Hand in Hand With Stakeholders to Create Savings

In the space of four years, Matt Mayer managed to cut supply costs and increase savings at Franciscan Alliance, one of the largest Catholic healthcare systems in the Midwest—and not by just a negligible amount. With Mayer serving as the vice president of material resources for the company’s eight hospitals and 14 campuses, the organization spent $28 million less on supplies in 2012 for equivalent care delivered than it did four years earlier. That equates to about a 15 percent supply cost reduction on its previous $190 million a year supply spend.

Although the process of realizing such significant results did elicit some pushback from physicians and other clinicians, Mayer—who was HealthTrust’s 2012 Operational Excellence Award winner—recognized early on how important it was to be transparent about the consolidation process and be willing to listen to the concerns and needs of healthcare professionals.

“I approach the situation from the standpoint that, first and foremost, we have to deliver the highest quality of care possible. But we also have limited resources. Since the physicians, nurses and clinical department heads are the experts in delivering care to our patients, I want them to tell me how we can work better together to reduce costs without negatively impacting care,” he says.

Mayer explains that he, together with his corporate material resources staff and hospital materials management directors, provides data and supply chain expertise to clinical staff. “I have a terrific group of hospital materials management directors to work with,” he says. “In the end, though, the physicians, nurses and clinical managers are the folks who need to come together and make sound decisions so that we can deliver high-quality care and continue to keep the doors open.”

Mayer knows that technologies and vendors change continuously, so it’s important to work hand in hand with clinical staff to get the best products at the best prices. “I’m fortunate to have Sandy Vitale, RN, CNOR, here at our corporate office to help work with the nursing and OR directors to achieve these cost-reduction goals,” he adds.

“From the vendor’s perspective, we find, if you do what you say you’re going to do, and vendors actually see market share conversions materialize and the volume that was promised is delivered, that makes you a very powerful force in the market. But we can’t do it without the doctors’ and clinicians’ support. No health system can. It is truly a collaborative effort.”

HealthTrust Support

Mayer works closely with HealthTrust to analyze contracts and participate in large contract buys. “For one thing, through HealthTrust we are a part of a marketplace with gigantic committed volume. That helps bring down the pricing,” Mayer explains. “But at the same time, we feel like we have a strong voice in making decisions about which vendors and products are awarded. We’re involved in all of the aspects I expect to be involved in for the actual negotiation of products.”

“Through HealthTrust we are a part of a marketplace with gigantic volume. That helps bring down the pricing.”
–Matt Mayer, vice president of material resources, Franciscan Alliance

Mayer credits a lot of his cost savings to the support he gets from HealthTrust, especially when it comes to commodity products purchased.

“The GPO is working for everyone,” he says. “It’s almost like I’ve got a Wal-Mart behind me taking care of those small details, so that we can concentrate on the more delicate areas like physician preference items (PPI).

“However, there, too, I receive help and expertise from HealthTrust. In just two implantable device product categories alone, SourceTrust is on track to help us save more than $6 million a year. That $6 million will go directly to our bottom line. If our net operating income is 4 percent, we’d have to generate another $150 million a year in top-line revenue to have that kind of financial impact. It’s extraordinary.”

SourceTrust Engagement

With healthcare reform laws in place, Mayer has to look at every division of his hospitals and campuses with a watchful eye to search for extra savings. Fortunately, he has received significant help in reaching that goal by engaging with SourceTrust.

With an emphasis on clinical expertise, leadership participation, physician collaboration and vendor engagement, SourceTrust provides custom contracts in physician preference areas, such as spine and orthopedic implants. SourceTrust’s team has experience in clinical operations, custom contracting, finance and legal—but the process is also collaborative and hands-on, so that people like Mayer can fill specific needs and goals.

“We’re looking at areas we had almost given up on, like implants used in the OR,” he says. “We’re working with physicians to negotiate and standardize purchasing with certain vendors and on certain products.”

Looking Forward

The sophisticated supply chain organization that Mayer has implemented also contributes to Franciscan Alliance’s significant yearly supply savings. The health system was one of the first to utilize Electronic Data Interchange (EDI) for automatic processing of POs and invoices, and it utilizes one standard materials management system, has one standard Item and Vendor database, and has centralized purchasing and accounts payable for its 14 hospitals.

Franciscan Alliance’s central purchasing director, Monique Deguara, is a key reason for its streamlined purchasing success, Mayer adds. “We’re spread out over 250 miles and two time zones. Without good processes, product standardization and the commitment to customer service that Monique has brought, central purchasing would not work.”

Mayer and Keith Fulks, director of contract administration, cardiology and capital equipment, also facilitate good communication between their facilities’ cardiologists and catheter lab specialists when ordering supplies. This arrangement was implemented in the 1990s to purchase large quantities of balloon catheters and cardiac stents, but Franciscan Alliance has since expanded that partnership to pacemakers and other sophisticated cardiac supplies, which translated into another $2 million in savings for 2013.

Other goals of Franciscan Alliance, Fulks says, are to “expand into more physician preference product areas and standardize on the specific products within our HealthTrust contracts. We also want to do a better job aggregating our capital equipment budgets and directing our capital spending in a more standardized way.

“HealthTrust has the tools and the knowledge to help with that, though,” he adds. “We’re happy with our relationship—and nobody’s twisting my arm to say that.”

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