Mastering your supply spend

Transcription

1 White Paper Mastering your supply spend Would you perform a procedure on a patient before validating eligibility for reimbursement? Of course you wouldn t. Then why not follow this same validation for your supplies? By relying on your item master content as your source of truth, the right supply cannot be validated before purchase. And as you struggle to control costs through value analysis and standardization, you typically turn to the item master as the baseline source for. Unfortunately, this source of truth is not always truthful in fact a recent study estimates that an item master is only 70% accurate. 1 This content problem creates inaccuracy, causing supply chain departments to spend time focusing on purchase dollars already spent, to identify contract overspend or leakage into standardization projects. Further, hospital networks with disparate systems cannot keep up with the ongoing churn of item master information to maintain accuracy. Through our market analysis including over $9 billion in supply spend, we ve discovered the following challenges: Paying disparate prices for the same products cost organizations about 2% of their Medical Surgical supply costs annually 12% overpayments are made on costly PPI items 24% of supply chain staff time is spent on fixing errors Organizations need normalized and rationalized supply spend with industry to create a single source of truth. The Sourcing solution helps drive sustainable savings for Med-Surg supplies by enhancing item master content. Through better item master content, the solution helps empowers users to make the right choice at the start of the procurement process. Real-time insights help monitor compliance to savings goals. Better content helps ensure compliance at the time of requisition by guiding the user to the desired item at the best price. By offering control earlier in the procurement process, organizations may virtually eliminate the tedious effort of validating and reviewing contract price discrepancies, and product selection after the purchase order has been sent to the vendor. Organizations can use guided procurement and organizational formulary rules to find items in the item master to meet the specific need, compare functionality and pricing, and to control choices at the point of requisition. Find On average, 44% of items cannot be found at the point of requisition and are purchased outside the item master. 2 Our integrated virtual item master () helps identify items through pictures, aliases and unlimited attribution, giving requisitioners guided access to all of the items available to them. Additionally, Strategic Supply Sourcing provides access to a standard catalog, The Matrix, that contains more than 1.4 million normalized and fully attributed items including photos and fulllength product descriptions. Users can easily find items to research for value analysis or to add items to their.

2 Find Compare Control figure 1 Organizations can use guided procurement and organizational formulary rules to find items in the item master to meet the specific need, compare functionality and pricing, and to control choices at the point of requisition. The Library helps to find the right item The Library aggregates supplier catalog to help eliminate the manual process for researching items. With the Library, you can search on specific criteria to find items easily at the lowest price without perusing individual distributor catalogs or bouncing from one website to another. The Library provides two sub-libraries: an organization library is a secure area to house an organization s private information on products, pricing, contracts, etc. The community library currently contains over 12,000 catalogs and growing. The community library is an area to load product catalog and share that content among community members (all Sourcing customers). Sourcing allows for a single search across all of the pertinent including your virtual item master, The Matrix, and the library, including both the community and private organization sub-libraries. Compare Without an effective process to drive standardization, your organization is exposed to diluting spend power and excess/obsolete inventory. Our industry-first, patented artificial intelligence (AI) engine normalizes and attributes, allows for the definition of functional equivalency by product family and recommends lower cost alternatives and most compliant alternatives at the point of requisition. To successfully achieve comparison, we normalize and attribute to a single source of truth. Integrated with all contracts, users can compare items to help make the right decision to control spend. Sourcing combines internal and external supply chain including GPO contracts, vendor catalogs and self-contracted items. Information rolls up into a central yet lets each facility retain its own naming conventions. To help standardize critical, highimpact physician preference items (PPI), functionally-similar and functionally-equivalent items within your organization can be more easily identified. The ability to functionally compare items helps deliver better content at the point of requisition when searching for items and in gathering information for meaningful value analysis. Control When requisitioners are not presented with pertinent information, including the last price paid, the correct contract price and a less expensive alternative, your economic advantage through contracting and standardization may be at risk. This industry-first, preemptive formulary enforcement helps give you unprecedented control to find the desired product at the point of requisition, and it includes an anywhere-access mobile option. Other procure-topay (P2P) approaches focus on only automating existing processes, while the point of control remains after spend occurs. Further underlying problems remain unaddressed with P2P: proliferation of products and vendors, lack of access to pertinent external (like available contracts) and lack of needed information at the point of requisition. Our preemptive formulary control solution helps empower your users to make the right product decisions. The right decisions support the financial health of your organization while enabling visible insight in managing your spend. Any non-compliant item request prompts an alert to require approval routing, including delegations feature when approvers plan to be out of the office. 2

