Hospitals Better Identify Supply Savings Opportunities Based on Patient Mix with Premier Healthcare Alliance Methodology

Supply Mix Index™ integrates clinical and supply cost data from 700+ facilities to calculate an SMI figure for any acute care organization in the U.S.

CHARLOTTE, N.C.--(BUSINESS WIRE)-- Members of the Premier healthcare alliance are identifying supply savings opportunities through a value-added Supply Mix Index (SMI) methodology, which combines clinical and supply cost data from more than 700 hospitals.

Supply cost as a category makes up the second highest budget line (after labor cost), generally 30-35 percent of total hospital operating costs. For some providers, supply cost as a percentage of total cost can be higher.

Premier’s SMI allows Premier to calculate supply cost indexes for every Medicare Severity - Diagnosis-Related Group (MS-DRG). Using clinical, operational and supply cost data supplied by alliance health systems, Premier created the methodology which permits an SMI figure to be calculated for any acute care organization in the U.S. Blended and blinded data from more than 3.7 million patient level records was used to create the methodology, which is continuously being updated in Premier’s growing integrated performance platform.

“In order to ensure the ongoing delivery of the highest quality care, organizations must be cost-effective,” said David B. Pryor, MD, chief medical officer for Ascension Health in St. Louis. “This new methodology provides the capability to much more accurately measure supply expense in clinical procedures and to benchmark those expenses to ensure that best practices are followed.”

Keith J. Figlioli, Premier senior vice president of Healthcare Informatics said, “Examining SMI in relationship to CMI provides insight into the relative importance of supply expense to the total cost of treating a set of patients. For instance, a hospital with a high SMI will benefit disproportionately from reductions in supply expenditure. SMI can also be used to compare and define like hospitals in peer groupings, alone or in conjunction with other hospital characteristics with more specific indicators, such as readmission rates.”

SMI, as a means of incorporating patient mix in regards to supply expense, allows for cross-hospital comparisons of supply efficiency, and is useful in comparing a hospital’s “supply intensity” to other hospitals. Case Mix Index, a traditional methodology to adjust for patient mix when analyzing hospital supply expense, is frequently challenged as a valid metric. For example, an MS-DRG with a high total cost will have a high CMI weight even if there are few supplies used. Because of this, Premier created the SMI methodology to supplement CMI, as it demonstrates a more direct correlation to supply expense per patient case than does CMI.

Premier’s SMI methodology is first being employed in the executive level reporting application of SupplyFocus®, to which acute care facilities submit data quarterly. SupplyFocus is also included with OperationsAdvisor®, Premier’s labor productivity and benchmarking product.

SupplyFocus and OperationsAdvisor are part of LaborConnect®, Premier’s labor management program, which helps hospitals control costs and improve care delivery. The program saved hospitals $120 million in labor and supply costs last year.

Premier’s industry-leading technology solutions led the organization to be ranked 72nd on the 2010 InformationWeek 500 list of the top technology innovators in the nation.

About the Premier healthcare alliance, Malcolm Baldrige National Quality Award recipient

Premier is a performance improvement alliance of more than 2,500 U.S. hospitals and 75,000-plus other healthcare sites using the power of collaboration to lead the transformation to high quality, cost-effective care. Owned by hospitals, health systems and other providers, Premier maintains the nation's most comprehensive repository of clinical, financial and outcomes information and operates a leading healthcare purchasing network. A world leader in helping deliver measurable improvements in care, Premier has worked with the Centers for Medicare & Medicaid Services and the United Kingdom's National Health Service North West to improve hospital performance. Headquartered in Charlotte, N.C., Premier also has an office in Washington. Stay connected with Premier on Facebook, Twitter and YouTube.


Premier healthcare alliance
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