Post Consumption Materials Management for Hospital Economic and Environmental Sustainability
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1 Post Consumption Materials Management for Hospital Economic and Environmental Sustainability Ron Pierce President WM Healthcare Solutions, Inc. September 22, 2009
2 Presentation Objectives Identify challenges related to managing healthcare waste Understand key drivers impacting waste safety, compliance, cost Discuss models to manage waste materials post consumption Identify short-term and long-term benefits of post consumption materials management for economic and environmental sustainability
3 Agenda Healthcare Facility Waste Challenges Post Consumption Materials Management Issues Implementing Integrated Managed Waste Solution
4 Healthcare Environmental Challenges 1 Balancing service mission with economic viability/survival Most hospitals are non-profit institutions Aggregate hospital industry operating margin 4% 30% U.S. hospitals report negative operating margins 2 Complex operations Numerous regulations, safety, compliance & liability issues Enormous physical plant, staff intensive service requirements Aging facilities, not energy or operationally efficient Widespread construction 3 Enormous consumption of resources Energy, water, organics, manufactured products, drugs, chemicals Large environmental operating cost, footprint & impact 4 Emerging external influences Evolving legislation Landfill diversion requirements Pressure to develop green initiatives
5 Challenges for Healthcare Executives (1) Nursefinders, Inc. Quarterly Survey 1 Inadequate/declining reimbursement Productivity management Rising insurance costs Severe staffing shortages Patient satisfaction Capacity Quality compliance/patient safety Managing premium internal labor costs Revenue enhancement Governmental regulations and mandates 2.08
6 Healthcare Waste Waste Mgt. Challenges : Healthcare Facility Waste Complex materials, regulations Exposure to safety, risk, liability High cost, environmental impact Fragmented service model Risks w/poor Waste Mgt. Environment of care compromised Employee safety exposure Compliance failures, fines Inflated operating costs Negative environmental impact Negative institutional publicity Rewards w/proper Waste Mgt. Safe environment for patients/staff Compliance assured Risk/liability mitigation Efficient use of resources Reduced operating costs Improved environmental impact Institutional image protected
7 Hospital Waste: Complex Categories BIOHAZARD Infectious Waste - regulated medical waste - a portion of medical waste that has significant potential to transmit disease, including red bag waste and sharps Hazardous Chemical Waste waste that may cause or contribute to increase mortality or increased illness, or pose a present or potential hazard to human health or to the environmental when improperly managed. Recyclable/Reusable Materials materials that can be diverted from disposal through recycling or reuse. Solid Waste also known as garbage, trash, rubbish waste that is not infectious or hazardous, much of which can generally be recycled. Radioactive Waste waste, due to its radioactivity, that must be handled and disposed according to strict federal guidelines. Chemotherapy Waste hazardous drugs must be source segregated and disposed according to state and federal regulations.
8 Hospital Waste Mgt. Challenges Managing Safety, Cost, Compliance, Risk & Environmental Impact Solid Medical Hazardous Pharmacy Special Universal Chemical Recyclables Waste Waste Waste Waste Waste Waste Waste Recycling HOSPITAL MANAGES INTERNAL DOCK-IN OPERATIONS Waste Categorization, Minimization, Handling, Storage, Recycling, Safety, Compliance, Risk Management, Training, Treatment (on-site), Transport, Logistics, Vendor Selection, Contracting, Accounts Payable, IT, Reporting Waste VENDOR MANAGES EXTERNAL DOCK-OUT OPERATIONS Hauling, Treatment (off-site), Disposal (Landfill), Destruction (Incineration), Recycling, Composting, Compliance, Documentation, Reporting
9 Fragmentation Increases Cost Focus is managing cost of units of service, not total cost Numerous specialty waste vendors for each facility Limited standardization of systems, processes, pricing Dozens of vendors, contracts and points of service contact Hundreds of purchase orders, transactions and invoices Limited leverage, control or integration of waste initiatives
10 Fragmentation Increases Risk Impaired control over waste related regulatory compliance Impaired control over waste minimization & recycling programs Impaired control over vendor management & total cost control Impaired benchmarking of performance key indicators Impaired control over waste related environmental impact
