Westchester Medical Center turns transparency into $9 million in savings

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When Jim Connor, vice president, supply chain operations at Westchester Medical Center (WMC), took on supply chain responsibilities in 2008, he knew it was time for a major change. Years of outsourcing the materials management function had left WMC unable to easily track how much was being spent, determine the rationale for product selection, or evaluate how efficiently those expenditures were handled. Millions in supply spend were being funneled into a black box that yielded little more than a notification when suppliers were added or replaced.

Connor and his team have championed the adoption of a new approach to supply chain management – one which in short order helped to change the fortunes of WMC’s business operations and begin a turnaround that has contributed multimillion-dollar savings for its bottom line.

Serving a 5,000-square-mile area that is home to more than 3.6 million people, WMC is the regional trauma and tertiary/quaternary care center for the Hudson Valley of New York. As a public benefit corporation and academic teaching center, WMC maintains its mission to treat anyone in need of advanced medical care. However, its commitment to serve area citizens is not without financial challenges.

Just a few years ago, huge losses had the facility on the edge of bankruptcy and the difficulties facing WMC’s supply chain operation were only one link in a larger chain of hurdles it faced as part of an effort to regain financial footing. One step in the right direction was taking back direct control of its materials management process and finding a partner to help establish a creative business model that went beyond traditional group-purchasing concepts.

Connor reports that WMC’s current partnership with MedAssets, initiated in July 2009, has been based from day one on honest, opencommunication, complete operational transparency, a shared commitment to delivering results and aligned incentives where all parties benefit from the savings achieved.

Armed with actionable data and accurate business intelligence supplied by MedAssets, Connor and his team are changing the culture for supply chain management at WMC and adopting a data-driven process that has transformed the black box of supply spending into a fully transparent system – one that has yielded substantial savings for overall product expenditures.

The MedAssets relationship with WMC has been built on the foundation of an open-ended dialogue with hospital executives and physicians that focuses on getting the right information to the right person, at the right time. Connor credits MedAssets flexibility and creativity in structuring a process that was tailored to WMC’s unique requirements based on listening and using that input to craft solutions to which all parties can subscribe.

The use of advanced data analytics from Aspen Healthcare Metrics, a MedAssets company, has enabled WMC to identify a path to both immediate savings opportunities and longer-term supply standardization opportunities that improve financial performance.

MedAssets guidance was derived from a review, by service line, of 12 months of WMC purchasing, finance and clinical utilization data, including physician preference items. For each service line, MedAssets provided Connor and his team with a presentation of the data, down to such details as the types of screws used for orthopedic procedures. From the data, WMC was able to identify its big-target savings opportunities, such as the potential for a 50 percent decrease in pricing for supplies for spine procedures.

Aspen’s data analysis capabilities are differentiators, according to Connor and far surpass WMC’s ability to review the numbers internally. “The data is airtight,” he says, “and our physicians are very receptive to it, particularly to how it shows the linkage of supply costs with their clinical data.”

Physician buy-in is essential to changing buying practices for physician preference items. The analysis by service line through MedAssets Service Line Analytics and consulting provides a credible launching point for further discussions with doctors to understand how they work with specific items, what needs drive their choices and how their product selections can be modified to satisfy both their clinical requirements and meet WMC’s overall financial objectives. Working with trauma surgeons to design their product formulary or meeting with total joint physicians to help establish the criteria upon which contracts will be negotiated is part of the process and creates an atmosphere of trust and buy-in to drive change in how PPI supplies are purchased.

This new approach to procurement set the stage for transparency across commodities using MedAssets group purchasing organization. Prior to making the change to MedAssets as its group purchasing partner, WMC had little to no knowledge about the supply contracts that were in place or the reasons behind why certain contracts were being changed from one supplier to another. The primary reason for this was because the management of the supply chain was outsourced to a firm that did not have a business model that was aligned with WMC.

Connor and his team determined if WMC wanted to accomplish the improvements they targeted, a new foundation based on data and transparency needed to be established. Once the partnership began with MedAssets, WMC implemented technology to move from paper-based contract management to an electronic system that enabled data mining to identify pricing, standardization and clinical utilization opportunities. Just as WMC has experienced success with reducing physician preference item costs, there have also been great improvements in how WMC utilizes GPO contracts for commodity product evaluation and procurement. Similar to the PPI initiatives, the data and analytic capabilities that the MedAssets GPO relationship has brought to the table have been the key to WMC’s success.

WMC has definitely turned the corner and continues to respond effectively to new financial challenges at both the state and federal levels. The organization overall is now profitable for the fifth consecutive year and its supply chain operation is posting savings numbers that exceed projections – potentially hitting its three-year target in only 18 months.

Connor and his team, with guidance from MedAssets, have implemented more than $9 million in savings on an annual supply spend of nearly $125 million. Largest cost reductions have come from the Cardiology/Interventional and the Ortho/Spine service lines.

With additional initiatives under way in pharmacy, med/surg and surgical services, the stage is set for more savings and a better bottom line for WMC. The challenges remain, however. Physicians must continue to provide support, while variables such as new technologies, product recalls and suppliers’ marketshare holds still require careful navigation.

However, Connor is confident he has the process and support system in place to continue finding the right answers. “Projects don’t go without glitches, but I’ve appreciated how MedAssets has facilitated an open and honest discussion to find solutions and get them in place quickly,” he said.

In the bigger picture, Connor believes his new supply chain process will continue to provide WMC with ongoing savings that meet or exceed targets. “From the beginning, we liked the MedAssets business model, particularly the focus on technology and other value-added benefits,” Connor concludes. With the help of its revamped supply chain business, WMC continues to ride a new wave of success.