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Facilities Planning Summit
The Philosophy of IDN Program
Presenters:
Sean Poellnitz
Director Contracting and Resource Utilization
CHRISTUS Health
Confidential information for the sole benefit and use of CHRISTUS
Overview
2
Draft – For Discussion Purposes Only
Sean Poellnitz Director Contracting and Resource Utilization
Rules of Engagement Capital Planning
TCO ExpectationsSupplier
Collaboration
The Next Ten Years
Presentation Objectives
What plan to learn today:
• Drive understanding around the philosophy of IDN Capital Programs
• Understand what IDN and Supplier stakeholders need for win-wins
• Talk about how to integrate your supplier strategies to add value to IDN Capital Programs
• Real conversations around the soft points around successful IDN relationships
• Q & A if appropriate
Who We Are International Catholic, faith-based,
not-for profit health system comprised of almost 350 services, more than 50 hospitals and long-term care facilities, 175 clinics and outpatient centers, and dozens of other health ministries and ventures
Our Mission: to extend the healing ministry of Jesus Christ
CHRISTUS Health Geographical Coverage
6 States in the United States
Recent expansion into East Texas with additions of Trinity Mother Frances and Hopkins County Memorial Hospital
International Operations 9 acute care facilities in Mexico 3 acute care facilities in Chile 2 acute care facilities in Colombia
60 hospitals and long-term care facilities
28,000 Associates
$5b total asset
4,500 operating beds
9,600 physicians on staff
> 350 medical facilities owned/managed
Largest % charity care of any Catholic providerSupply Chain
$1.4b in spend (supplies, drugs, and purchased services)
250 FTEs
Largest Healthcare provider in Mexico, Chile and now Columbia
NEW: CHRISTUS Trinity Mother Frances
CHRISTUS Health
Industry Recognition
2016
7
Old Healthcare Supply Chain
8
Unreliable Irrelevant
Lack of Leadership Support
Customer Non-Compliance
Broken Promises
Poor Communications
Transactional
Source: J O H N S T R O N G, L L C
-$60
-$55
-$50
-$45
-$40
-$35
-$30
-$25
-$20
-$15
-$10
-$5
$0
$5
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Billio
ns
Revenue: Hospital Payments Shortfall to Costs for Medicare, Medicaid and Other Government, 1997-2013[1]
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2013, for community hospitals. (1) Costs reflect a cap of 1.0 on the cost-to-charge ratio.
Shortfall in Medicare reimbursement
Shortfall in Medicaid reimbursement
Supplier Relationship Management (SRM) is the discipline of planning for and managing all interactions with strategic third-party organizations that supply goods and/or services to the customer organization in order to maximize the effectiveness of those interactions by collaboratively identifying and working opportunities for all parties to realize new value
Definition: Supplier Relationship ManagementN
um
be
r o
f V
en
do
rs
Many
Few
Type of RelationshipTransactional Strategic
• Arm’s Length• Cost-Driven• Availability-Driven• Performance managed
• Long term• Mutual benefits• Shared resources• Open communications• Shared risks and rewards• Senior leadership involved• Relationship managed
Tier III
Strategic Council
American will still be striving to get health insurance
Baby Boomers eligible for Medicare
Controlling case cost with revenue shortfall
$1.2T of Healthcare expenditures tied to waste & inefficiency
External Barriers and Risk
Source: J O H N S T R O N G, L L C
12
Cost Pressure: The Usual Reaction
OSU Wexner asks hundreds of vendors to discount prices by 20%Written by Kelly Gooch | December 29, 2014
The Ohio State University Wexner Medical Center is looking to cut $40 million from its annual cost of supplies and services by asking hundreds of its largest vendors to give a 20 percent discount, according to The Columbus Dispatch.
• Movement of Focus on Price to Value • “Do I need the same level of service?”• “How much am I paying for
convenience?”• Process Costs vs. Price
• Supply Chain and Acquisition Costs
• Costs to Use a Product or Service• After the Costs
CFOs and of Supply Chain Organization requiring more date based decisions
We have external benchmarking tools driving new expectations
We’d exhausted the “low hanging fruit”, yet the supply chain represented more than 35% of our total expenditures and growing
Market demands required a move from a holding to operating company – think and act like a system
Reactive, short term contracting has become costly while more evidence based decisions are needed
Internal Barriers and Risk
Understand the IDN’s History/Vision
Clear knowledge of the Contracting Strategy
Start opportunities at Corporate
Properly leveraging Business Reviews
Get comfortable with your data being questioned
Be innovative and open to ideas while providing transparent clinical evidence (Ex. Risk Sharing)
Proper partnering and support of implementation and conversions
The Value of Relationships
8 Rules to Successful IDN Contracting
Source: J O H N S T R O N G, L L C
Should SCM Be Worried About Price Alone? Are you buying “Price” or “Value?”
