C-Suite: Supply Chain more than 'storeroom stewards'

CEOs recognize expanded, expanding impact on clinical delivery, performance

Hospital and healthcare system CEOs juggle a plethora of responsibilities I from atop their perch in the C-suite. These include planning, directing and coordinating daily operations; overseeing employee and organizational performance; setting strategic direction and policies; establishing and reinforcing a productive corporate and clinical culture; maintaining relationships with medical and payer organizations, referring physicians, public communities and the media.

Separately and independently, supply chain need not be one of them.

Yet that does not mean CEOs cannot - or should not - be involved in some way with supply chain activities. A small number of CEOs that Healthcare Purchasing News has profiled in the past may have spent a portion of their earlier career in supply chain so they are familiar with the profession's myriad idiosyncrasies and nuances. The vast majority, however, have not booked any direct supply chain experience, save for hiring the right people to handle a function that represents a significant portion of a provider organization's expense stream - and growing each year.

At best, these CEOs rely on their supply chain leaders, group purchasing organizations and suppliers to help make and shape decisions about their operations. Among this group are those who "Support, Understand, Recognize and Empower" the Supply Chain department and its leadership to make optimal strategic and tactical decisions for the organization's ongoing success and ultimately to enhance patient care delivery.

Eleven years ago, HPN launched an annual campaign to identify and honor these hospital and health system CEOs with its SURE award. This year, HPN honors three more to join 34 others already profiled.

HPN's 2016 SURE CEOs are John Finan Jr., President & CEO, Franciscan Missionaries of Our Lady Health System (FMOL), Baton Rouge, LA; Richard Statuto, CEO, Bon Secours Health System, Marriottsville, MD; and Karen Teitelbaum, CEO, Sinai Health System, Chicago.

Finan embraced a fivephase, multi-year supply chain strategic plan to elevate FMOL's clinical resource, financial and operational performance. Those five phases include developing clinically driven strategic sourcing, clinical resource utilization, consolidated distribution and supply management, inventory management performance improvement through data standards, "perfect order" principles and point-of-use processes, and value chain interoperability and best-practice implementation. Since 2012, FMOL has booked a 7 percent reduction in Supply Expense per Adjusted Discharge.

As a valued member of FMOL's C-suite alongside Finan, Vice President of Materials Management William Mosser spearheaded these initiatives, which involved the opening of the FMOL Health System's Logistics One Supply Distribution Center in April 2015 and an upcoming (at press time) supply data standards playbook designed to help healthcare organizations adopt and implement GS1 healthcare standards. These initiatives also inspired HPN to recognize FMOL as one of 11 "Supply Chain Operations Worth Watching" (See December 2015 HPN).

Statuto recognized how supply chain operations "impacted not only the margin to support the mission, but also the outcomes of the patients that they serve." Overseeing a healthcare organization that spans 15 acute care facilities (owned, managed and via joint ventures) and more than 450 nonacute care facilities in six states primarily on the East Coast, Statuto, along with Vice President of Enterprise Resource Planning and Supply Chain Operations David McCombs, reached out to physicians to recruit and integrate them into Bon Secours' clinical transformation initiatives. Fortified with variable cost-per-case data that included product usage, physicians were able to see how their practice and performance impacted patient outcomes, which motivated them to improve their costs per case.

When Teitelbaum assumed the CEO position at Sinai in 2014, she faced a number of challenges common for safety net hospitals that hinged on expense reduction strategies and tactics and meant re-evaluating the status quo. Teitelbaum initiated a considerable cultural change for an organization that included four hospitals and other nonacute care facilities covering the west and southwest sides of Chicago's community.

Within a year, she appointed a system-wide Supply Chain director, Justin Schneider, Pharm.D., Vice President, Clinical Operations, centralized supply chain operations and tackled the "historically difficult" category of physician preference item conversions, which has generated value-driven success to date. With her background knowledge of supply chain processes and healthcare procurement challenges, Teitelbaum has inspired clinicians and administrators to work together, emphasizing the overall financial and quality impact of supply chain efficiency and effectiveness and not just cost reduction alone.

