2. MEETING OBJECTIVES
Introduction
How did we get here?
Recognition of similar market missions
How MHS core competencies compliment MedAsset’s initiatives
Potential synergy of working together
How to proceed?
3. MHS OVERVIEW
•Founded in 1999 by Ken Kelliher and Mike Ferris
•Significant organic growth plus two strategic acquisitions:
@Par Mobile Supply Chain Software and HISI
•Largest provider of inventory valuation services for hospitals in
US
•Serve 1,000 hospitals
•Client satisfaction rating of 95%
•Client retention of 97%
•Currently more than 500,000 SKU scans daily
•Product database of 1.5M unique items
•Functional Equivalents
•Hazard Track / Expired Products
4. Management Health Solutions, Inc. MHS is a healthcare supply chain services
company, and the leading provider of an integrated clinical inventory
management solution called OPTIC.
Creates superior control over supply chain operations
Improves financial performance and enhances patient safety
About MHS
Creates Profitable Departments & Maximizes Clinician Time On Patient Care
5. Organizational Impact
Increase Revenue
Recover lost charges
Increase Cash Flow
One time reduction on inventory
Reduce Expense
Optimize and Control Inventory Levels
Reduce and Control Supply Spend
Better Information
Realize Supply Chain Visibility
Access to data
Maximize Productivity
Drive Efficiencies Across Enterprise
Optimize the Workforce
Total Quality
Improve Internal Customer Satisfaction
Enhance Patient Care and Safety 5
7. A key to providing effective
solutions to clients is collecting
accurate data in the most efficient
and least invasive method.
The core competencies of MHS involve the
capture of data in hospitals using the @Par
software package and complete physical
inventories of supplies. From these
competencies MHS utilizes clean, workable
data to provide a menu of solutions resulting
in benefit to the organization. The ability to
obtain this data should be of great value to
the MedAssets solution process.
8. Discover
Conduct physical inventory count
TOTAL SUPPLY CHAIN SOLUTION
Analyze historical and transactional data
Quantify reduction opportunity
Diagnose
Integrate automated solutions for clinical,
warehouse and distribution inventory
management
Master data item management– aggregate,
clean, enrich and maintain data
Monitor supplier contracts, product alerts &
recalls, usage trends
Deliver
Define & implement supply chain process
innovation strategies
Create visibility into inventory management
through online portal
Leverage analytical reports to identify further
opportunities
9. MHS Core Competencies and Service Offering
MHS Core Competencies and Service Offering
Software applications that allow
@Par™ supplies to be tracked and billed from
receiving dock to clinical usage.
Software Designed interoperability to leverage
performance of existing systems.
OPTIC Program
OPTIC Program
Inventory valuations for supplies,
Inventory pharmacy , and capital assets.
Thorough counting and identification
Valuation of organization assets with data
reporting available via web portal.
Item master cleansing and provision
Data of data reports to identify
irregularities of the procurement
Management process. On-going maintenance of the
item master process (adds/updates)
Individual projects designed to alleviate
Professional supply chain issues including process
mapping and modeling. Deep dive into
Services client data to recommend and
implement systemic solutions.
10. Data Driven Management
On-Demand Reporting
Real-time/Batch upload/download with Hand
Held Wireless or Cradle synchronization
Par Optimization Reports
Preference Card - Case Utilization
Variance Report
Utilization information &
Product management reports
Self-service webpage receipt confirms product
Pick/Delivery/Return; who, when and
where.
Physical Inventory Review process for
recounts prior to booking
Discrepancy reports note variances for
immediate correction
Workforce Management & Productivity
reports
11.
12. “improving processes”
“optimize supply chain
operations”
“customized solutions”
“reduce costs and increase
revenue”
Common goals for clients with
focus on the supply chain
operation. Can these goals be
met more effectively with a
synergistic approach from
MedAssets and MHS?
13. @Par™ Clinical Value Analysis
Software
Physician Preference Items
.
Inventory
Valuation Bill Only Supplies/OR Log
Data Inventory Right-Sizing
Management
Supply Expense Per Case
Professional
Services Utilization Data
MHS Core Competencies Compliments
MedAssets Client Initiatives
14. Borrowed from the Aspen presentation
A package of consulting services and tools must be driven by their
needs – this is solution selling
Lead With Clinical!
