The Dallas-Fort Worth area health system used the pandemic to increase supply chain transparency and add technologies to increase diversity in its vendor pool.
Shaun Clinton is one of the few supply chain leaders who can admit to not running short of personal protective equipment during the early days of COVID-19. Texas Health Resources staff was able to continue using new PPE, while maintaining the clinical protocol. Once the supply chain team determined there was enough product on hand and in the pipeline chain, they wanted to be transparent about what was available and usage statistics, says Clinton, the senior vice president of supply chain management at the Dallas-Fort Worth area health system.
"I'm a huge proponent of shortening supply chains on critical items," he says, something that came in handy during the early months of the pandemic. Texas Health already had a partnership with PPE manufacturer Prestige Ameritech, located outside Fort Worth. The health system was procuring 100% of their N95 respirators from them when the pandemic hit, along with a good portion of their isolation gowns. In January 2020, Clinton met with the company and said "we know this is probably the big one we've talked about for a long time. What's it going to take for me to basically take control of the supply chain on some critical PPE items and further our partnership with you?"
Procuring enough PPE was important for Clinton, who is responsible for all Texas Health's centralized purchasing, a system with 25 acute hospitals and around 30 ambulatory surgery centers, 15 imaging centers, 18 urgent care facilities, and 250 physician offices.
Clinton did not want to be beholden to long supply chain lines, one reason for the Prestige Ameritech partnership. It was not a protectionist agenda, he says, "This is simply a practical reality. The shorter the supply line, the easier it is for me to manage." In May, Texas Health was among 15 health systems, plus Premier, to acquire a minority stake in Prestige Ameritech, committing to purchase a portion of respirators for the next six years. During the early part of the pandemic, Clinton did supplement N95 orders with purchases from other companies, along with isolation gowns from another nearshoring source.
Creating transparency through a dashboard
The pandemic accelerated Clinton's goal to make the Texas Health supply chain more transparent. Supply chain transparency is difficult for several reasons. One is that it is hard to explain to people what the supply chain is. "I live in an esoteric world. I can't even explain to my parents what I do for a living," he says. Up until COVID, supply chains were taken for granted. "No one really dives deep into supply chain unless you've made it your career." That means that supply chain staff must explain what it is, so people can understand why it impacts the health system.
The second reason transparency is difficult is because the supply chain is opaque. It's hard to know where an end product is manufactured, let alone backtracking to know the source of all components making up the end product. "People look to the Far East to be economically viable in the supply chain," he says. When products are produced far away, it is harder to be transparent.
To show the health system what critical supplies they had on hand, what they burn through on a daily basis, and how many days on hand they had, Clinton's team developed a dashboard. They have since expanded the list of included items, showing the days on hand and availability of these items at 30, 60, and 90 days, and sometimes beyond that. "We're in the middle of a tough 18 to 24 months stretch because of external factors impacting the global supply chain," he says, "so we need to be very transparent there."
Senior Vice President of Supply Chain Management Shaun Clinton/Photo credit: Texas Health Resources
The dashboard, created by his staff and updated automatically, is viewed by numerous teams, from top executives to materials management, who make decisions based on the dashboard. In the early days, some staff members thought the health system needed 200 days of inventory on hand. When translating that into storage needs, people realized there was no 10-story building available to warehouse everything. "Part of being transparent is saying, 'Here's what you need, and how much that represents, and can you store this on site?' Or, 'If you want more, you will have to find a place to put it,'" he says.
Some supply chain staff may fear transparency, as others may questioning decision-making and performance. But "being opaque causes more angst that being transparent," Clinton says.
Increasing diversity
Technology has also helped Clinton further his goals to increase supplier diversity, equity, and inclusion (DEI) efforts. While DEI has always been important to Texas Health, he says, over the past 18 months they realized they could do more. He sees DEI as a top priority, "making sure that what we do with suppliers represents our community as a whole." It's not just about providing great healthcare, but also creating fair and equitable opportunities for everyone in the communities they serve, he says.
In the past, Clinton and other Texas Health supply chain professionals had a hard time finding more diverse suppliers. "I simply didn't know who you were and what business you were in," he says, leading staff members to ask vendors they knew to provide RFPs on paper. They created a flowchart of their sourcing process, and realized that suppliers didn't know how it worked. They codified it and began using an online bid tool, allowing them to reach a wider audience. "Now we're not just dealing with folks we know," he says. They also created a diversity dashboard to track goals by month and by category, instead of just using Excel.
Texas Health found its biggest opportunity to increase diverse spend so far in purchased services, such as using window cleaning companies or pool cleaning companies for their fitness facilities. They are also prioritizing the use of diverse subcontractors in building projects.