HPN's traditional wide-ranging interview explore how FMOL's Finan, Bon Secours' Statuto and Sinai's Teitelbaum interact with supply chain operations, as well as provide insights for Supply Chain leaders to develop credibility and influence.

HPN: What motivates your interest in supply chain management and how hands-on should you be?

FINAN: An obvious interest is our supply spend, which has traditionally exceeded 20 percent of total expense and now trending down. (We're currently at 18 percent and targeting 16 percent within the next 18 months.) More importantly, supplies and services, as well as procurement and distribution processes, have a direct impact on quality and satisfaction.

STATUTO : Bon Secours Health System has a strong history of serving those who are poor, sick or dying as the key mission of our sponsors. As a result, we serve a disproportional amount of the poor in our communities. The financial challenges of our mission require that we be exceptionally diligent in delivering optimal outcomes with the lowest cost possible. Supply Chain has a key role in not only cost management of variable costs but also insuring our caregivers have the necessary and prompt access to supplies, equipment and service for the most efficient care process possible. This critical support requirement is growing as we extend our care responsibilities across the full continuum of care to our communities.

How can/does a supply chain manager/director/executive/leader influence you?

FI NAN : By exhibiting behaviors which are consistent with our mission, performance which exceeds expectations, and presenting ideas which improve quality, satisfaction and cost.

STATUTO: First is to ensure that every Supply Chain strategic initiative and effort brought forward for consideration is aligned with our mission and key goals as expressed in our Strategic Quality Plan. Second is to provide insight in what are both the causes of variation of performance issues and most importantly what are proposed solutions.

What are some of the attributes/characteristics of an effective supply chain director/ executive/leader?

FINAN: We have defined eight characteristics of effective leaders in Foundational (remember the mission), Service (be of service), and Stewardship (take care of our resources) categories. These apply also to Supply Chain leaders:

1. Relies on spiritual grounding

2. Demonstrates integrity

3. Extends hospitality

4. Builds relationships

5. Responds to needs

6. Sustains priorities

7. Seeks excellence in performance

8. Achieves measurable results

STATUTO: In today's healthcare landscape a Supply Chain leader must have excellent critical thinking and analytic skills, and must also think strategically and anticipate future scenarios for which the Supply Chain model must be positioned. An effective leader must also be able to communicate and interact with clinical leadership and operating executives with a compassionate approach to put themselves in the shoes of our caregivers and patients.

TEITELBAUM: More and more I am seeing the need for the Supply Chain leader to think strategically. We have moved beyond the traditional purchasing and distribution functions of supply chain, and are asking our Supply Chain leaders to seek out unique contracting, partnership and affiliation opportunities. Understanding how these unique relationships can deliver stronger value to our health system, and ultimately to our patients, allows us to better position ourselves to provide a higher quality of care at a lower cost.

The supply chain leader must also be highly collaborative. With numerous vendors, new products, and constantly updated outcomes data, the Supply Chain leader must be able to collaborate with clinicians to determine what the most cost-effective products are for our institutions and our patients. It is critical to engage physicians and other clinical staff in the assessment and selection of products and supplies for successful buy-in and implementation, especially in physician preference items.

How can consulting firms, distributors and GPOs contribute to the performance of your internal supply chain management expertise without overshadowing the department or usurping control?

FI NAN: Outside parties can best serve our mission when services provided add clear value aligned with our strategies and goals.

STATUTO: Distributors play a key direct role to insure the most efficient supply chain processes by eliminating costly waste and insuring that key critical supply items, such as solutions, key drugs, vaccines, etc. are always available even in periods of market shortages. Consulting firms are effective when key and objective expertise is needed to assess a complex issue and provide insight into solutions. However, consulting should be considered as augmenting core Supply Chain capabilities as opposed to performing key core functions. GPOs historically have served to aggregate buying power and to influence development of key products and services on behalf of their members. Bon Secours Health System's participation with our GPO [Premier Inc.] is changing to become a relationship based on them serving as a total performance improvement partner and a comprehensive resource to our team.