CVA It is the core of all
our offerings and
Utilization central to change
SIM/ BAR
Data
management
Operations
&
Customer Navigator
PPI @Par can provide
Contract technology platform to
capture data and
formulate workable
Strategic
SLA/SI database to assist in
Sourcing solution sales
15. Benefits and Savings
Realize Total Supply Chain Visibility
Accurate Information
Optimize and Control Inventory Levels
Reduce and Control Supply Spend
Optimize the Workforce
Drive Efficiencies with Clinical Staff
Improve Internal Customer Satisfaction
Right Product Right Place Right Time Right Quantity!
Enhance Patient Care and Safety
ROI 4 - 8 to 1
16.
17. Opportunity Assessment Agenda
Tour all related supply chain areas
Review Current Inventory Management processes
Evaluate inventory storage configuration
Review vendor management and consignment controls
Review Procedure Card and Case Cart process
Present Findings
Assessments are conducted by senior healthcare supply chain
consultants
18. Solution Benefits
Rapid Inventory Reduction
Reduce Inventory 20-40%
Increase turns with fewer shortages
Improve cash flow immediately
Improve Patient Safety efforts by identifying expired and
obsolete product
Clinical Supply Chain Process Mapping
“As Is”
“Should Be”
Gap Analysis
Information Technology functional capability Assessments
(what IT applications exist and what should be used)
Implementation Strategy and Planning
19. Inventory Reduction Example
OR PAR Level Review
Location Target Value Actual Value Variance
The actual inventory value in the sample OR-1 $15,108
OR-2 $50,329
clinical areas was 56% greater than target OR-3 $14,327
inventory values. Assuming the same OR-4
OR-5
$43,204 $85,107
$94,715
$41,903 97%
variance across all clinical areas, with a OR-6 $80,613
OR-7 $24,955
total value of $1M, the client had $592k in OR-8 $18,871
excess spending. OR-9 $35,908
OR-10 $94,130 $180,157 $86,027 91%
OR-11 $34,033
OR-12 $14,589
OR-14 $13,820
OR-15 $25,124
A 56% Reduction Using OR-16
OR-17
$41,759
$48,621
OR-18 $16,151
MHS Methodology Yields OR-19
OR-20
$28,684
$47,880
OR-21 $15,697
$592K in Savings! OR-22
C-1
$72,929 $63,083
$61,005
($9,846) -14%
C-2 $45,171
Sub-Total $210,263 $328,347 $118,084 56%
Total $1,055,707 $592,887 56%
20. Inventory Baseline Charts
Hospital Owned Inventory Supplier Consigned Inventory
$20,000, 1% $50,000, 3%
$50,000, 4% $0, 0%
$100,000, 7% $309,120, 20%
OR Group OR Group
Cath / EP Labs Cath / EP Labs
$1,195,000, 88% $1,221,000, 77%
Special Procedure Rooms Special Procedure Rooms
Emergency Department Emergency Department
Annual Clinical Spend Inventory Turns Analysis
$1,270,000, 5% $678,000,
Hospital Consigned Total BOH Avg Monthly Inventory
$5,262,000, 21% 3% Annual Spend Mos BOH
Inventory Inventory Inventory Spend Turns Rate
OR Group $1,195,000 $1,221,000 $2,416,000 $17,905,000 $1,492,083 1.6 7.4
OR Group Cath / EP Labs $100,000 $309,120 $409,120 $5,262,000 $438,500 0.9 12.9
Cath / EP Labs Special Procedure Rooms $50,000 $50,000 $100,000 $1,270,000 $105,833 0.9 12.7
$17,905,000,
Special Procedure Rooms Emergency Department $20,000 $0 $20,000 $678,000 $56,500 0.4 33.9
71%
Total $1,365,000 $1,580,120 $2,945,120 $25,115,000 $2,092,917 1.4 8.5
Emergency Department
21. Baseline: Clinical Inventory Turns
The MHS methodology establishes baseline statistics
Clinical areas falling below the optimal turns rate are identified for the
Inventory Optimization focus beginning with the ABC analysis
Energy is directed toward increasing turns and reducing spend
22. Clinical Inventory Targets Turns and Inventory Reduction
Opportunities
CIM-established baselines are published and progress toward turns rate
benchmarks measured periodically to ensure reductions are achieved using
inventory optimization best practices
Inventory reductions are a new source of funds as dollars once tied up in
inventory are freed up for alternative investment opportunities
In this example, the Cath/EP Labs, Special Procedures and ER areas all exceed the
recommended BOH and inventory turns rate. However, the OR actual BOH
exceeds the $1.49M threshold necessary to achieve the benchmark 12.0 turns
annually and will require a $926K reduction in the inventory value to reach the
target.