Price (95% of RPG Activity Today)
Value• Contracting• Procurement• Distribution• Vendor fees• Freight• Inventory Management• Carrying cost• Receiving• Internal distribution• Payment• Terms• Processing
• Discrepancy management
• Returns• Recall management• Item registry• Service• Maintenance• Vendor support• Training• Education• Conversion• Data management• Item file
Understand the IDN’s History/Vision
Mission Influence
How Have They Grown
The Current Market Pressure
The Current Supply Chain Goals
Where Are They Going
Understand our Pain Points for both stakeholders
Get to know the IDN
Industry-Wide Capital Provider Pain Points
Disorganized process |Multiple, disparate
stakeholders
Difficulty finding secondary equipment suppliers |
Lack of benchmarking data
Poor record keeping or reporting | Difficulty
managing vendor relationships | Internal
trackingPoor visibility | Inability to drive group transactions |Poor demand aggregation
and lack of scale
“My biggest pain point is a broken
capital procurement
process.”CATHERINE GREIN
Contracts Administrator
WellSpan HealthNeed for Greater
Aggregation
Little Tracking and Reporting
Need for Greater Insights
Internal Inefficiency
17
Source: L.E.K. survey, interviews & analysis
Supplier Pain Points Drive Up The Cost of Equipment
No transparency | No visibility
Significant resources spent working with the wrong people, and negotiating
contracts
Difficulty communicating with
provider decision makers |
Significant SG&A costs
“Identifying the right
opportunities and efficiently
managing my teams ability to
work them.”
MARK LaPorteDirector of Sales,
HealthcareInterMetro Corp.
Need for Greater Access
Inefficient Use of Resources
Opaque Provider Budgeting
Process
18
Source: L.E.K. survey, interviews & analysis
The Best Plans
Clear knowledge of the IDN’s Contracting Strategy
Contracting Team Structure
How they leverage the GPO
Influences of their VAC governance
Spend Management Philosophy
Where are they going
Get to know the IDN
Inefficient
Source: NYU Stern/Bloomberg
Inadequate Support
Benchmarking solutions lack precision and are deemed “inadequate” by 64% of providers
Benchmarking is not Cost Savings!
Source: L.E.K. survey
Construction*$41B(53%)
IT equipment^$6B (8%)
Capital equipment**$30B(39%)
~$70-80B
40
60
80
100
20
0
Non-clinical$4B
(14%)
Non-differentiated$4B
(14%)
Routine use$8B
(26%)
Specialty / narrow use$4B
(14%)
Capital Equipment
Total Capital Expenditure
Source: U.S. Census Bureau; L.E.K. survey, interviews & analysis
Large Market
U.S. Hospital Capital Spending (2015)
The Healthcare Equipment Market is Inefficient
21
49% 51%
Equipment Supplier Costs
Product
SG&A
High cost & technical$10B(32%)
Source: J O H N S T R O N G, L L C
GPO Participation is Uneven across Product Categories
Source: Schneller, The Value of Group Purchasing
78% 82%
36%
Consumables Pharma Capital Equipment
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Percentage of U.S. Hospital Purchases that go through a GPO
GPO Contract Compliance
Source: L.E.K. Consulting & HSCA
Purchase with
primary GPO
(56%)
Purchase with secondary GPO
(56%)
Do not utilize a
GPO (25%)
All Goods Pharmaceuticals
Purchase with
primary GPO
(90%)
Do not use GPO (10%)
Source: J O H N S T R O N G, L L C23
Healthcare Group PurchasingSuppliers: “How do we better leverage the GPO”
Basic Homework Gametime
• Passive• Do you know your customer’s
GPO(s)?• Are targets prioritized?• Do you know the GPO’s terms
with suppliers? (Contract summary)
• What value besides price do they add to your story?
• Suggests Action• Do you know the account’s GPO
sales resources?• Which targets can/will they help
with?• How do the GPO contract terms
assist you in defining value?• Are you hunting?• Are you actively implementing the
GPO contracts you have?
Source: L.E.K. Consulting
Sales Models Built Around ValueWhat is my Value Proposition?
Traditional Sales View Future Sales View
• Sell more product, especially the “Cadillac”
• Customer service no matter the cost
• Customer and employer process costs are “their” problem
• “I’ve known Bob for 25 years”• The ‘big shots’ know about the
healthcare environment• We’re locked into this account• Do I really know the current status
of an account?
• What problems is the provider trying to solve?