11 Agenda Healthcare Facility Waste Challenges Integrated Post Consumption Managed Materials Waste Solution Management Model Issues Implementing Integrated Managed Waste Solution
12 Major Hospital Waste Categories Waste by Volume (1) MSW 80% RMW 15% HAZ 5% MSW - Municipal Solid Waste 80% RMW - Regulated Medical Waste 15% HAZ - Hazardous Waste 5% (1) 1 to 1 Ratio of MSW to RMW by Total Spend
13 Sample Solid Waste Analysis (1) Solid Waste by Volume (1) Paper 53.8% Organic 17.6% Plastic 14.6% Other 6.6% Metal 2.5% Glass 1.8% Yard 1.6% Special 1.4% (1) Source: Survey of Hospitals in Los Angeles, CA
14 Sample Pharmacy Analysis
15 Summary Waste Analysis Findings What Hospital Waste Analyses Uncovered Hospitals focus on managing unit cost (price) of waste service Unit cost not critical total cost driver, little opportunity to reduce Most critical cost variable is waste categorization & segregation Disposal cost varies from $0.03/lb to $6.00/lb (2000%) by category Waste disposal risk/liability disproportionately high compared to cost
16 Summary Waste Analysis Findings What Hospital Waste Analyses Concluded Need to develop total cost materials (waste & recycling) solutions Opportunity to reduce operating costs through integrated management Need to classify materials from higher to lower cost/risk categories Need to develop proper waste categorization & segregation
17 Need for Integrated Waste Model Integrate service model across continuum of material streams Categorize & segment materials for safety, cost, compliance, risk Minimize waste through recycling, diversion, volume reduction Improve logistics management to reduce total operating costs Improve synergies: contracting, purchasing, AP, compliance reporting Improve total cost management of internal ( dock-in ) external ( dock-out) services, processes and operations related to waste Improve facility safety, compliance, risk, cost and sustainability
18 Agenda Healthcare Facility Waste Challenges Post Consumption Materials Management Issues Implementation of WMHS Integrated Solution Implementing Integrated Managed Waste Solution
19 Holistic Material Resource Mgt.
20 Holistic Material Resource Mgt. EPP Environmental Preferable Purchasing Achieve Maximum Impact: *High Achieve High regulation volume: Maximum 50% *High - Impact: 70% cost of waste *High risk *High impact Even Paper/Cardboard Waste Has Value Objectives: Identify reusables: refurbishment, Articulate Plastics Use Waste Less, minimize as all your Renewable kinds Mission Waste Energy reuse, sale or donation Create Glass Manage Fuel sustainability according Source model Durable reusable med to equipment regulations Manage Empower Metals Single-use Landfill: BEYOND device employees methane reprocessing compliance gas recovery Organics to Furniture compost protect Manage Waste workers, BEYOND to energy improve compliance Construction - cogenerate community Linens and Demolition health EPP: Reduce Food electricity Specify service and total become recyclable ware cost environmental materials and risk and items stewards made Reduce Patient with supplies recycled environmental content, commodities impact that Manage have value. materials, not vendors Beneficial Reuse Material Recycling RMW Hazardous Radioactive Chemo/Pharm
21 Integrated Waste Migration Strategy ENTRY LEVEL STRATEGIES Negotiate discounted unit service costs Maximize cost per unit by rightsizing containers/service frequency INTERMEDIATE LEVEL STRATEGIES Re-classify all waste streams by material content, regulated status Segregate waste based on material properties Develop single stream recycling program for paper, plastics, metal Export reusable supplies, instruments and equipment for beneficial reuse Install equipment to process medical waste on-site ADVANCED LEVEL STRATEGIES Develop composting program for organic materials Outsource integrated waste management program across all waste streams Move all materials to lower cost, risk, environmental impact categories
22 Cost Driver Proper Categorization Material Consumption Waste Diversion Waste Avoidance ($1.50/lb) ($.30/lb) ($.04/lb) ($.01/lb)
23 Categorization Not Price Drives Cost Before: Estimated Annual Waste Volume and Costs for a typical 250 Bed Hospital Estimates based on regional $353,070 averages and normalized for an acute-care facility with an adjusted number of patient days of 100,000/yr *3,405,972 lbs. After: Aggressive Waste Segregation Drives Reduced Total Disposal Cost (1) Total costs are the sum of billings for units of service from all vendors who manage waste stream(s). 38% *3,405,972 lbs. $217,718 Total costs driven by material categorization, diversion and recycling (1) No change in total material volume or unit of service pricing 63% landfill diversion rate for solid waste