Data and supply chain trends
Clinton finds data helpful in benchmarking. There are plenty of opportunities, he says, to benchmark against other health systems, but it is hard to normalize the data. "I can look at peers and see how they're doing. But if they're all crappy, and I'm just the best of the crappy," that doesn't help Texas Health, he says. There are plenty of opportunities to benchmark across Texas Health entities, though, seeing if they are using the right amount of supplies based on the census, for example. "I have to meet the goals for Texas Health. That's why I look across our system, make sure we're always getting better."
Macro trends in the global supply chain are an "utter disaster," he says, and that impacts Texas Health. He likens it to playing a game of whack-a-mole. "Every day it's something different," he says. He sees the future including artificial intelligence and machine learning to create faster demand signals, which will allow him to make the best procurement decisions.
As the world climbs out of the pandemic and moves into an endemic stage, Clinton also sees a well-run healthcare supply chain as being a competitive advantage, much like has happened in some other industries. When the supply chain normalizes, it needs to remain highly visible to senior leadership. "That will encourage everyone to become more transparent."
Villain created the first provider-owned personal protective equipment manufacturing facility in the United States for nearshoring supply.
Ochsner Health System in Louisiana experienced supply shortages during 2020 just like other healthcare organizations. But it got a head start stocking up. Prior to the COVID-19 pandemic, Ochsner's Régine Villain, SVP of supply chain network and chief supply chain officer, was paying attention to the news. At the start of 2020, a mysterious disease was impacting people in Wuhan, China. Soon after, Cardinal Health issued voluntary recalls of medical gowns made in that country. The gowns were part of custom packs, the cornerstone of operating room procedures. This one-two punch affecting China's manufacturing and labor led Villain to an "aha" realization. She foresaw others in China getting sick, which—along with the manufacturing issues—would impact healthcare supply production.
She told her team to start stocking up, as she anticipated shortages. Villain also sent a system-wide memo asking staff members to tell her what services and items were essential, as they could be in a shortage situation soon.
Villain was still relatively new at Ochsner, having joined in February 2019. She had not yet proven nor "Ochsnerized" herself, she says. But she was no stranger to crises, having worked in supply chain at New York-Presbyterian Hospital during 9/11, and she was comfortable with crisis management.
COVID-19 walloped New Orleans after the February 2020 Mardi Gras season. "I knew it was go-time. I needed to rise up as a leader and make sure my team knew I would be there with them. I wanted the organization to have a sense of comfort I was leading them through that as a supply chain leader," she says.
Going into the first wave, the health system's supply chain started in a position of strength. But she quickly realized that the supply consumption rate was far surpassing the accumulation levels. As Louisiana's largest nonprofit, academic healthcare system, and the Gulf South's largest health system as well, Villain says, this had a big impact. Villain is responsible for 25 owned and managed hospitals and more than 100 clinics, with 32,000 employees and 4,500 employed and affiliated physicians. The health system treated about 900,000 patients in 2020, she says. Villain is responsible for strategic sourcing, contracting and procurement for these entities, including all physician preference items, purchased services, capital support, procurement facilitation, logistics, distribution, transportation, and warehousing of these items.
Diversity is key
At the beginning of the crisis, Villain expanded her network outside the department, forging close relationships with clinicians like infectious disease specialists. This helped her understand their needs, set new policies, and tailor the organization's messaging. One example is minimizing how many family members could visit a sick person, partly to reduce and preserve PPE.
With so many organizations trying to secure PPE from China, "we walked away from China because we knew it was a mess," she says. Medical systems in New York, Washington, and Louisiana were surging at the same time, competing for the same resources. "Ingenuity became the key to get out of this bind."
Photo credit: Régine Villain is the SVP of supply chain network and chief supply chain officer at Ochsner Health System. Photo courtesy of Ochsner Health System.
Villain's department began diversifying its sourcing, finding vendors in Brazil, Mexico, South Korea, Australia, Germany, and Canada. Even though COVID was finding its way to these other countries, it was not yet as bad there, and every bit of sourcing helped.
Many of these vendor connections were a result of personal connections. "It didn't matter that Ochsner didn't have a relationship with the vendor," she says, but her relationships mattered. "It was those connections that made a huge difference and created a differentiating factor."
Pivoting to do things differently
Relationships also helped when working with local businesses to create PPE products. Mardi Gras is a huge industry in Louisiana, and the surge occurred just after the season ended. Factories finished with Mardi Gras costume-making pivoted to making PPE. Local distilleries proactively approached Ochsner with offers of hand sanitizer. "They weren't going to be making booze anytime soon. The primary ingredient of hand sanitizer is alcohol. We got that!" she says. The community rallied around the health system to make sure it had what it needed.