23. A-B-C Inventory Classification
The standard ABC analysis breakdown with benchmarks and safety stock
targets
The ABC analysis provides the information needed to manage 80% of
your clinical spend effectively
Developing item reorder parameters that lead to increased turns
requires a thorough ABC analysis
MHS focuses on where the dollars are spent to reduce quantities and
dollars in the clinical inventory
25. Savings Opportunities
Enter Inventory Balance On-Hand Typical Savings
Excess Clinical Inventory Reduction 7.7%
OR Suite Par Management 3.7%
OR Storage Area Par Level Management 1.6%
Reduction of Bulk Storage 6.9%
Reduction of Carts Storage 0.9%
Process Flows and IT Utilization 2.0%
Suture and Endomechanical Storage Consolidation 1.6%
Consignment Expansion Program 3.1%
Consignment and Vendor Management 2.4%
Enter Annual Spend
Reduction of In-bound Freight 0.25%
Product Standardization/Vendor Consolidation 1.00%
Enter Annual Staffing Costs (Fully Loaded)
Rework and Feedback Loops 7.5%
IT/SIS Enhancements 3.0%
Case Cart System Improvements 5.0%
26. Inventory Findings
MHS conducted full physical inventories at all Loma Linda facilities to
provide a total on hand value of all clinical supplies. The total value of
clinical inventory for all Loma Linda facilities was $11,018,734 with the
bulk of the inventory in the main hospital.
As with all MHS inventories we assess the expiration dates for all items
with expiration dates and if there were expired items they are tracked
and removed from the supply area. The total value of expired supplies
throughout the Loma Linda facilities was $73,170. While this is a
relatively low percentage of the entire inventory, the patient safety issue
should be considered.
Items that are found within the facility that cannot be matched to the
either file may be considered “unapproved” items. During the inventory
MHS identified 916 unique items that we were unable to match to either
the item master or your 24 month purchase history.
27. Inventory Findings
Inventory Value By Facility
Inventory Value
$7,501,372
$1,925,516
$979,578
$446,605
$4,653 $28,774 $63,695 $68,541
LLUMC Surgery East Campus Heart & Heart & Highland Pro Plaza CT FMO
Center Imaging Surgical Hosp Springs
28. Inventory Findings
Upon evaluating those items physically on hand during the inventory
count within the Loma Linda facilities against the purchase history,
MHS has determined that certain items may be potentially obsolete,
overstocked, or low volume use items. These items should be reviewed
jointly by the clinical staff and supply chain staff for disposition.
The results of this analysis found that there is up to $2,414,939 or 22%
in potential surplus and or obsolete inventory for these facilities. The
chart below shows the value of on hand inventory that showed no
purchase activity in 13 to 24 months and over 24 months.
Facility 13 to 24 24 mo. Total
LLUMC $512,253 $815,035 $1,327,288
East Campus $331,179 $615,358 $946,537
Surgery Center $55,110 $86,004 $141,114
Total $2,414,939
29. Clinical Supply Chain Findings
Loma Linda's Materials Management department has limited jurisdiction
over the clinical supply chain.
The OR should be a customer of Material Management where the supplies
and equipment are available at the point of use whenever needed. Clinical
resources need to be patient focused and sterilization resources are needed
to decontaminate and reprocess instruments and equipment.
There are a number of processes that are hand offs between disciplines.
The major issue we discovered with this is that there is no follow through
on the next steps or completion of the entire process. In most cases there
is no individual with knowledge of the process from beginning to end.
This lack of continuity leads to a break down in the completion of a
process and creates an atmosphere of distrust.
