Here's a big supply chain cost-savings opportunity: physician preference items

It's a fair guess that many hospitals and health systems will be making cost savings a New Year's resolution in 2019, and by standardizing physician preference items, they could realize some of those savings in their supply chains.

It's an approach that has certainly worked for Kentucky- and Indiana-based Baptist Health, which centralized its supply chain operations in 2013 and as since gone on to standardize PPIs in such a way as to save a little more than $12 million just on supply chain products in 2017.

THE PROBLEM

It can be challenging to find savings in the supply chain, which is why the standardization of PPIs was a top goal for Baptist. But that of course begs the question: What does standardizing PPIs even mean?

Let's start by quickly defining physician preference items. Quite simply, they're the practical items and tools that clinicians use in their work, and have specifically earmarked as being their "favorite" or "preferred" items -- which could range from scalpels to complex machinery to surgical gloves.

Standardizing PPIs means different things in different contexts. Cindy Gueltzow, executive director of system services supply chain at Baptist, said different aspects of the PPI picture can be standardized, even when it comes to maintaining a hospital's current portfolio of contracts.

Approaching vendors with price parity is a potential avenue, as is working with physicians to develop protocols about certain products. Or you can do it in the most fundamental way and standardize then vendors with whom you do business.

"We start with the data and move forward with our subject matter experts," said Gueltzow. "Sometimes there's administrative leadership determining what is the best thing for our organization, and we identify what the best possible opportunities look like."

PROPOSAL / MARKETPLACE

Baptist wanted, and needed, a vendor partner who was the right fit. While there are a few PPI and supply chain vendors out there -- Premier and Kermit, to name but two -- Baptist was most impressed with Medline due to their robust reporting capabilities and their control over the manufacturing process.

That's when the system brought its nurses and physicians into the process.

"We grew from there, and played on the subject matter teams," said Gueltzow. "We continued to meet with them -- we called them our resource council -- and it's based on the type of work that they do.

"We brought the products to the subject matter experts and had them consider what the opportunity would look like with the Medline branded product. Sometimes we kept them, sometimes we asked to make changes to the product so it would be something we could use in the future."

That collaboration is the central piece of the puzzle, since it allows the system to make purchasing decisions based on both the price of the item and its potential to improve patient care. Striking the right balance allows clinical quality to flourish while resulting in cost savings.

"Our number one priority is making sure our clinicians have the quality tools they need to do their jobs," said Gueltzow. "The decisions that are made are very impactful and they have staying power, so it's not a decision that's made lightly."

RESULTS

The $12 million-plus in supply chain savings in FY17 speaks for itself, but it doesn't happen automatically. It requires communication with the vendor, especially if changes need to be made to a product.

Sometimes that's just a matter of getting the quality folks on the phone and explaining to them what the issues with a certain product might be, and what needs to change. In some cases Medline will put their chief nursing officer on the phone to speak with Baptist's nurses, facilitating contact with subject matter experts who can weigh in with authority on the matter.

Diligence and adaptability are required to consistently manage PPIs on a fiscally prudent way, largely because technology evolves so quickly.

"There's something new coming out every single day," said Gueltzow. "And much of it is what we want to be using for our patients, because we want the best, but if you don't work with your physicians to understand that new technology, you may contract for everything, thereby raising your costs."

PPI absolutely has to have physician input, said Gueltzow. Physicians are placed on Baptist's service lines, and they review all of the contracts associated with their particular lines.

And what's nice about the resultant cost savings is that Baptist doesn't always have to opt for the least expensive item. If a slightly more expensive product would make more sense, the money is there for it.

Collaboration is the one part of the process that will never change, said Gueltzow.

"It's supply chain, so there's never a steady course," she said. "If you're doing things the same way you were doing them yesterday, you're probably doing it wrong. We have to find new and different ways to partner with our clinicians and dovetail these new technologies."
 

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com