The staff also had to reconsider its usual ways of doing things, thinking creatively. That meant changing to some reusable items rather than disposable ones. It also meant implementing conservation measures. Instead of disposing of gowns after one use, clinicians used gowns longer if safety evidence showed it could be done.
"I call it going back to 'yabba-dabba-doo' time—what we did before we got so fancy," she says. It's balancing the basics without compromising safety or effectiveness. That practice is still happening, as supply chain shortages have continued with different products, especially for those without alternatives, as some medical products only have one main manufacturer. Raw material shortages, like resin, are forcing clinicians to rethink how they do things.
Standing up a factory
After the second COVID wave, Villain began talking about creating a resiliency plan which included PPE nearshoring options. This led to the biggest project Villain took on in recent years, and her proudest one at Ochsner. The health system created a joint manufacturing partnership called SafeSource Direct to produce PPE in Louisiana. It's the first provider-owned PPE manufacturing facility in the United States, she says. The partnership includes Trax Development and Vizient, which will eventually make products available to its members.
"This was almost like a mind-bending exercise because I have to be the provider, supply chain leader, and now the manufacturer in the business of making stuff," she says. "I am my own customer."
SafeSource is focusing on essential line items like gloves, gowns, masks, respirators, caps, and shoe covers, "the bread and butter of everything we do in healthcare," she says. The gloves are being produced now and going through an accelerated FDA approval process. They can be sold to non-healthcare entities without the same requirements, until they are FDA-approved. She plans to source 100% of Ochsner's glove volume through SafeSource Direct. The facility, which is 2.5 hours from New Orleans, in Lafayette, Louisiana, will produce 1–2 billion gloves per year.
Ochsner is not manufacturing the supplies to save money. "We're looking at this to create that supply assurance lifeline, making sure we have the resiliency in our ability to source," she says. That said, they plan to scale the manufacturing capabilities across multiple industries and entities. The partnership is looking at how to diversify the business to offer the products to others, so that ultimately Ochsner will not be the only customer. "The idea that we are playing a part in helping to stabilize the market for supply chain availability is rewarding," she says.
Much of Villain's time at Ochsner has been dealing with COVID. "The supply chain has been in a constant line of fire since 2020, because of PPE, the first wave, second wave, and the hurricane [Ida]," she says. "The supply chain is where everything converges. Everything everyone needs comes through the supply chain."
She credits her staff with staying motivated and positive, even with the constant pressure. "I know without a doubt that none of the things we were able to do would have happened without the people we work with."
Downey comes to the new role from Vizient, where he oversaw supply chain operations while working with 35 acute care and 200 nonacute care facilities in its purview.
In November, the Cleveland Clinic named Steve Downey as its chief supply chain and patient support services officer. The position covers the health system's global supply chain and support services, including strategy and operations.
Downey comes to the role from Vizient, where he oversaw supply chain operations while working with 35 acute care and 200 nonacute care facilities in its purview. At Cleveland Clinic, Downey's domain includes 19 hospitals with 6,500 beds, and more than 220 outpatient facilities, with locations in several U.S. states plus Canada, United Arab Emirates, and England. The system handles 273,000 hospital admissions and observations, 217,000 surgical cases, and 8.7 million outpatient visits a year.
Downey relies on his educational background in technology and engineering, as he combines an analytic and systems approach to ensuring supply chain success. In December, Downey answered five questions for HealthLeaders on where health system supply chains are headed in the industry, and at Cleveland Clinic.
HealthLeaders: What healthcare supply chain trends do you see for 2022?
Steve Downey: Shortages are the biggest problem we all face today. What we'll see in the next year is health system leaders shoring that up as best we can. It's got a ripple effect when one shortage hits and we have to communicate across all of our sites about substitutes and find products. When I joined here, one of the early things I asked about was shortages, and how do we get ahead to be sure we have substitutes, making sure [we] have better resiliency. That [we] understand the risk points for making inventory decisions and sourcing decisions. There are technology components to it, like how to get inventory visibility. How do we partner across the supply chain better? All those sorts of things are going to be a big focus for us and other health systems next year.
HL: What lessons are hospital systems still learning from the pandemic?
Downey: COVID taught us that a well-functioning, informed supply chain that acts as a system is a strategic asset. Cleveland Clinic gets that. Clinicians can operate at license, we can be innovation partners, we can talk about pushing things forward in new ways to care, with new ways to get product to patients. As a strategic lever, [supply chain] drives all things with budget and executive alignment. When folks see supply chain at that level, it becomes more than just getting product. It becomes how do you enable everything we're trying to do operationally and clinically, and it becomes much more important.
