with its distributor, Medline. "Medline is the wheels under the product for us," he said. "They continue to use their channel consolidation expertise to move more product through their distribution." They provide operational efficiencies such as using fewer trucks, consolidated invoicing, and the procure-to-payment cycle.

Clinician alignment

Since the merger, Hurry also helped build a team of clinical supply chain leaders, led by Dr. Jimmy Chung, the new chief medical officer who partly focuses on supply chain optimization. Chung's clinical team includes 45 people, including surgical navigators with operating room experience, service line leaders, and clinical resource managers (CRMs) who help with governance, decision-making, education, development, deployment, and managing through changes.

This structure has brough tremendous physician alignment across the ministry, Hurry said, with better insights on how to optimize the supply chain. They used to use around 50 spine product suppliers, and now use fewer than 10 after a six-month review with the physicians across the organization. Involving the clinicians "gets rid of the stigma that supply chain are bean counters and they don't care about quality," Hurry said. They lead with clinician involvement on decision making and governance on supply choices, and the supply chain teams make the best deals based on clinician preference.

Looking toward the future

Hurry has been in the healthcare supply chain world for a decade, but in the general supply chain field much longer. Comparing supply chain in healthcare to other industries, he said that healthcare is very different, especially the digital aspect. "The technology is more robust outside of healthcare," he said. The healthcare supply chain does not use consistent language, which is a hurdle. Grocery and retailers have UPC codes adding to the consistency, but that is not the case with healthcare. "We have to optimize and trick the system to make the language feel consistent."

This makes it difficult to draw insights and actionable analytics from clunky and outdated data sets, he said. BSMH set up an insights team in 2021, which Hurry differentiates from analytics.  "Many can run analytics, fewer can run insights." With the opportunity to use fully remote personnel, he has built a team across the country, complemented by the clinical team.

One project going forward is looking at the purchase service space, which Hurry said is "chaotic." It's not optimized or organized, and benchmarking is minimal in the United States and across that space. "We need to look at that world differently," he said.