Parkview Health System (Fort Wayne, IN) took advantage of the opportunities presented by major construction and renovation projects to completely revamp its approach to supply chain management. Borrowing heavily from best practices used by commercial and governmental acquisition organizations, the health system tackled the challenge of establishing a collaborative, effective, responsive, and cost-efficient end-to-end supply chain in a fully automated and virtual environment. Through operational efficiencies, contract cost reductions, technology enhancements, and other associated benefits, investments in the new approach have been recouped in just two years. In fact, $22 million of cost-savings opportunities were attributed to the new approach over that time frame.

The opportunity to reinvent the health system’s supply chain was provided by Parkview’s concurrent development of a state-of-the-art regional medical center and a new community hospital, as well as its renovation of the former flagship hospital. The vision for all these projects was to maximize the available clinical space allocated for service lines and specialty areas, in part by excluding asset storage areas. Fulfilling this vision meant transitioning to a centralized distribution center to serve the supply needs of the seven hospitals and more than 300 physician practices and outpatient and ambulatory surgery centers affiliated with the health system. It also became clear that meeting the health system’s goal would require “renovating” the organization’s supply chain model, involving people, processes, and technology.

The challenges were vast and the time frame was short. In a period of about 13 months—the time between the hiring of the new vice president of supply chain and the opening of the first hospital—the health system addressed the following challenges:

• Developed and executed a comprehensive construction plan for the centralized distribution center. To help with this process, site visits were made to well-established distribution centers across the country. These visits allowed the Parkview team (which included information systems, purchasing, contracting, and logistics personnel) to understand the resources needed for various technological, operational, and logistical approaches and to gain knowledge in their areas of responsibility from their counterparts at the visited facilities.
• Selected a warehouse management software solution with a demand forecasting module, virtual inventory capability, and a robust point-of-use system (POUS) with patient-charging capabilities. This software platform was considered essential to establishing a fully functional distribution center supporting a complex integrated delivery network. The platform supported total visibility of inventory throughout the entire network. In addition, the POUS linked product consumption to the patient charging and billing cycle, facilitating the billing of $9.1 million for patient-chargeable items in 2013; previously, most of those charges would not have been captured. “In essence, they were lost opportunities,” noted Donna J. Van Vlerah, Parkview’s vice president of supply chain.
• Reorganized a traditional resource materials management department to create a full-spectrum supply chain acquisition model, which now operates under the name the Supply Chain Operational Resources eNovation (SCORe) department (“eNovation” being the organization’s shorthand for electronic-based innovative technologies).
• Developed and implemented significant changes to business practices.
• Fostered organizational acceptance of the planned changes. Developing a leading-edge acquisition group required convincing the entire health system to accept the revolutionary concepts that were being implemented. Frequent communications helped win over previously skeptical staff. Face-to-face “voice of the customer” surveys helped identify the end users’ needs and requirements, and reports provided to individual departments underscored the advantages associated with the new budgetary control and inventory management processes. One big selling point: The organization’s clinicians no longer spend valuable time ordering and processing inventory.

Finally, the team had to stock the new facilities, an effort that required making huge investments in capital purchases and products. This meant that the organization had a tremendous need to procure healthcare technology in the most cost-effective manner possible and to ensure that capital investments were aligned with its strategic technology needs. Parkview Health System reports that it relied on ECRI Institute’s SELECTplus capital equipment analysis and PriceGuide benchmarking tools to gain the knowledge it needed for successful negotiations, including gaining insight into market trends and identifying the best pricing available to the health system.

Best Practices

This submission illustrates how an organization can take advantage of the opportunities presented by major disruptions—in this case, construction and renovation projects—to implement long-range improvements. According to Ms. Van Vlerah, once the decision was made to optimize the clinical space in the new and renovated facilities, the thought process then became “How can we optimize the current state to make a better future state?”

Following are a few key characteristics that contributed to the success of this initiative:

• Openness to new ideas—To transform a traditional healthcare materials management department into an efficient, leading-edge acquisition group, Parkview looked beyond the healthcare realm, researching and borrowing from the best practices used by acquisition organizations in other sectors.
• Meticulous planning—Before designing its own distribution center, the Parkview team used site visits to learn what options were available, to clarify its own needs, and to educate key personnel about how to perform their function most effectively. With respect to identifying and implementing technology, Parkview again relied on research and expert analysis to select the best alternatives. In Parkview’s own judgment, as noted by Ms. Van Vlerah, “successful implementation of the appropriate technology was instrumental in our success.”
• Effective communication and transition management—To gain staff acceptance of the new processes, the Parkview team made a point of establishing lines of communication, listening to end users’ needs, and addressing their concerns. Ms. Van Vlerah observed that some clinicians found it difficult to relinquish control over the product-ordering function to an “outside” group. Thus, her team sought to prevent disruptions that could hinder acceptance of the new processes. For example, until sufficient data was available to fine-tune inventory levels, the team erred on the side of overstocking items to ensure that supplies were always available when needed.

Congratulations and thanks to the people who submitted Parkview’s application for the Health Devices Achievement Award: Jack Hahn and Donna J. Van Vlerah.