Speed to Supply Chain Savings

A successful implementation and strong HealthTrust support through conversions helped Sisters of Charity Health System exceed its savings goal

When Andy Motz started three years ago as vice president and chief procurement officer at Cleveland, Ohio-based Sisters of Charity Health System, he had one directive: centralize contracting and find supply chain savings for goods and services at the system’s four wholly owned hospitals. Those hospitals are St. Vincent Charity Medical Center in Cleveland; Mercy Medical Center in Canton, Ohio; and Providence Hospital and Providence Orthopedic Hospital, both in Columbia, South Carolina.

The system was already a member of another group purchasing organization (GPO), but the hospitals—all mid-sized and geographically dispersed—were responsible for their own contracting. Most of the contracts were tier-based on dollar amounts, so the hospitals often paid for products at the entry-level tier.

“From a procurement standpoint, we didn’t have a lot of pull with specific suppliers,” Motz says.

In July 2013, Sisters of Charity dropped its former GPO relationship and switched to HealthTrust, engaging with the core GPO contract portfolio as well as with SourceTrust for medical device sourcing and ServiceTrust for purchased services contracting.

Because HealthTrust pricing is based more on market share, the system saved $10.7 million in the first 15 months of its membership—$1.8 million more than initially projected. (See box below for a breakout of the savings.)

Previously, Sisters of Charity’s supply cost was close to 24 percent of net patient revenues. Now, one hospital is consistently under 20 percent and the others are dropping. Motz says the system’s ultimate goal is to hit 18.5 percent across all facilities.

“With HealthTrust, we’re much more system-focused,” Motz says. “If one hospital wants to look at a new device, we look at it collectively, and our first choice is always a HealthTrust contract. We find significant value in being part of a GPO that has the strength of billions of dollars of purchasing power behind it.”

Switching to HealthTrust 

It didn’t take long after Motz started at Sisters of Charity for senior leaders to engage him to switch GPOs. With a background in consulting, he had worked with all of the major GPOs, including Consorta, which merged with HealthTrust in 2007.

Sisters of Charity started having conversations with HealthTrust leaders in October 2012 and a market basket analysis soon followed, which showed a $5 million savings opportunity just from HealthTrust national contracts.

Motz’ analysis of physician preference items (PPIs), particularly at Providence Hospital and Providence Orthopedic Hospital, showed even more savings potential. By December, Sisters of Charity was achieving a solid case for switching to HealthTrust. “We were pleased to work as partners with HealthTrust to achieve the best value this new relationship could bring,” Motz says.

Sisters of Charity is a Catholic health system devoted to healing individuals, families and communities in Ohio and South Carolina. It is often at the forefront of identifying and addressing unmet needs in the communities it serves. Opportunities to increase efficiencies, such as those achieved through HealthTrust, have a major influence on the system’s finances and extension of its mission.

“It truly has an impact,” Motz says. “Lowering the cost of the goods we purchase supports good stewardship of our resources and extends our healing mission.”

Successful Implementation

Although the majority of savings were realized on the supplies, services and medical devices Sisters of Charity was already using, Motz knew clear communication and collaboration would be central to implementation success. As the leader implementing contracting at the corporate level, he engaged support from HealthTrust to help organize teams and, in some cases, assume the difficult work of ensuring conversions were done correctly.

Once the contract with HealthTrust was signed, Motz led a large kickoff meeting. He brought supply, pharmacy and food directors from each hospital to Cleveland to meet with the HealthTrust implementation team. Director of Implementation Alia Schmidt helped support the med/surg conversions that achieved $4.2 million in savings over 15 months.

About 80 percent of the system’s products crossed directly with HealthTrust contracts, but Motz and his teams still took the conversion process in stages, starting with sole-source contracts, then moving to dual-source contracts and finally the multi-source ones.

About 80 percent of the system’s products crossed directly with HealthTrust contracts, but Motz and his teams still took the conversion process in stages, starting with sole-source contracts, then moving to dual-source contracts and finally the multi-source ones. Weekly meetings between hospitals’ personnel, HealthTrust and med/surg distributor Medline helped keep the conversions on track. Team members met weekly by webinar for five months until they were satisfied that Medline had the system mapped to all the corresponding HealthTrust contracts.

“Getting correct pricing wasn’t perfect for every contract conversion, but because of the weekly meetings we were able to work through any discrepancies and correct issues as soon as they started,” Motz says.

