Standardizing Products - McKesson Medical-Surgical

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Product Standardization

The chosen few: product standardization across many physician offices is a challenge, but no cause for panic

Most supply chain executives know the challenges of standardizing medical-surgical products and equipment within an acute-care hospital’s four walls. It’s not easy. Now try standardizing across those 15 physician practices your health system acquired last year. And the 10 additional ones acquired earlier this year. “Don’t panic,” says Jon Manitta, director of purchasing and project manager for George Washington University Medical Faculty Associates, a practice with more than 700 physicians in Washington, D.C. “First and foremost, you have to be empathetic [with the practices]. If you try to attack supply chain with a mallet, you’re going to want to downsize to a scalpel.”

“The non-acute care environment is a different animal [from the hospital],” he continues. “People’s expectations are different. The latitude they have had is usually different. It’s a much more siloed environment. They often look at their practice groups as their own thing. They get very ingrained in how they do things. And they often attribute their success to the fact that they have that latitude. “Michael Cassaro, manager, Office of Strategic Sourcing for Atrius Health, Newton, Mass., says, “The majority of physicians are flexible when they understand the ramifications of their decisions on the organization’s bottom line. They just need to be engaged early and see the data.

“The difficulty lies in the size and breadth of the organization,” says Cassaro, whose practice is made up of 750 physicians representing more than 50 specialties in 29 locations in eastern Massachusetts. “Physicians with experience in small private practices may realize that every product they buy has an impact on their own pocket. That’s not always as easy to see in a large organization.”

Mass confusion

At first glance, executives brought up through the acute-care ranks might dismiss the supply chain ramifications of their newly acquired physician practices, given the relatively low volume. But often, as time goes on, they discover that failing to control purchasing and inventory leads to more expense, SKUs, waste and inefficiency than they anticipated. Those inefficiencies are often passed on to their distributors, who in turn must increase prices to recover their additional costs.Twenty-four months ago, most supply chain executives didn’t give much thought to their non-acute care charges, says Katie Udenberg, vice president of health systems for McKesson Medical-Surgical. After all, they often account for 5 percent or less of their overall system’s spend.

“…We’re finding that with every analysis, every category we go after, we can save anywhere from $20,000 to $25,000. You have so many categories that before you know it, you’re at $300,000.”

– Michael Cassaro, Atrius Health

“But now, health systems are acquiring practices at an unprecedented rate,” she says. “And if they are behind in developing standardization guidelines, it quickly becomes overwhelming to catch up. That’s usually when they ask us for help. They know we have a template [for servicing non-acute care sites], and they ask us to tell them what they need and whether we can recommend a change in formulary.”At that point, the McKesson [Medical-Surgical] team is likely to ask one question, says Udenberg: Do the physicians in the newly acquired practices have an incentive to be cost-effective or not? “If they do, they are wide open to standardization,” she says. “If they don’t, they may want to stay with their preferences.”

Adding up to real money

It’s a challenge with which Cassaro is familiar.”We just met with a couple of our specialty chiefs yesterday and had this very discussion about product standardization,” he says. “McKesson [Medical- Surgical] helped us put together 50 pages of data, showing how much we pay for products, how much we buy.”We could see we buy 74 different types of gloves in something like 10 categories. We could easily get that down to 10 or 15. The savings from consolidating may not be that big, but we’re finding that with every analysis, every category we go after, we can save anywhere from $20,000 to $25,000. You have so many categories that before you know it, you’re at $300,000 savings.”

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