30. Supply Replenishment
Central Sterile has responsibility for instrument sterilization throughout
the facility as well as partial replenishment responsibility for the OR
storage areas. CS also has partial responsibility for picking the OR case
carts.
The inventory in both SPD and the OR core is perpetual however this is
not effective and it is being managed as an adjustment inventory.
SLS’s have PTs Perioperative Technicians who also have limited
responsibility for supply availability within the OR; they are assigned to a
specialty and are directed by the respective SLS as to what to order. PTs
have other responsibilities beyond the supply chain and are involved in
room turnovers, patient transportation, and other non-technical
responsibilities within the OR.
31. Supply Replenishment
Supply replenishment in theory is based off of automated reorder points
within PMM however electronic reorders are not being placed.
The current replenishment process is a manual process performed by the CS
Tech and PTs (there is an “invisible” segregation between who does
what tasks).
Supplies within Central Sterile are replenished in a similar fashion however
this is done by another Central Sterile technician. The Central Sterile
technician monitors what's on the shelf and then determines based off best
guess what is needed to fill cases on the following days.
There is an abundance of returned items returned from the OR. During our
visit we observed roughly 10 to 12 carts full of supplies that were returned to
the storage room, this is typical as noted by the CS staff. This indicates that
there is some inaccuracy with the preference cards.
There is an abundance of sterile sets and instrument in the OR core as
well as in Central Sterile. Sterile sets should all be maintained
together in the same location. It is our recommendation that consideration
be given to reorganizing the storage areas for supplies and sterile trays.
32. Information Technology
Loma Linda is currently using the McKesson suite of products. PMM is
used for procurement and inventory management activities; HMS for
surgical management; PSM for surgical scheduling; and PFM for
financials.
The technology exists for efficient and effective processes within the
surgical supply chain however this technology is not being effectively
leveraged and managed to optimize the surgical supply chain.
It was mentioned numerous times that staff frequently allows others to
use their log in to access the system.
There are a tremendous amount of manual processes that take place as
workarounds partially due to the ineffective management of the
materials management information system and the surgical
information systems.
There is far too much access to these systems further deteriorating the
integrity of the data and the effectiveness of the systems.
There is inconsistent utilization of these systems throughout the Loma
Linda facilities.
33. Process Analysis
LLUMC presently has the systems in place to facilitate the “should be”
processes however there will need to be policies and procedures
developed and enforced.
There is also a need for more formal and detailed education on the
entire process.
There is also an opportunity to implement a point of use system in the
clinical areas to act as a data repository but primarily as a collection
point for all transactions associated with the clinical areas.
Implementing a point of use system that utilizes handheld technology
would reduce the amount of paper generated and wasted within the
process as well as add more accountability and stream line processes
that will reduce both time and labor while improving product
availability at the point of use.
Capturing data at the point of use and using that data to optimize par
levels will reduce inventory and increase trust in the system therefore
improving customer satisfaction.
The current span of control within Loma Linda is currently a barrier to
optimization.
34. Opportunities/Recommendations
Evaluate the implementation of a Master Data Maintenance program
that puts limited access to the item master and related files within PMM.
An initial cleansing project should be implemented to eliminate the
duplicate items, manufacturers and vendors and to clean up Unit of
Measure and conversion factor issues.
Review all excess / obsolete inventories with appropriate clinical staff to
determine if these items can be removed and made inactive. If so arrange
for these items to be returned to the vendor for credit or resold.
Eliminate current perpetual inventory process in Central Sterile and the
Operating Room and reengineer the process and storage allocation for
supplies and trays.
35. Opportunities/Recommendations
Implement enhanced supply chain process that will:
Utilize hand-held technology for all supply chain activities
throughout the clinical areas including traditional “non-stock”
SKU’s;
Eliminate the distinction between “stock” and “non-stock” SKU’s
within the replenishment process to support consistent process flows;
Eliminate all existing manual systems and coping mechanisms
(workarounds) within the clinical supply chain;
Implement formal feed-back loops in order to drive data-driven sku
velocity analysis for all PAR locations supporting on-going PAR
optimization activity which will reduce inventory and reduce
expedited inbound freight costs;
Develop a consignment management program that includes monthly
reconciliation process with the Manufacturer rep.