• Be realistic about the relationship• Better understand all of your
customers needs• Deliver on all promises• Get your value framework right• Aim for greater transparency• Be proactive• Look beyond the client to deliver
value
SURVIVE THRIVE
Adopted from Retel, Marco and Bradford, Edmund “Tasting the Success of Co-Created Customer Value, “Velocity” Magazine Issue 2, 2014.
J O H N S T R O N G, L L C
Soruce: J O H N S T R O N G, L L C
Changing Sales ModelsTechnology, costs, value analysis pressure traditional models
Buyer—Seller Collaboration
Don’t use the term “partner”!
Understanding the buyer/seller relationship
Technology driven
Disruptors empowered by information, communication
New ways of evaluating, buying products
Rep-less sales strategies
Supplier SG & A “through the roof”
Eliminates “upselling”
Role of sales people…beyond selling
Vendor control policies drive need to change
Greater channel, pricing transparency
Contracting * Project Management * Spend Management
Contracting…….What We Do?
Savings Goals
Standards Financial
Analysis/Forms/Tools
Staffing Changes
Contracting Priorities
ApprovalRouting/Legal/Risk
CONTRACTING THOUGHT LEADERSHIP/SOLUTIONS
BRAND MANAGEMENT
How do we better service our stakeholders?
Ideas. Insights. Interactions.
Don’t buy into facility based agreements
Work with Corporate on Day 1
Understand the power of Clinical Champions
Assign a National Account Rep that serves as a ONE STOP POC
Manage your field reps
Corporate Centralization
CHRISTUS Health Capital Process Flow
Properly Leveraging Business Reviews
Lets Talk……….
Current State
• What products/services does your company provide CHRISTUS? (~5m)
• What is the current and three prior years’ scope of business in dollars by CHRISTUS region? As possible, provide this information by product/service category. (~25m)
• Considering CHRISTUS as standalone profit center for your organization, how are we doing? In other words, how does CHRISTUS compare to your very best customers in terms of our contribution to your company’s profit margin? (~20m)
• In the last 12 months, how have you specifically supported CHRISTUS with our Quality Assurance, Sustainability, or Diversity initiatives? (~15m)
• In the last twelve months, where in the industry have you been recognized (i.e., green initiatives, employer of choice, diversity, operational excellence, etc.)? Of these recognitions, where and how might CHRISTUS benefit from your capabilities? (~5m)
• What are the top three opportunities for improvement to enhance our relationship? (~5 min)
CHRISTUS Health Business Review Questions
Future State
• What products/services does your company provide that are not sold to CHRISTUS? What are the obstacles/limitations for selling these to CHRISTUS? (~10m)
• What are your areas of potential growth within CHRISTUS ? What can CHRISTUS Supply Chain Management do to facilitate this growth? (~10m)
• What unique opportunities exist between our organizations to develop and drive unique solutions for the betterment of both organizations and the industry at large? (~15m)
• In the next 6 months, what can we agree to accomplish together? (~10m)
Total Minutes = 120
CHRISTUS Health Business Review Questions
“Data is the ultimate basis for driving integrated decision-making – not opinion, not physician preference, not centralization of purchasing authority but rather, aligned and data-driven decision-making” Creating the right data (a holistic view) no silo
decisions how does this purchase affect the organization as a whole (reimbursement etc.)
Don’t come to a meeting with assumptions
We know the market pricing, trends, and internal price parity
Ask us for reports and agree on baselines (Ex. Annualized #’s)
Suppliers expect compliance and we expect support
Who’s Data Is It Anyway?How Sharing Data Drives Supply Chain Innovation
Only 55 % of respondents believe suppliers fully understand the challenges of their organization and work to attain mutually agreed upon goals.
73% of executives indicated the quality of information shared is the biggest barrier for their organizations to achieve greater collaboration with suppliers.
70% say there is just "sometimes" a trust and willingness to collaborate between healthcare providers and suppliers.
The Integrated Delivery Network Summit Market Research survey was conducted among 200 senior healthcare supply chain executives in September.
SOURCE: Becker's Hospital Review
Valuing Relationships Collaboration
Collaboration vs. Collective Impact
Final Thoughts…Supply Chain and the Evolution of Healthcare
• Increased pressure to manage costs and revenue
• Integrated solutions that improve cost and quality
• Value story in the context of the total cost of care
• Strategic partnership between providers and suppliers
• Greater transparency: data sharing and deeper collaboration across strategic initiatives
• Products linked to customers through contractual risk arrangements
• More direct customer relationships by suppliers
Speaker Contact Information
Sean Poellnitz, BS, CHRM
Director Contracting & Resource Utilization
Supply Chain Management
214-463-6097
