MedStar’s Supply Chain Puts Patient Needs First
- Consolidate five separate purchasing functions, centralize distribution, and improve customer service for seven hospitals and 19 diversified businesses
- A systemwide supply chain, inventory management and business process outsourcing plan
- Centralized purchasing sites and established standardized procedures for inventory replenishment
- Realized over $30 million in savings during the duration of the contract
A world-class supply chain reputation doesn’t happen overnight. For MedStar Health, it took nearly a decade, a desire to break through a performance plateau and a plan to focus on creating sustainable business advantages for its hospitals, caregivers and patients.
This major regional health network in the Baltimore-Washington, D.C., area chose CSC to identify high-impact supply chain initiatives and technologies, and create and launch a systemwide inventory management and distribution solution.
MedStar’s supply chain management delivers high-quality products and services at the lowest cost by improving its business processes, enabling technologies, and driving closer relationships with internal and external stakeholders, including process partners.
“In a long-term relationship, there’s a lot of opportunity to leave a bad taste in the client’s mouth,” says Barbara Ripollone, principal, CSC Global Health Solutions. “But this relationship became much closer than what you typically see between a vendor and client. It’s been very successful.”
Enabling a supply chain solution
In 1998, MedStar and CSC began a 10-year partnership to design and implement a best practice supply chain solution for its six acute care hospitals, a rehab hospital and 19 diversified businesses. This deal also included business process outsourcing, in which CSC oversaw purchasing for the health group.
CSC led the design, development and implementation of a systemwide inventory management and distribution solution. This provided ongoing consulting to support the MedStar supply chain vision, which clarified costs, created information to support decisions,and enhanced the quality of service and profitability.
“The value of the work was much greater than the consulting dollars,” says Cecily Fisher, partner, CSC Global Health Solutions. “MedStar was able to get to leading practice levels quicker and sustain the gains.”
Realizing efficient operations
While the systemwide supply chain implementation identified more than $30 million in savings for the duration of the contract, along with managing and expanding purchasing functions for MedStar, it came with several key challenges.
MedStar had five separate purchasing and replenishment functions and rogue purchasing from all departments. Each hospital had redundant warehouse inventory, the return on investment did not support building a needed regional distribution center and outdated enterprise resource planning tools were not being capitalized.
"One of the tactical strategies for our supply chain program was to decrease handling costs for both official and unofficial inventory,” says Lee Himmel, MedStar’s corporate assistant vice president of materials management. “However, it was identified up front that excellence in customer service to our clinical and ancillary services would be included among the measurements of success.
“Advanced replenishment, in concert with point-of-use technology, has not only resulted in significant reductions in inventory, but also reduced labor needs in purchasing, accounts payable, material management, automated patient charging and supply replenishment," he says.
As the solution unfolded, purchasing sites were centralized and standardized procedures for inventory replenishment were established and instituted at all hospitals, with requisitions going from 40 percent paper to almost 90 percent electronic.
“When the purchasing department was centralized, we recognized the need to maintain our customer touch points,” says Donna Norman, MedStar’s corporate director of purchasing. “CSC worked with us to create a purchasing call center. This allows our customers, both internal and external, to easily reach out to an individual and get their concerns met in a timely fashion.”
“In addition to customer service surveys, the call center has proven to be a valuable asset to this department's quality assurance efforts as each call is documented and categorized according to the nature of the problem and location, thereby providing an easy identification of opportunities for improvement,” adds Himmel.
Purchasing and tracking capability was improved and CSC helped MedStar realize the full potential of its enterprise resource planning investment. More than 4,000 contracts were loaded into an upgraded Lawson platform, decreasing staff replenishment time and distribution labor by nearly 40 percent.
CSC managed the procurement functions, which reduced redundant staff and allowed for additional work to be performed without additional employees at major sites, including the National Rehabilitation Hospital, Georgetown University Hospital and Washington Hospital Center.
“The most significant outcome of our program is the decision to support information and the accessibility of products to those who provide direct care to our patients," Himmel says.
Increasing savings systemwide
An e-commerce solution resulted in $400,000 in annual savings by balancing inventory, streamlining workflow with electronic ordering, and capturing charges and utilization data by patient. CSC also led development of a regional distribution center using a national distributor, which realized savings of $1 million annually.
A systematic standardization of products and services also took place, including deciding which products should be adopted, as well as developing systemwide management and maintenance contracts with existing vendors and suppliers to significantly reduce costs.
CSC also created comprehensive users’ guides that provided systemwide consistency in operations and practices and conducted numerous training sessions that were customized for each of MedStar’s hospitals.
Corporate policies and procedures were also developed, along with comprehensive training materials for managing the operating room inventory and consignment management guidelines and procedures. In addition to cost savings, the solution included tracking tools to measure success and analyze usage and history reports for the Baltimore-area hospitals.