36. Opportunities/Recommendations
Segment typical supply chain duties and responsibilities from
typical clinical duties and responsibilities, concentrating expertise
for each function.
Implement a single stage case cart pick process that allows for
ownership of the entire process within one discipline.
Realign PT’s to segregate inventory management role within
the OR
Develop a retraining program for PMM and HSM that includes
not only functional use of the system but a complete review of
the processes and responsibilities.
Leverage existing knowledge base and supply chain policies and
procedures for all clinical supply chain activities across the
health system assuring that all facilities are applying best
practices. Develop internal benchmarks and publish performance
metrics across the system to further engage staff and raise
expectations.
37. Opportunities/Recommendations
Review and revise preference cards to effectively identify “open”
and “hold” items and develop active feedback loops that
continuously maintain preference card accuracy.
Use procedure charges to monitor cost per procedure by facility
and physician
Review in room supply charting process and responsibility to
possibly shift this role to supply chain staff.
Inventory all sterile instruments and sets and catalogue by
description and compare to current equipment lists in HSM and
disassemble sets that are no longer in use.
Removing sets from the OR core and consolidate in CSR
Assess current active sets to current demand assuring there
enough sets meet that demand.
Implement an instrument set tracking system that provides
complete tracking of individual instruments and has the
capability of managing loaner and consignment sets.
38. Opportunities/Recommendations
Implement inventory control enhancements to increase product
availability and improve efficiency across all product lines. There will be
investment associated with implementing point of use technology however
the saving derived from operation efficiencies combined with reduced
inventory, and efficient ordering will be significant. Charge capture will be
significantly increased enhancing revenue and allowing for performance
tracking statistic i.e. Cost per procedure / adjusted discharge etc.
39. Savings Opportunities
One Time Cash infusion Annual On Going Savings
A Master Data Maintenance program should be implemented to control
access to all pertinent files in both PMM and HSM. The results will allow
LLUMC to reallocate staffing currently involved in file management to focus
1 $660,000
on strategic sourcing and consolidation opportunities. The resulting savings
could be in the area of 2% of the spend. (Calculation based on OR only) See
data savings below.
All excess inventory or inventory that has been determine as obsolete should
be removed from the inventory and if possible return to the vendor for
2-4 $1,650,000 $800,000
credit. Implement processes related to inventory reduction and par
optimization. (15% reduction)
Processes around the supply chain activities in the OR should be revised. This
should include a consolidated case cart picking process, staff realignment,
5-7 retraining program, application of best practices, development of ?
benchmarks and dashboard reports, and implementation of technology to
improve processes. (Productivity gains are difficult to track savings
Review and revise supply lists on preference cards and develop process to
track utilization and use results to monitor costs and actual supply usage per
8-9 procedure. In addition identify instrument sets that have had no usage over $100,000
the last 2 years and determine feasibility of eliminating sets to free up extra
instrumentation.
Implementing these inventory control enhancements will increase product
availability and improve efficiency across all product lines. There will be
investment associated with implementing point of use technology however
10 the saving derived from operation efficiencies combined with reduced $150,000
inventory, and efficient ordering will be significant. Charge capture will be
significantly increased enhancing revenue and allowing for performance
tracking statistic i.e. cost per procedure / adjusted discharge etc.
40. Warehouse Automation
Floor
Unit
Packaging
Critical Care
Clinical Labs
LUM STORES
Support
Locations
Emergency
Surgery
Special
Procedures
WAREHOUSE REMOTE
DEPARTMENTS
STOREROOM
41. Distribution Automation
Floor
Unit
Packaging
Packaging
Critical Care
Clinical Labs
LUM STORES
Support
Locations
Emergency
Surgery
Special
Procedures
WAREHOUSE REMOTE
DEPARTMENTS
STOREROOM
42. Total Supply Chain Automation
Floor
Unit
Packaging
Packaging
Critical Care
Clinical Labs
LUM STORES
Support
Locations
Emergency
Surgery
Special
Procedures
WAREHOUSE REMOTE
DEPARTMENTS
STOREROOM
43. @Par Interoperability
@PAR
Mobile Supply Chain
Platform
HL-7 Interface
Legacy Systems
MMIS ORIS
ADT EMR BILLING
Fully Integrate End to End Solution for Total Visibility