Supply chain management and logistics can serve as a cost management tool for healthcare organizations, said Brent T. Johnson, Intermountain Healthcare's vice president supply chain and support services and chief purchasing officer, in an interview with DCVelocity.
The more efficiently and cost-effectively the healthcare facility manages its supply chain, the better the outcome for both patient and provider, said Johnson, who manages the Salt Lake City-based company's $1.5 billion nonlabor spending, as well as a number of other services, such as laundry and linen, environmental, clinical engineering, food and nutrition, information technology asset management and printing.
Intermountain Healthcare built the new $40 million Intermountain Kem C. Gardner Supply Chain Center in 2012. The 327,000 square-foot facility employs more than 350 people who stock and distribute more than 2.5 million medical items annually, bringing previously scattered services and programs to one location, according to the article. The distribution center supports all of the operations for all Intermountain's hospitals, clinics and home care services, which include 33,000 employees, 22 hospitals, 185 clinics and 26 retail pharmacies.
The all-inclusive approach--managing the administrative, material management and logistics, and ancillary services in one location--helps the nonprofit healthcare system reduce costs of providing healthcare services while maintaining a high standard of care and good patient outcomes, according to the article.
"That's unique in healthcare, where they typically don't manage these types of activities as rigorously as other aspects of the business. Generally, if healthcare providers have extra money, they spend it on clinical care. They don't realize that having poor technology and processes does impact clinical care," Johnson said in the interview.
Johnson anticipates about $200 million in savings over the first five years the center operates, savings generated through pharmacy services, printing, IT asset management and the company's ancillary imaging equipment service program.
Managing the 200 contracts for and distribution of 7,000 basic medical and surgical products will also generate cost savings, as well as increased service levels that will impact patient care and remove the supply burden from the nurses, providing even more savings, according to the article. Johnson also expects to see a 15,000 reduction in road miles put on to deliver products and equipment to all its facilities. Product standardization across the system's 22 hospitals also is essential to the supply chain strategy, he said, cutting out hidden costs from distributors and other supply chain partners.
To build a stronger supply chain program, the Health Industry Distributors Association (HIDA) Education Foundation also recommends embracing best practices, such as fixing inefficient contracting practices and championing data standards and turn that data into actionable insights, FierceHealthcare previously reported.
And Richard Kunnes, M.D., CEO of the Sevenex Group, also advocates a supply chain to help hospitals optimize resources and be more efficient--as long as hospitals reduce their supplies, FierceHealthcare previously reported.
Kunnes said hospitals need to stop buying what they don't need and convert expenses into revenues. "In our experience, it's particularly beneficial for hospitals with positive operating margins of 5 percent or less--which is probably 90 percent of all hospitals today, or 95 percent of non-profit hospitals," he said.
To learn more:
- read DCVelocity's interview with Brent T. Johnson
Related Articles:
Hospitals can tighten their supply chain--with less supply
Reap supply chain savings with better contracting, data
Hospitals accelerate cost-cutting efforts
Guest Commentary: Getting to the real drivers of cost
Healthcare groups move toward global purchasing standards
Senate Finance probes Medtronic contract cancellations