It's so hard to have everyone using the same product, across in-patient, out-patient surgery centers and clinics. The best responses are systemwide. All these changes COVID keeps throwing at us, like a new hot spot or variant, or a backorder or labor challenge … how to keep that agility in place? We've had to have effective communications, good reporting. We've had to make fast decisions, rather than go back to the old way and slow things down.
How do you react quickly and keep that ability, and keep the supply chain agile to respond? It either starts that way or philosophically becomes that way. You make a decision that you want to behave like a system. So, then the executive teams carry it, the teams carry it. Part of it also comes from having respect for your peers and being in a peer network. Each institute knows each other, and they talk cooperatively all the time. It comes even when you're talking where our growth should be, where we're going to put in a new site, or whatever that you're thinking about that system. Whose item master are we going to use, or what strategic supplier relationships will we have?
HL: Where are the biggest areas for innovation in the health system supply chain right now?
Downey: The more strategic and smooth-running your supply chain becomes, the more you're able to move forward into those new areas. I look at how care continues to be a continuum. Supply chain will follow that. I see that happen a lot in other industries, like Apple having to do repairs, having to do e-commerce, having to supply Apple stores and big box stores, all similar locations with similar inventory but different systems. Supply chain in healthcare is heading that same direction. How do we cover that continuum of care? How do your retail pharmacies, your mail-order pharmacies work with an e-commerce approach to have product where you need it, where the patient expectations are that high for service, that you're making sure you have what you need wherever you are, and that the supply chain is able to execute on that? How do you integrate the need for supplies in all of those areas? There's room to take down the barriers, the artificial walls that are in place with all the different players in healthcare, like between suppliers and distributors, GPOs and health systems, and all kinds of different data sets. There is room for innovation there.
Automotive figured that out a long time ago. If you bring everyone into the same sandbox, and bring everyone into a common language, you help each other solve problems. For example, if healthcare got better at demand forecasting, would it help manufacturers plan their lot sizes better and distributors plan their inventory amounts better?
There's a lot of room for data management. And we see much better AI and [machine learning (ML)] now on that front. But as we move to cloud, and creating these broader data lakes, the more data you have, the more we have to be smart to get something out of it. So, if we have datasets that are now global datasets, where you're bringing all kinds of information together, you need smart systems to tell you what to look for.
HL: How will you use AI and ML to improve your supply chain?
Downey: The Cleveland Clinic has a culture of being data-driven. We have folks that are dedicated to analytics. Overall, in supply chain there are a lot of metrics. There are visible clear benchmarks. You know where you stand against other subgroups. You know where your benchmarks are and continue improving them. Dashboards bring things to the right level's attention, the right visibility for the right people. You have to understand your audience for the data. Are you speaking to an institute chair, COO, CEO, your own teams, to make sure it's presented in a way that is forward-looking?
I'm going to make sure our data is fast, accurate, complete, useful, and broad. All the supply chain data should be consistent and accurate across the globe, and uses all the right categorization and standards, so a rich data set. Because what we find is, as you try to do analytics or data merges, all your data needs to be clean. If it's out of a legacy system, that takes you a month to get it. And by the time you get to it, if it's not accurate, suddenly it's useless. That's where my comments about it being agile and fast come in. We're a highly automated and driven culture already, but I think we will see that just continue to grow.
HealthLeaders: How do you envision incorporating sustainability efforts into procurement?
Downey: Sustainability and diversity make for a strong supply chain. We're a strong advocate for the Healthcare Anchor Network, with team members dedicated to diversity and sustainability. How do we continue to grow that spend? When I think about sustainability, it's two aspects: sourcing and operational. Factoring sustainability into sourcing, working with supplier partners, ensuring we're buying the best sustainable option, the best resilient option, the best diverse option, that you're weighing all those factors. The other side is the operational part. How are you making sure, as the product gets to you that you don't overnight everything? So, you're not using air service you don't need. Or are there times we didn't leverage facilities close to each other? Did we expedite something that was just next door? Operational can be more sustainable. There always will be room there as well.
With seven hospitals and multiple ambulatory centers, The Ohio State University Wexner Medical Center takes a standardized and data-focused approach to supply chain management.
While Hal Mueller worked briefly in healthcare before, the bulk of his corporate life was spent in purchasing at Ford Motor Company. Auto parts aren't healthcare supplies, but there are similarities. He brings that perspective to his work as chief supply chain officer at The Ohio State University Wexner Medical Center (OSUWMC). "In some ways, there are parts of the business world where healthcare gets closer and closer to a manufacturing environment," he says. "We talk about variation being the enemy of quality. We like to optimize variation; it's not about minimizing variation."
