IDN Summit (IDN): Gene, give us an overview of ROi and its relationship with the Sisters of Mercy Health System.
Gene: Resource Optimization & Innovation (ROi) is the for-profit entity through which the Sisters of Mercy Health System conducts its group purchasing, clinical consulting, distribution, transportation, pharmaceutical repackaing, print shop and custom procedure pack manufacturing activities.
ROi was founded by Sisters of Mercy in 2001 with a mission to improve the financial, operational and clinical performance of our customers through a clinically integrated supply chain. While the original purpose of ROi was to solely drive value for Mercy, we have recently been commissioned by Mercy’s Board of Directors to expand service to other healthcare providers that share our passion for supply chain excellence, integration and reform.
IDN: Since you’ve gone to a Consolidated Services Center (CSC) model what have you found to be some of the benefits and also challenges? How are you addressing the challenges?
Gene: Sisters of Mercy has hospitals in Missouri, Arkansas, Oklahoma and Kansas. Some of our hospitals are in rural areas and the major distributors could not service them on a consistent, low cost basis. As a result, Sisters of Mercy decided to build a CSC and internalize MedSurg and Pharmaceutical distribution. One of the benefits we have seen from the CSC is vast improvement in fill rates to our rural hospitals. We deliver to all our facilities daily from the CSC, which has allowed the hospitals to reduce on hand inventory by 42% and eliminate almost 3,000 weekly stock-outs of needed supplies. Another benefit of the CSC is that it has become a platform for future growth of innovative services. For example, we launched a clinical impact program called MercyMeds that has eliminated almost 18,000 annual medication errors by integrating technology, medication dispensing cabinets, pharmaceutical repacking and distribution. We used the CSC’s infrastructure to manage all the repackaging, barcoding and distribution of pharmaceutical supplies for Mercy’s facilities. Another example is the recent construction of our FDA regulated Custom Procedure Pack manufacturing facility that has resulted in significant cost reductions and improvements in product quality and standardization. The Custom Procedure Pack operation is located within the CSC and is perfectly integrated into the CSC operation.
IDN: OK let’s suspend reality for a moment and appoint you ‘Healthcare Czar’. You can change anything you want to change with regards to the current healthcare delivery systems in the US to improve patient care and affordability, what would you change? What would you not change?
Gene: I believe that care needs to be more aligned and integrated. We need to harness and use information technology, through an electronic patient record, to deliver care at locations that deliver the best outcomes at the lowest cost. Physicians need to be at the heart of this integrated model, leading its development and implementation. As an industry, we need to better control and rationalize the adoption of new technology and utilization of supplies, which we believe are growing at a much faster pace than the cost of labor and will in the future surpass labor as the largest cost element for a healthcare system. We need aligned incentives for physicians, providers and suppliers to collaborate on radically changing the quality, cost and delivery of care.
IDN: You’re still ‘the Czar’, what would you advise the federal government to do in regards to potential health care reform?
Gene: I am mixed on the government’s role in healthcare reform. On one hand, being the largest payer, the government has significant leverage over the economics of healthcare and can force players to change their business models. I greatly sympathize with people that are uninsured or under insured and thus not receiving the care that they and their children need. So in this respect, I would like to see the government help reform our industry. However, I am skeptical that the government will mandate a solution that truly fixes healthcare’s access, quality and affordability long term. So, at the end of the day I am mixed on this issue. The only advice I would have for the government is to seek plenty of input from experts within our industry that live and breathe our challenges and opportunities every day. The one area where I would definitely like to see more government intervention is in helping our industry adopt and implement data standards, including Unique Device Identifiers, which will enhance patient safety and reduce unnecessary costs.
IDN: So do you think healthcare reform will happen this year and what will it look like? How do you think it will impact ROi?
Gene: Well, if history is any indication of what can be expected in the future, then I would say that we shouldn’t expect much radical reform from Washington. However, President Obama is certainly determined to buck the trend, so at this point I tend to think that some level of reform will take place. If so, ROi is well positioned to respond to the changes. Because we have internalized so many parts of the supply chain, we can be nimble in our reaction and model re-design to ensure that the evolving needs of our patients are met.
IDN: Since coming to ROi, what’s been a key initiative you’ve worked on and how has it impacted Sisters of Mercy and/or a particular hospital?
Gene: I have been at ROi for two years and in that time we have internalized Custom Procedure Pack manufacturing, consolidated our Trans program (80+ vehicles across Mercy), consolidated Print Shop operations, internalized Surgical Instrument Repair and started a medication formulary development initiative. Life has been very busy, to say the least. I am proud of all of the accomplishment and most importantly our fabulous team that has driven them. What all of these initiatives have had in common is a strong business case that delivers clinical, operational and financial benefits, developed with input from our customers and includes dedicated resources for implementation and ongoing management. We have found these key elements to be critical success factors for ROi.
IDN: What would be three key areas you’d advice health systems CEO’s to focus on concerning their supply chain?
Gene: My first advice is to view Supply Chain as a key strategic component of their business model. If viewed in that light, and invested in accordingly, the Supply Chain business should produce significant financial benefits to the organization. CEOs need to project the growth of supplies compared to labor into the future. If their organization is like ours, we foresee a potential cross in 2040 where the costs of supplies may exceed the cost of labor. If so, supply costs need to be managed in a strategic manner to ensure that future growth trends are contained. The second piece of advice is to ensure that the right Supply Chain leadership is in place and that leadership shares common metrics with the providers that are served. Common metrics will ensure that everyone is pulling in the same direction, which is not always the case when clinicians and supply chain staff are involved. My third advice is to give the Supply Chain leader authority to question and reduce all non labor expenses, not just supplies. We often view Supply Chain solely as medical and pharmaceutical supplies, but there are many other non-labor cost categories that need to be managed and often lack an owner for contracting and fiscal responsibility.
IDN: How could suppliers work better to partner with ROi? What are examples of a good partnership(s) you can share with us?
Gene: We would like to see suppliers be more proactive at bringing creative solutions to ROi. Unfortunately, most suppliers are so focused on growing their relationship through product sales, they ignore the fact that innovative organizations like ROi are looking to expand partnership and collaboration through supply chain strategies. As an example, we started a VMI program with Johnson & Johnson that is yielding positive results for both organizations and bringing us closer to each other. We are working on a Perfect Order and Data Standards Implementation initiative with BD that is helping both organizations remove inefficiencies and reduce unnecessary costs. These are great examples of large, complex suppliers thinking strategically about customer relationships and bringing out-of-the-box solutions to the table.