Methodist Health System Saves $6.5+ Million by Aligning Incentives to Reduce Operating Costs, Improve Quality and Safety

Three Dallas hospitals partner with the Premier healthcare alliance to adopt a new supply chain metric, collaborate to exceed expense reduction goals

CHARLOTTE, N.C.--(BUSINESS WIRE)-- Methodist Health System of Dallas has saved more than $6.5 million through a risk sharing partnership with the Premier healthcare alliance.

In search of more innovative ways to improve operating expenses, Methodist and Premier adopted a new supply chain metric that aligns incentives to reduce costs while improving quality and safety.

“We tracked the metric every month and achieved our goal. In fact, our savings were better than the metric we set, more than $1.5 million above our goal,” said Pam Stoyanoff, MBA, CPA, executive vice president and chief operating officer at Methodist, one of Premier’s 200 hospital and health system owners.

In March 2010, the two began an 18-month supply chain partnership to lower supply expense per CMI adjusted discharge by at least 1.2 percent. The baseline metric in fiscal year 2009 was $1,413 across Methodist’s three participating campuses. The target was $1,396 – a raw improvement of $17, or $5 million, while maintaining and improving clinical quality levels.

“Our partnership has been terrific. Our bottom line has improved and one of the reasons is because supply costs are down. You take a risk, but if you want a large gain, you have to take a risk; and Premier’s willing to take it,” she said.

Wes Champion, senior vice president of Premier Performance Partners said, “This is an example of true partnership within an organization and beyond. Staff from Methodist’s quality, safety, medical, supply chain and operations teams coordinated efforts with our experts to improve performance. That’s how care is transformed through collaboration. And that’s when you know hospitals are treating people in the safest, most efficient and cost-effective way possible.”

Methodist leadership identified several success factors, such as:

  • Engaging staff at all levels,
  • Always including physicians,
  • Optimizing supply expenses in key physician preference areas,
  • Minimizing new supply expenditures, and
  • Choosing a partner willing to share risk.

A new supply chain steering committee was developed, including system leadership, site presidents and vice presidents (ad hoc), supply chain/purchasing leaders, and Premier representatives. Its purpose was to remove roadblocks and approve major initiatives. The entire process worked through a strong value analysis process already in place.

Premier used a project management office model that managed the pipeline, tracked savings initiatives, and coordinated communication. Its clinical and operational subject matter experts (such as orthopedic/spine experts) identified and developed savings opportunities and provided implementation support (such as training).

Targeted savings included price reductions, utilization reductions, resource consumption, practice changes (such as vendor market share shifts), and inventory reduction. Primary areas included major physician preference items, general surgical and medical products, and ancillary/clinical spend (lab, imaging and pharmacy).

Methodist achieved an additional $1.2 million in future spend avoidance as a result of the partnership with Premier and continues to realize savings.

Stoyanoff said, “We’ve been extremely happy with Premier, and all of the resources they’ve brought to the table. What I would say to other Premier members who are considering such an engagement is ‘Go for it!’.”

“Premier measures our successes by how successful our members are,” Champion said. “With Methodist, achievements were made through the movement of a supply metric, not just a dollar reduction of supply costs. We are honored that they would entrust us with this important initiative to complement their already successful and aggressive labor management efforts.”

For 16 years Methodist has been an owner of Premier, working to transform healthcare. Using a combination of Premier supply chain and quality data, as well as expert resources – including the risk sharing partnership – Methodist has benefited from more than $25 million in membership value over the past five years.

Additionally, Methodist Charlton, Methodist Dallas and Methodist Mansfield Medical Centers are new members of Premier’s QUEST®: High Performing Hospitals collaborative, with 293 hospital members increasing adherence to evidence-based care delivery in six critical areas to improve the patient experience and avoid harm while reducing mortality, cost of care and readmissions.

As members of Premier’s PACT™ (Partnership for Care Transformation) collaborative, the health system also works alongside nearly 80 health systems representing 450 hospitals, 20,000 physicians and 2 million covered lives across 42 states.

About Methodist Health System

Guided by the founding principles of life, learning and compassion, Methodist Health System provides quality, integrated care to improve and save the lives of individuals and families throughout North Texas. Methodist Dallas Medical Center, Methodist Charlton Medical Center, Methodist Mansfield Medical Center, Methodist Richardson Medical Center, Methodist Midlothian Health Center, and Methodist Family Health Centers are part of the nonprofit Methodist Health System, which is affiliated by covenant with the North Texas Conference of The United Methodist Church. Additional information is available at Connect with them through Facebook, YouTube and Twitter at

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 81,000-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
Alven Weil, 704-816-5797

KEYWORDS:   United States  North America  California  District of Columbia  Illinois  North Carolina  Pennsylvania

INDUSTRY KEYWORDS:   Technology  Data Management  Health  Hospitals  Other Health