TEITELBAUM: We are always seeking the best overall value in how we provide care and how we conduct our business. We expect the same of external partners. Whether you are a consultant, a distributor, a vendor or GPO, you need to continuously demonstrate the value your relationship with the health system provides. Organizations cannot expect to have expertise in every facet of supply chain, so we lean on our external partners to provide a certain level of expertise. As long as this expertise complements or enhances our internal supply chain team's work, instead of complicating it, the partnership will be held in high regard.

What's the biggest misunderstanding CEOs have with supply chain professionals and how should they both solve that disconnection?

FINAN: It may relate to a perceived definition of supply chain as "purchasing and delivery of items" versus "procurement of all non-labor items and services." Effective supply chain teams can add great value through the latter.

STATUTO: Supply Chain has historically been fairly narrowly viewed as the storeroom stewards and contracting support resource. In the past decade the advancement of clinical value analysis programs, databases linking purchases to actual clinician utilization and growing standardization of clinical care protocols involving key supply device has positioned Supply Chain to be a major contributor to clinical and cost performance improvement. It is important to involve Supply Chain on the broader strategies and discussions about the evolving healthcare model, and to expect Supply Chain to step up and perform at even higher levels to contribute to the progress in cost and outcome improvement.

What do you believe is the most innovative thing supply chain management has accomplished that exceeded your expectations?

FI NAN : Two in recent periods are the creation of highly effective product assessment committees (PACs) with high levels of physician engagement, and development of our Central Distribution Center. These have and will continue to be great contributors to our success.

STATUTO: In the past several years our Supply Chain has made tremendous progress in developing a formulary model with key clinicians to help control the runaway cost inflation we were experiencing with physician preference items, such as implants. This has come about by creating credible and trusting relationships with clinicians, and developing the formulary approach so it is co-owned. We have reigned in the cost factor and still are able to support innovation and growth where supported by an evidenced-based approach to evaluation of new products. This formulary model positions us to be successful with the growing bundled payment and value based purchasing reimbursement programs.

TEITELBAUM: 1 have been impressed with how supply chain leadership has looked beyond our health system's traditional GPO and vendor relationships in order to partner with local and national supply chain collaboratives. In a recent collaborative partnership, we achieved an overall supply savings of 8 percent without disruption to our organization. Aside from the significant cost savings, this allowed us to drive product standardization and streamline vendors, which can only improve quality and safety for our patients.

How do you ensure that the clinicians get along and work together with supply chain management so that the processes for revenue generation, expense reduction and highquality patient care are not disrupted (e.g., refereeing disputes, building consensus)?

FINAN: Clinicians are passionate about our mission, strategies, and goals, and bring wonderful insights and perspectives to our supply chain processes. Interactions are most effective when the organization is transparent with factual data and the clinician's contribution is respected and applied in solutions.

STATUTO : A key factor is to align the Supply Chain efforts for cost/ process improvement with the major clinical and efficiency improvement initiatives that are most important to clinicians. Clinicians clearly want to improve care outcomes and control costs. Supply Chain must understand and address the key clinician concerns while simultaneously providing accurate data to support the recommendations for supply cost improvement actions.

TEITELBAUM: The Supply Chain team must be able to effectively collaborate with clinicians. All parties need to keep open minds when approaching decisions which may impact clinical operations, overall expenses and revenue generation in clinical areas. Open communication, positive or negative, is very important so the adoption of change is supported and effective.

What's one lesson you learned or piece of career advice you'd like to share with supply chain professionals to be successful?

FI NAN : Embrace changes that lead to improvement with enthusiasm and confidence.

STATUTO: Learn about all aspects of business. You need a strong foundation in finance, human resources, operations, strategy, etc., to be a trusted partner/ resource to the CEO/ executive team for supply chain strategy, action and improvement.

TEITELBAUM: My counsel is the same for supply chain managers as it is for anyone I coach. If you see a gap in leadership, meaning a problem that needs to be tackled, step up, take it on and follow the "under promise and over deliver" adage.

What can supply chain leaders do to earn a seat at the senior/executive management table in the C-Suite - or at the very least an open door?

FINAN: Successful organizations always engage highly effective leaders in critical decisions. We expect effective, high performance from all of our leaders. Strategic and innovative thinking, collaborative leadership and the ability to achieve goals in ways which are consistent with our values are all criteria we'd expect from our supply chain and any leader in our organization.

