Cutting supply costs only half the battle

Regular review, close contract management needed

NASHVILLE, TN  -  Although summer movies highlight the deeds of solo superheroes, attacking hospital supply costs is strictly a team effort. At the Premier Breakthroughs conference in Nashville on June 6, representatives from Methodist Health System in Dallas, Texas, chronicled their 18-month collaboration with Premier Consulting Solutions  -  a partnership that helped significantly reduce supply costs and keep them there.

Methodist Health System operates 1,200 beds in four hospitals  -  and consistently ranks in the top U.S. quartile in both quality and clinical outcomes. The system has achieved major savings with its centralized purchasing operation, yet it was eager to make even deeper supply cost reductions.

"Working with Premier gave us the firepower to save $7 million on 133 projects," said Peggy Shewmaker, Methodist Health's supply chain purchasing director. "We created a team that performed what we called 'value analysis on steroids,' where the aim was to decrease supply costs and keep them lower. Instead of measuring our four facilities individually, the team came up with system-wide metrics. And we shared monthly performance numbers with all our managers so they could monitor how we were doing in supply expense per CMI adjusted discharge."

Methodist Health's cost-cutting program  -  dubbed "Hold The Gain"  -  had a dual strategy: improve internal communication while demanding greater accountability from vendors.

"Communication was the key to finding big savings on our spinal implant contracts," said Karen Kelly, RN, the system's contract nurse manager. "Representatives from OR and our Spine Institute now meet quarterly to discuss physician preference items (PPIs) and review spending. We're also meeting regularly with 36 different spine vendors  -  and doing semiannual reviews with all vendors associated with spine, orthopedics and trauma."

Kelly added that the vendor reviews always have a clear agenda. "When the vendors see the agenda in advance, they're better able to align to our goals," she said. "And it's important to conclude each meeting by asking them, 'Do you have any additional savings opportunities for us?' That prompts them to add value-added items like training programs at little or no cost to us."

Technology also plays an important role in maintaining supply cost victories. "We really rely on Premier's MySpend tool," said Shirley Moler, RN, Methodist Health's contracting director. "It provides a quick way to dive deeper for answers."

Methodist Health is also paying close heed to an often overlooked spending culprit: rental equipment.
"Every hospital spends a sizeable amount of money on rental equipment like wound vacuums," said Kelly. "There should always be a point person responsible for getting equipment back to the rental company before incurring late fees."

Moler added that some cost-cutting measures are particularly challenging. "Every hospital faces the problem of how much to stock for low-volume procedures like open-heart surgery," she said. "Without effective management, those items often expire before you can use them."

"It's important to celebrate our victories," added Kelly. "Our supply chain team sends out frequent Hold The Gain emails, and employees are proud to post the results in their units."