3 Hasten your savings roadmap in real time At-a-glance analytics direct decision makers quickly to highest savings opportunities and provide organization-wide visibility to help manage department spend. With access to details, executives can review overall realized savings and missed opportunities needed to direct their staff to specific opportunities across product families or vendors. Plus visibility of purchased non-contract items helps managers target items for contracting, helping improve portfolio management overall. This real time, consolidated view helps eliminate multiple steps of manual gathering and analysis to help save significant time and money. With the visibility offered, you may accomplish multiple value analysis projects in a shorter timeframe. Your value analysis efforts can evolve into an enforceable process to help drive sustainable savings. Strengthen value analysis review with clinical efficacy Organizations are pressured to control costs while maintaining supply quality. Normally, when comparing products, you are looking at functional equivalents and cost. In the current healthcare environment, controlling cost is important; however, outcomes are also directly related to financial viability. McKesson has partnered with Hayes, Inc. to help enable organizations to review clinical efficacy of medical technologies. Now, users can seamlessly connect to Hayes extensive base as part of an integrated value analysis Outside Vendors Inputs & Outputs Internal & external Normalized descriptions Manufacturer Functional equivalent identification GPO Value analysis process directly from within Sourcing. And, with a Hayes subscription, you can obtain Hayes evidence-based ratings in the contexts of patient safety and health outcomes. You can use this information to help purchase products that align clinical goals with fiscal realities. What this means to your hospital Comprehensive Data Management Although we fully support all initiatives that drive to standards, we believe that choosing the status-quo is like choosing to close your hospital s doors. Our approach is to use artificial intelligence, AI to systematically learn the nuances present in supply chain so that the economic advantage can be immediately gained. Let s look at the following example, typical in the day-to-day operations in any hospital today: The Marketplace Cloud-based AI Procurement Engine photos descriptions transactions Hospitals Physician practices Clinics Long-term care facilities figure 2 The healthcare system s virtual item master () exchanges information with an e-commerce marketplace, an artificial intelligence (AI) engine that contains the industry set. The hospital has created an item, vendor, and perhaps a manufacturer master file in which it stores its. Despite considerable investment in manpower and a commitment to accuracy, it is often the case that there are inherent inconsistencies in the way is presented. For example, a supplier named Best Delivery Systems, Inc, can be recorded as Best Delivery, BDS, and many other variants. While this does not prevent daily purchasing activities it does create duplication within the vendor master table, dilute the recorded spend that is actually taking place and make the loading and matching of group purchase contracts extremely difficult. This is one of the major reasons for the low contract to item match rate that we see in healthcare today. 3

4 Using AI and its ability to learn alias terms we are able help resolve this problem systematically, with the potential to help increase both productivity and potential cost savings to the organization. It is our ability to discern and match multiple inputs regardless of source, that makes the difference. You could say we don t care what you call it we know what it is. Access to Data MSSS provides today s hospital unparalleled access to. First through the organization s virtual item master, then a secondary repository containing over 1.2 million items, and then through a vendor catalog library that currently has over 14,000 catalogs loaded. Each repository easily is searchable within the application. Rule Enforcement Without automated rule enforcement the standardization efforts of your organization may go unrealized. MSSS is the only materials system in healthcare that provides a formulary for medical surgical items. Similar in concept to how pharmacy controls prescriptive drugs, using MSSS, hospitals can now direct users towards the right product. Helping to promote efficiency through a streamlined approval process, cost management and protecting against the introduction of nonapproved products entering the supply chain. Price Management Because of the disparate nature of it can be extremely difficult to compare the prices of similar items. Nowhere more so than in Orthopedics, where it s not unusual to pay different prices for the exact same item just because it is slightly longer or shorter. Imagine going to the department store and paying a different price for a sweater just because it s a different size. We have resolved this problem by first normalizing the. We then categorize each product into groups based on their specific attributes. Finally we validate pricing within each group to detect price variance. Once detected, we present these variances within a report (and include supporting detail such as contracts and applicable invoices). We also allow the user to systematically set a results threshold, which helps the user in the review process by hiding low value results from the report helping speed up the review process and allow the user to focus on higher value opportunities. Expand resources to drive sustainable savings McKesson Supply Chain Advisory Services provides you with continuity through the entire activation process and beyond with an assigned central point of contact, a business advisor along with supply chain optimization expertise from McKesson. As an ongoing resource your business advisor brings the knowledge you need and delivers robust tools to supplement your team. Your advisor will help you attain the full benefits from using McKesson Strategic Supply Sourcing not just the easy-to- identify savings. In coordination with supply chain consulting expertise McKesson directs system alignment with your unique processes and goals. The combined effort helps to optimize the system from implementation to sustained savings. Through quality checkpoints and quarterly business reviews your advisor helps to highlight realized savings and identify other areas for opportunity. Contact us Let Sourcing support your formulary and provide the comprehensive you need to better manage PPIs and drive new savings. For more information, please contact your account executive. 1 Global Data Synchronization Network, accessed December 12, 2013, AHRMM Website; ext/standards/gdsn.html. 2 McKesson/Meperia healthcare marketplace. 4

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