24 Integrated Waste Mgt. Solution (1) Waste Stream Operational Mgr. Supply Chain Materials Mgr. Risk Partner Hospital Value Solid Waste Recycling (1) Numerous single waste steam vendors displaced by consultative partner managing entire institutional material stream post consumption, with aligned operational, environmental and financial objectives. Red Bag Waste Green Purchasing Material Reduction Medical Sharps Trace Chemo Pathology Waste Pharmaceuticals HIPAA Waste Hazardous Universal Waste Source Segregation Compliance Mgt. Beneficial Reuse/ Donation Programs End of Life Mgt Back to Manufacture Recycling Commodity Materials Organic Composting Renewable Energy Risk Sharing Cost Risk Environmental Footprint Radioactive
25 Value from Integrated Solution Total Cost Reduction Risk Partner (Commitment) One Integrated Program (Max Value) One Management Contract (Alignment) Sustainability Strategy Achieving Green Goals One Service Infrastructure (Guarantees) 1 One Billing System (Integrated Data) Managed Solutions Network Scalable One Reporting Database (Benchmarking) Cradle To Grave Indemnification (Manage Risk) One Integrated Invoice (Reduce Admin) Shared Risk
26 Developing Integrated Waste Model Master Service Agreement (MSA): Single contract manager for all waste services Assignment to manage all existing contracts Individual Service Agreements: Service addendums for each individual waste stream Contracts flexible to meet local operating requirements Conduct Facility Assessments Develop financial and operational baselines Develop Goals Develop targeted operating goals Develop Financial Model Fee-for-service by waste stream, or capped at risk for all
27 Opportunities for 1 st Year Benefit Operational Assessment: analyze waste volumes generated at each facility Financial Assessment: analyze costs by waste stream, create baseline Contract Review: analyze all vendor contracts & invoices Service Modeling: standardize measurement of requirements at each facility Right Sizing: optimize waste handling, containerization, & service frequency Recycling: initiate programs for paper, corrugated, plastics & metals Vendor/Contract Consolidation: consolidate to reduce complexity/cost Contract Consolidation: consolidate contracts/invoices reduce operating cost Benchmarking: develop reports to compare performance across network
28 Opportunities for Long-Term Benefit Cost Management: generate less waste for lowest total operating cost Lean Operations: streamline material flow, highest efficiency & lowest cost Sustainable Supply Chain: purchase to end-of-life materials management Environmental Purchasing: reduce non-recyclable material consumption Waste Diversion: migrate materials from high cost/risk to low cost/risk Waste Reduction: beneficial reuse, donation and recycling Liability Indemnification: disposal at WM landfills, Super Fund indemnification
29 Integrated Waste Solution Benefits One integrated sustainability program One contract, contact, invoice, indemnification partner Expertise to right size resources, equipment & service levels Maximize waste categorization, diversion and recycling Liability indemnification, including at the landfill Development of best demonstrated waste/recycling practices Development of facility & environmental sustainability programs
30 Healthcare Waste Program Options (Large scale, Full integration, Superior Expertise) Ball Size = Scale/Volume Vendor is a integrated outsourced mgmt company Focus = Total Costs Cost Variables = Waste Categorization, Segregation, implementation of sustainability initiatives Costs = Fixed less rebates Institutional Model Broker Model Degree of Expertise (Small scale, no integration, some expertise) (Limited scale, no integration, low expertise) Degree of Integration (Large scale, contract integration, Minimal expertise) GPO Model Institutions/Brokers attempt to manage vendors, leverage unit price, service levels Focus = unit cost + Margin Cost Variables = Price and Vol Costs = $0.03/lb - $6.00/lb (2000%) by category Integrated Waste Management Model
31 Presentation Deliverables Identified critical challenges to managing healthcare waste Identified key drivers impacting waste safety, compliance, cost Identified models to manage waste materials post consumption Identified benefits of post consumption materials management
32 Post Consumption Materials Management for Hospital Economic and Environmental Sustainability Ron Pierce President WM Healthcare Solutions, Inc. September 22, 2009
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