STATUTO: Become fully knowledgeable of the organization's strategic goals and direction, and gain expertise of how Supply Chain is evolving in healthcare to provide solutions to contribute to these goals. Also develop performance metrics about costs, utilization and supply impact on clinical outcomes and share with leadership routinely.

What are your thoughts about payers offering supply chain services to healthcare provider organizations, specifically in the area of implants and physician preference items? Do you see it as assisting a hospital's supply chain department (outsourcing these tasks so that supply chain can focus on other areas) or usurping supply chain's authority and effectiveness in working with physicians? Why?

FINAN: It depends. Historical roles and skills of payers in assessing and assuming insurance risk are very different from those required to effectively deliver care. Supply chain services are a sophisticated, important and distinct discipline requiring skills and systems not easily developed. However, the potential value of the concept to the provider would lie in the payer retaining the economic risk of high-cost items.

STATUTO: The farther away you get from the provider/patient direct relationship the more difficult it is to develop and implement an effective care/cost optimal model. Care and cost decisions are best made by the providers and clinicians working together within the parameters of value-based purchasing programs as administered by payers. The key is that you have to understand and take into consideration the entire procedure or care process and the specific circumstances of the facility or clinical program. Payers can provide a significant contribution by developing and sharing evidence of outcomes and correlation to preference items usage to these outcomes. Our industry is really lacking in this kind of data from which to make good decisions.

Some provider C-suites are empowering physicians and/or the CMO to get more involved with supply chain. Do you see this as a wise move even if it removes the CEO from the process to focus on other issues? Why?

FINAN: CMOs need to be engaged in supply chain strategy and implementation to a much greater degree than the CEO because supply chain is a critical support function.

STATUTO: Facilitating greater engagement and accountability of physicians and clinical leaders is definitely a wise move. However, the CEO must still be significantly involved. As healthcare provider organizations continue to work to remove unnecessary variation in care process and develop clinical programs to serve entire communities, supply and equipment strategies to support these efforts become very important. You cannot grow a program or work towards greater efficiencies without also having a supporting technology and supply strategy.

Your organization has made significant strides in adopting and implementing data standards for product identification (GS1, UDI) and reimbursement. What have been the results to date? And what motivated your organization to develop what should be a helpful how-to roadmap for others to follow to facilitate their own adoption and implementation efforts?

FINAN: Although we've made positive strides with Data Standards, we're still at the beginning of our journey. We've had success with several trading partners in using Global Locator Numbers (GLN) and Global Trade Identification Numbers (GTIN) in our daily transactions. In each of these instances we've seen fewer procurement discrepancies and we're able to meet our payment terms to gain discounts. We're now implementing use of the GTIN in our distribution center (Logistics One) and will soon be redesigning our Operating Room supply chains to use GTIN to meet the Universal Device Identification (UDI) requirements.

We decided to develop and offer the roadmap for others to follow to help energize the provider community in implementing these standards in their own environments. Our industry has been debating the merits of data standards since the mid-1990s with few organizations taking the lead to drive broader use. In general, we all have a significant amount of waste, both in our internal data management efforts and in our transactional areas with trading partners. Providers, suppliers, and the payer community have all built their own numbering schemes to identify things that are used in clinical care. Few of these schemes align with each other and the amount of redundant work we all have in creating and maintaining this data in supply chain, revenue cycle, claims and medical records is no longer acceptable. We, as providers, need to drive the use of data standards and the work we're doing here at Franciscan Missionaries of Our Lady Health System is focused on helping to build that common voice and approach. HPN

John Finan Jr., President & CEO, Franciscan Missionaries of Our Lady Health System (FMOL), Baton Rouge, LA

Nominated by: William Mosser, Vice President, Materials Management

Richard Statuto, CEO, Bon Secours Health System, Marriottsville, MD

Nominated by: David McCombs, Vice President, Enterprise Resource Planning and Supply Chain Operations

Karen Teitelbaum, CEO, Sinai Health System, Chicago

Nominated by: Justin Schneider, PharmD, Vice President, Clinical Operations (encompasses Pharmacy. Cardiology, Stroke and Supply Chain Services)