There are good clinical reasons for some variation, he notes. "That said, the manufacturing mantra is a standard bill of material, a standard bill of process." That allows the supply chain to remove unnecessary variation from the system, by connecting with clinical leaders and letting them guide the process.
Enlist the medical staff
As part of this clinical inclusion, Mueller helped hire a surgeon as the medical director of supply chain three years ago. This medical director spends 20% of his time on supply chain issues, and the remaining 80% on his clinical, research, and teaching responsibilities. "He represents the overall umbrella for all clinical specialties" in the supply chain realm, Mueller says. He oversees the associate directors of supply chain in orthopedics, cardiology, and nursing, and they all help vet potential supplies and liaise with the medical staff.
While OSUWMC is not the only medical center with that role, "it was a total win for us to decide to go down this path. I was ecstatic about the opportunity," he says. The group purchasing organization they're part of holds a regular forum of 15–20 medical directors of supply chains that meet to discuss issues.
Hal Mueller is the chief supply chain officer at The Ohio State University Wexner Medical Center. Photo courtesy of The Ohio State University Wexner Medical Center.
Commodity management and strategic consolidation
The OSUWMC includes seven hospitals with about 1,580 beds, and a number of ambulatory centers in the Columbus area. When Mueller arrived at OSUWMC in 2015, he brought commodity management and strategic consolidation of spending inside the sourcing team. Previously it was dispersed, disjointed, and inconsistent, with people approaching the market in non-standardized ways. To bring the functions together, Mueller's team divided the supplies into 210 commodity categories and divided those into three groups. The supply chain department focuses on one-third of those annually, usually renegotiating three-year contracts. This approach has enabled them to consistently go through their spend portfolio, addressing a subset of supplies yearly in a structured format in a repeatable process.
OSUWMC tries to include clinical information in sourcing. That means not just discussing vendors and pricing, but incorporating processes, component standardization, and utilization quantities. "Our mantra is typically, 'Use less, waste less.' It's a key element of what we do," he says. However, there is always an opportunity to improve upon the financials. The health system focuses on getting to industry benchmark pricing and usage levels.
Kanban inventory management
In 2017, OSUWMC began moving to the 2-bin Kanban system of inventory management. Each type of supply is placed in two bins, one in front of the other. When the first bin is empty, it's scanned for replenishment and the second bin is moved forward. As a standard manufacturing approach, Mueller says, it lets the health system see and track the product flow through the organization and provides data to use for procurement. OSUWMC can minimize the time spent ordering, not order to excess, and have almost no expired inventory. The supply chain department uses the data to determine how long each bin usually lasts. If the normal period for one supply is 10 days and the bin is depleted too quickly, there's a problem. It could indicate a larger bin is needed or it could be another issue.
The Kanban system allows OSUWMC to use a systematic, measured approach to the supplies and replenishment. "We can have a discussion based on real-time data as opposed to "it looks like we need more,' " he says. "We're trying to be a data-driven organization, which means you have to get the data."
Mueller says the Kanban inventory management process has been a huge success. "It was rewarding and surprising, the value it brought to our organization because of the visibility it gives you throughout the organization," he says. "The adoption rate from our partners and hospitals has been an interesting one." Initially the 2-bin Kanban system was not well received but now it's not only wanted but expected. It's shown the core competence of a well-trained supply team and provided value to the organization. "This has been an opportunity to look from the receiving dock to the bedside, and all the opportunities in between. It exceeded our expectations in how much it would help the organization."
Pandemic-related changes
Like other healthcare systems, OSUWMC's supply chain department had to make changes when COVID-19 hit. During the initial months of the pandemic, "one of the most important things we did was get control of the demand signal and get control of the receipt and the disbursement," Mueller says. Prior to the pandemic, any area of the organization could place orders with the distributor. If one department got its order in first, that department would beat out other departments for supplies like N95 respirators. "It prevented various groups from ordering 10 boxes," he says. Mueller changed the system so OSUWMC only placed one order per day, and the orders arrived at a central point for receipt. For scarce supplies like N95 masks, the health system scanned the masks as they handed them out to staff members for tracking purposes.
The next step was to stand up a warehouse in less than a month. OSUWMC transitioned from a large space used collectively by different departments, to a fully operational medical-surgical warehouse. Previously OSUWMC almost exclusively relied on its distributor for catastrophe-type surge supply requirements. "Like many groups, we decided we wanted a bigger buffer between ourselves from bedside to distribution," he says. The organization now maintains a 90-day inventory of certain supplies, like PPE.