“You can’t take it for granted that signing a letter of commitment will result in getting the correct pricing from the supplier,” he continues. “You have to follow up with your distributor to verify the contract number and proper tier are being recognized.”

member_success_2Concurrently with the med/surg conversions, pharmacy directors at each of the four hospitals worked with the HealthTrust Pharmacy team on conversions that saved the system another $900,000.

The pharmacy purchasing contract began in October 2013 and by December of that year, Sisters of Charity was 95 percent compliant.

In addition to clearly communicating the directive that the first choice should be buying through a HealthTrust contract, Motz says it helped that HealthTrust had a close working relationship with Sisters of Charity’s pharmacy distributor AmerisourceBergen.

“There was no learning curve there, because AmerisourceBergen already knew what the correct pricing should be,” he says.

On an ongoing basis, Motz uses Health-Trust’s inSight spend analytics tool for both med/surg and pharmacy to look for new savings opportunities and to help ensure his hospitals are paying the right price for products they buy. “And inSight helps us monitor our purchasing habits,” Motz says. “If we’re buying anything off contract, our goal is to get it on a contract.”

At St. Vincent Charity Medical Center alone, Motz has used inSight to identify $80,000 in pharmacy cost savings.

PPI Potential 

Actual savings exceeded projected savings due largely to the success of medical device sourcing agreements set up through SourceTrust. Still, contracting for medical devices had its fair share of obstacles.

At St. Vincent, annual spend on orthopedic implants totals $3 million across 10 suppliers, and annual spend on spine implants totals $4 million across 14 suppliers.

“When you are spread across that many suppliers, you don’t have much purchasing power,” Motz admits.

SourceTrust was able to help Motz improve St. Vincent’s medical device purchasing efficiency through price concessions. Motz says, “Because HealthTrust is able to connect us directly to the device manufacturer in some cases, we’re eliminating extra distributions markups that can be a big part of implant costs.”

Sisters of Charity leadership and Motz are now engaged in a new project with St. Vincent leadership and medical staff to consolidate the hospital’s suppliers and products. Armed with potential savings data from SourceTrust, they are hopeful it will result in an additional $2 million in savings. Even at the other hospitals where orthopedic and spine devices were being sourced across just three suppliers, SourceTrust was able to help Sisters of Charity save more than $4 million.

With these and similar projects, Motz credits the success of achieving the supply chain savings while continuing to advance the quality of care provided to patients across Sisters of Charity Health System, in large part, to the involvement of the clinical care teams in the decision-making process for cost-saving measures. The pharmacy team and medical staffs at each of the hospitals are involved every step of the way in the decision-making process for supplier reduction and pharmaceutical streamlining.

Quality of care is preserved and advanced by the ability to reallocate savings to other areas of facility need. In fact, Mercy Medical Center achieved accreditation as a Joint Commission Certified Total Hip and Total Knee Center of Excellence during the supply chain transition process.

member_success_ChartThroughout this and other work, Motz engages the support of the SourceTrust team, including Chris Stewart, assistant vice president of clinical program development and delivery, and Keith McReynolds, clinical director, to help facilitate changes.

For example, as part of the SourceTrust agreement, Sisters of Charity switched to a new model of PEEK interbody spacers for use in spine surgeries.

“Chris had personal conversations with our physicians, which was instrumental in gaining physicians’ input and support,” Motz says.

Meanwhile, McReynolds helped Providence Orthopedic Hospital achieve national benchmark pricing with its three orthopedic suppliers by participating in meetings with the hospital’s physicians and leadership, as well as with its suppliers. The suppliers sat across a table from the hospital’s physicians, who laid out their pricing expectations. As a result, all three suppliers adjusted their pricing.

“A big part of our success was having physicians, the ones actually using the products, deliver the message to suppliers,” Motz continues. “And, we couldn’t have gotten them on board without the support of HealthTrust.”

HealthTrust, in turn, applauds Motz and his fellow Sisters of Charity leaders for not being afraid to tackle the transition.

“Leadership at the system level has been the driving force behind Sisters of Charity achieving and exceeding its goal,” says Jim Dinnegan, HealthTrust account director. “Andy empowers the supply chain and value analysis teams to accomplish common savings goals together, making the system stronger.”

Jay M. Kirkpatrick, HealthTrust’s MidAmerica Region CEO, agrees that a team approach made the difference. “Change is typically hard, but IDNs that embrace it, engage with their physicians and clinicians, and take a leadership role in driving down supply costs are the ones that truly benefit from HealthTrust’s portfolio of services,” he says. “Andy and the entire team at Sisters of Charity have done all of these incredibly well.”•