Our focus at St. Luke’s is better outcomes at a lower total cost of care. Every department contributes to these goals. In most cases, we have seen that we can achieve better outcomes while reducing costs. Supply chain is a great example.

Here with a report about the great work St. Luke’s Supply Chain has been doing to support our Strategy 2020 is Communications Coordinator Chereen Langrill.

- David C. Pate, M.D., J.D.

Good health isn’t happenstance. Good nutrition, regular activity and stress management all play their roles.

Financial health requires the same vigilance. St. Luke’s Supply Chain plays a big part in the health system’s financial health through the supplies, services and suppliers it purchases and uses on behalf of the organization, and as such, it watches for potential pitfalls or opportunities for improvement.

In all, St. Luke’s Supply Chain is the gatekeeper for nearly $500 million in supplies and services. The work done by the team touches nearly everything that keeps the health system running smoothly, from maintenance contracts and medical equipment to the supplies used to clean patient rooms.

Over the past three and a half years, the department has delivered $57 million in cost savings initiatives. In fiscal year 2017, it reduced St. Luke’s expenses by $5.9 million.

“Supply Chain has transformed itself from a tactical department into a trusted and strategic partner for the health system,” said Adrian Wengert, St. Luke’s Health System vice president of Supply Chain.

Here are five ways Supply Chain has made St. Luke’s a more efficient health system.

Embracing Category Management

Supply Chain has embraced a category management approach, which groups similar or related products and services. This gives planners and leaders the ability to drill down into specific areas, such as purchased services (housekeeping, landscaping, etc.). Through this approach, the team has been able to standardize and refine contracts.

Patty Skeie, Supply Chain category director, joined the team three years ago as the department’s philosophy was beginning to shift.

“Category management is very prevalent in other industries, but it’s still new in health care,” Skeie said.

Rather than continuing to take an “if it isn’t broke, don’t fix it” approach, the department added category directors who could find opportunities to save money while maintaining the highest standards for patient safety and care.

“We decided we needed to be better at this,” Skeie said.

Choosing a New Group Purchasing Partner

The team switched to a new pharmacy wholesaler, medical-surgical distributor and most importantly, group purchasing organization (GPO).

 “It took a lot of work, but we did it,” said John Barnes, St. Luke’s Health System director of systems and analytics. “We’re proud of that. We are constantly pushing ourselves to do the right thing and not just stay with the status quo.”

Most of St. Luke’s annual purchases of services and supplies are contracted through a GPO to save money, because the purchases are based on volume and can be standardized.

The move to a new GPO, HealthTrust, allowed St. Luke’s to begin a massive commodity conversion project involving physician leaders and clinicians. Over the past three years, more than 1,000 items have been converted to new manufacturers, resulting in significant cost savings.

“Assessing, revising, communicating,” Barnes said. “We do that in small doses when changing supply companies. This was just a bigger project.”

Reducing Irrational Variation

Imagine the amount of time and expense it would take to maintain a fleet of 100 vehicles, all different makes and models.

Supply Chain works throughout the health system to find inefficient redundancies and then reduce them.

Paying multiple suppliers for the same product – or buying several different brands of the same product – wastes money and can pose a safety risk because clinicians and caregivers must know the differences between each product.

For example, St. Luke’s recently moved to a single brand of hypodermic needles, going from 96 different types to 54. The conversion reduces employee risk for accidents because there are fewer needle types staff members need to know.

Among other initiatives:

• A repairs and maintenance project resulted in more than $1 million in savings. Supply Chain spent four months studying repair and maintenance records and refined maintenance contracts to make them more efficient and to avoid excessive repairs.
• A pricing refresh for blood products generated a savings of nearly $350,000.
• Supply Chain expects to save more than $600,000 this year after standardizing materials used for total joint replacements.

Building on Physician and Clinician Engagement

Including physicians and others in the decision-making process allows those closely involved in patient care to provide input and perspective. And it extends beyond patient care. Supply Chain works with leaders and staff throughout the health system.

“Many of them are subject-matter experts in those areas, so we need to get their feedback to be successful,” said Matt Stephens, the Supply Chain category director over purchase services.

While working on the clinical cost savings initiative involving joint replacement, a team from Supply Chain met with physicians to present options who then voted on a new approach that was implemented in February.

Collaboration with physicians, clinical leaders and others led to the purchase of new biplane equipment used in interventional radiology. As part of the agreement with the manufacturer, St. Luke’s can upgrade to new equipment when it becomes available, which will ultimately save the organization $500,000.

Staying Ahead of the Curve and Adapting When Necessary

When Hurricane Maria hit Puerto Rico in fall 2017, it destroyed a plant that manufactures medical supplies (such as IV bags), and St. Luke’s had to adjust to that change rapidly. Bill Whiting, Supply Chain inventory manager, constantly works with clinical staff members to find equivalent substitutes and work-around solutions that won’t compromise patient safety.

“We are pretty creative in the ways we can help accommodate the system in emergency situations like these,” Whiting said.

Whiting follows inventory trends to watch for potential challenges. He is currently following the tariff issue between China and the United States and the possibility that the United States will begin imposing tariffs on items imported from China. Whiting is looking at every item St. Luke’s uses that is manufactured in China and trying to determine if he needs to stock up now.

As a not-for-profit health system, finding opportunities to save money is an essential function. The work done by Supply Chain ensures the organization remains healthy, and in turn can continue to care for the health of people in the communities it serves.

It is a vital role that developed from an idea that the status quo wasn’t good enough.

“I think we’re on the right path,” Skeie said, “and we will need to continue to find creative and innovative ways to provide value as the health system evolves.”