OSUWMC worked closely with its own disaster preparedness team as well as others in Ohio. Daily communications with state government offices helped steer it or other organizations in need to vendors. They maintained the relationships, even with most PPE issues abated. With other supplies, though, it's like whack-a-mole. In the early stages, Mueller could look at a medical worker head to toe, to see what was needed. Now it's difficult to know each day where shortages will be. Between California port problems, national trucking issues, and aluminum shortages that affect crutches, "we're chasing a lot of product substitutions and product shortages because of freight challenges."
Priorities for 2022
As for OSUWMC's 2022 supply chain priorities, "we're trying to make sure we reassess supply resiliency," he says. The health system is in reactive mode, navigating supply assurance and disaster preparedness. Backorder management is a full-time job. "That will continue, I estimate, through 2022."
Proactively, Mueller's department is performing value-stream mapping to understand the entire value chain of what they buy, starting with raw materials. It's a team effort, as it works with the GPO to gain visibility. If a hurricane hits Malaysia, the department will know what components will be affected. While it evaluates suppliers, it's also proactively looking at diversity, to continue expanding on current programs.
Editor's note: This story was updated on December 2, 2021.
With seven acute care hospitals, the Texas health system is using innovative ideas to trim its $1.4 billion supply chain budget, while increasing efficiency.
When David Peck arrived at Houston Methodist in 2018, there was no centralized purchasing. Each entity of the health system purchased its own goods. Peck, vice president of supply chain management, centralized all purchasing at the corporate level, delegating it into pods: The operating room (OR) buyers. The laboratory buyers. The general medical-surgical buyers. And so on.
Supply chain started using Global Healthcare Exchange (GHX) tools to place and chase orders, allowing technology to do the follow-up work instead of Houston Methodist employees. The health system onboarded vendors to the GHX EDI platform. "When I got there, we had seven to eight transactions on the EDI platform. Now we have more than 200," he says.
With military precision, the former Navy officer set out to decrease supply delivery traffic at its seven hospitals, implement robotic picking at its warehouse, set a drone delivery plan in motion, and, when COVID-19 hit, arranged for local PPE manufacturing. During the pandemic, Peck's department also completed a $50 million cost savings initiative to renegotiate contracts and standardize products across the system.
Consolidated service center: standardizing delivery, reducing truck traffic
Houston Methodist leased 250,000 square feet in the 1.3 million SF distribution warehouse Medline built, to stand up a consolidated service center (CSC), to do all centralized receiving for the health system. The only deliveries that go directly to the hospitals will be via next-day air early morning, or anything mandated to go directly, like frozen bone and tissue, and radiopharmaceuticals.
The packages arriving at the CSC will be delivered by Medline in a 3PL backhaul. "Every item is received and accounted for the same way," he says. Using this method speeds up the invoice processing time, making it more uniform.
This method also reduces congestion on crowded campuses, by eliminating most delivery trucks. The Medline trucks make nighttime runs when it's less busy. It allows the hospital to better use its personnel, so they are not stationed at the receiving dock, he says. Peck says he is not sure whether this method currently lowers costs, but it improves operations and efficiency. In the next two years, Houston Methodist will maintain the seven acute care hospitals' OR inventory at the CSC. "That would truly reduce cost," he says. Currently each hospital OR department is ordering supplies separately.
Buying the beds
The CSC will have a bed depot to manage the rental bed fleet, and store and maintain their own beds. "Most places don’t think that way," he says, as most systems just lease beds. "For us, it’s a way to control our costs. It cuts down on rentals." The problem with bed rentals is that when a patient no longer needs the bed, the hospital pays for it to sit in a hallway or get stored somewhere else, until someone realizes it's a rental and it's returned. "If we own the bed, we can move it in our system much better."
Houston Methodist has 2,400 beds, with around 180 beds moving around the system at any given time. Special bed types might accommodate a bariatric patient or a post-orthopedic procedure patient, and these beds are not typically kept in the rooms. Sometimes the health system rents hospital beds, like during the COVID-19 surge, when extra beds were needed. Peck estimates that there's an 18-month pay-back when buying a bed. Buying 100 beds costs $1.3 million, and the savings can add up.
Robotic picking
The hospital system sends 7,000 lines of product a night to the distribution warehouse for product picking. Of those, 6,300 are ordered at the lowest unit of measure, so each item is individually picked instead of gathering a case or pallet. Each evening, the Swisslog robotic picker selects the items for the medical-surgical floors, like Band-Aids, to be delivered at night.
Houston Methodist is increasing warehouse capacity to put in OR supplies, and it will provide a purchase order, and that case will be picked individually, with items put in a tote for hospital delivery. "We’re a year away from doing that," he says. It involves ensuring the surgeon's preference cards are correct, a process taking place now. "It will take one case at a time, one hospital at a time to make sure we do that right."
Drone deliveries
Houston Methodist is exploring an opportunity with Zipline to use drone aircraft for quick deliveries or lab deliveries from the CSC hub to Houston Methodist at Texas Medical Center. Due to traffic, driving 40 miles in Houston can take 1.5 hours. The drone can be deployed to help with these pickups and deliveries throughout Houston. The drones have a 100-mile range, so they can make it from the CSC to a hospital, pick up or drop off the package weighting 10 pounds or less in a designated parking spot, and then return to the hub's landing zone or capture site. "We're figuring out the best way to do all this," he says. Peck estimates that the health system is six to eight months away from putting the drones in action, and at interview time, were finalizing the contract. Houston Methodist will likely start with two drones and expand as needed.
Local manufacturing
During the early months of COVID-19 in 2020, Houston Methodist was caught short on PPE like all hospitals. The health system developed a "pretty robust 3PL program and have partnered with local manufacturers in Houston to produce all of our isolation gowns, and all PPE except for N95 masks," he says. Houston Methodist no longer relies on Chinese manufacturing for PPE except for 3M's N95 masks. "We've gone from less than 5% onshore production to U.S.-made products," he says. Accounting for North American production, including Mexico, the hospital system is at close to 30% of its med-surg products manufactured on this continent. It worked with a manufacturer to pilot and produce nitrile gloves in Houston as well. Houston Methodist will buy 14 million pairs a month, or 25% of the gloves made, and the rest will be sold to other buyers.
The medical system is also working with a local company to produce saline. "We were all caught short in 2017 when Puerto Rico was wiped out in the hurricane," he says, as Puerto Rico is a key saline manufacturer. The local company is working with the FDA to get clearance for its product, Peck says. "The FDA is fully supportive. This will be the first onshore (saline) manufacturing company in the U.S." Efforts like these are helping Houston Methodist mitigate potential supply shortages and become more resilient, rather than relying on China and other Asian countries, he says.
Standardization
Like many health systems, Houston Methodist is looking to standardize more of its inventory to lower costs. Its $50 million initiative, completed during the pandemic, involved renegotiating contracts and analyzing data to understand physician practice utilization. One analysis involved supplies for a laparoscopic cholecystectomy. The health system found that the average cost was $30.25 for all products used in the procedure. The physician champion for reducing supplies for this procedure was the second-lowest cost user of product, 10 to 15 cents ahead of the lowest-cost user. "He went to that physician to see what he was doing differently," Peck says. That physician used Band-Aids instead of sutures on the three incisions. The physician champion tried the Band-Aid technique and it worked.
Supply chain expenses at Houston Methodist are $1.4 billion a year. "We're number two behind labor," he says. "I tell the HR senior VP, as long as you’re spending more than I am, I don't have to worry."
Healthcare supply chain leader LeAnn Born of M Health Fairview learned pandemic lessons to better identify the right leaders for change, pursuing action and not perfection.
The COVID-19 pandemic was challenging for healthcare systems in many ways. But even supply chain leaders firmly entrenched in their roles learned lessons that will improve their operations for years to come. LeAnn Born, vice president of supply chain at M Health Fairview is one such leader. Born has been at the supply chain helm of this Minneapolis system since 2010, responsible for supply chain at eight hospitals, more than 40 primary care clinics, and outpatient services like healthcare transportation.
At some point the pandemic will be in the rearview mirror, but it's not there yet. "It was career changing, and it changed our industry significantly," she said. On the bright side, the pandemic brought positive strategic attention to the healthcare supply chain, even if some of those strategies were the same.
LeAnn Born is vice president of supply chain at M Health Fairview. Photo courtesy of M Health Fairview.
Lowering costs
In 2019 and before, it was already common wisdom to lower costs by using a single vendor rather than multiple vendors for the same item type. And it was best practice to engage physicians to standardize preference items. "I think the pandemic brought a little more reality to what those strategic opportunities look like," she said. In examining what was unique about an N95 respirator, the supply chain team consulted with physicians before choosing the most appropriate vendors and models. They applied this experience and learning to orthopedic total joints and products used in neurosurgery cases as well.
Learning how to identify the right leaders to speed up the decision process was vital, whether these were formally leaders per their hospital roles, or informal physician champions who could help get projects across the finish line. "We learned how to do things quickly during the pandemic," she said, whereas before it might have taken months to work through a project to achieve consensus. "The pandemic taught us to bring the right people together, and don't pursue perfection. Instead, get good enough and move forward."
Finding those leaders can be difficult. In some hospital systems, talking with one chief of surgery to make a supply change isn't difficult. "I don't have a chief of surgery. I have eight," Born said. With a recent merger mix of employee and independent contractor physicians, "there are extra steps for the supply chain I lead." Born is working to develop a more efficient structure to identify the various physician decision-makers and physician champions, to avoid needing to track down individual doctors or department in every hospital. "That's where I'm in transition, but I know some other health systems have that operating very efficiently."
Transitioning out of the pandemic
Supply chain leaders and healthcare personnel are struggling to reenergize and reflect on what happened in 2020 and 2021, as there has not been much of a break. While cost control was always a supply chain focus, the pandemic highlighted the need for additional cost controls at M Health Fairview. The lockdown meant fewer elective procedures, the very procedures that were needed to generate revenue. Born and the supply chain department are focusing on standardizing products and negotiating better contracts with vendors. They are using fewer vendors in the cardiac, orthopedic, and neurosurgery area, which is trimming costs. Plus, physicians are more engaged and understanding about the hospital's economic requirements.
In terms of negotiations, the department wants vendors to understand that the healthcare system can deliver the volume or market share needed to meet the rates offered. "I want to make sure we stay true to that commitment," she said. It also means ensuring that the system's clinical partners are involved in product decision-making and comply with these decisions. "It is important for physicians and operational leaders to understand our contracts, the commitments made, and ensure that we are living up to those commitments." That means saying no to using new vendors when the clinical requirements are met by existing contracted suppliers. It's differentiating when a clinical requirement can't be met with the existing products and supplier, versus when someone just doesn't want to use the contracted supplier.
Getting through to physicians
Identifying the right physician leaders is one task. But getting them on the phone or in the room to discuss supply issues is another. What's changed with the pandemic is that the stakeholders are now more understanding of how and why these changes are proposed, and they're responding more quickly. "We used to have to spend a lot of time gaining buy-in from people," she said. Physicians get a bad reputation for resisting supply changes, she said, but "when we engage them at the right point in time and support them with information about how and why we're doing this, I generally find that the physicians are more than willing to get engaged."
Gatekeepers like operational leaders and support staff are great at blocking physician access. "Sometimes they try to prevent opportunities to go to the physician, thinking the physician will resist it," Born said. Time is their biggest barrier and Born spends a lot of time finding ways to get five minutes with the physician. When using formal channels, the staff may want to schedule six weeks out. Through relationship-building and finding the names of schedulers, it's easier to get in. It's also easier to ask for five minutes rather than a meeting with four people. "Talk to the scheduler and say [the doctor] is open to meeting," she said. "It's building confidence in them that the doctor won't get upset if you schedule that conversation."
Once in the room with the doctor, she delivers a crisp, clear message in a few minutes. "I like to give all the background of the situation but that's not what they want," she said. Instead, she uses the SBAR formula: situation, background, assessment, recommendation.
Using data to inform in-house practices
M Health Fairview uses data to monitor contract compliance and benchmark pricing. "Where we are spending more time and achieving impressive results is through looking at how products are used and variation that exists in use of products," she said, including with the physician leaders. "This leads to some wonderful dialogue. Often, they are not aware of the difference in price for different products and are open to using the products that cost less and deliver the same results."
Physician-to-physician conversations can impact how products can be used more efficiently and effectively, saving money and with less waste. "We are not to the point of directly linking use of certain products to certain outcomes, but we can verify that outcomes are comparable or even better with the use of fewer or less expensive products," she said.
Moving into 2022
Planning for 2021 was reactionary, given the pandemic. "I feel like I've been chasing my tail," Born said. "Now we have an ability to plan efficiently for 2022 and will go in more informed." One focus is managing product disruptions and unpredictability. Container ships have not been reliable, and production lines are shutting down due to labor issues and COVID-19 lockdowns in other countries. These are product lines she never worried about before.
As a result, her supply chain team created lists of critical items they are tracking. They've identified alternative products vetted by their clinical teams. "Some of these items have alternatives that go four to five deep," she said. "Sadly, it is common that the first, second, third, etc. alternative is not available when the primary product is not available."
While M Health Fairview traditionally uses as much automation and market intelligence as possible, they are finding that the experience and acquired talent of those on the supply chain teams are more effective than the data-driven tools that worked for them in the past. "People following their gut or recognizing a trend before it becomes obvious are the types of things that are helping us get needed products today."
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