Convatec Brings Together Supply Chain Constituents

Edition: July 2002 - Vol 10 Number 07
Article#: 1287
Author: Repertoire

Greensboro, NC --
Today's provider community is facing serious financial challenges as costs continue to rise and reimbursement moves in the opposite direction. As a result, many of the accepted practices and traditional relationships in the supply chain are being questioned. And with good reason. After all, the supply chain is one of the few places where providers can expect to find significant savings.

In an effort to share information on this issue, Convatec brought together a number of its customers and constituents for an open and engaging session at the Grandover Resort in late April. The group included distributors, hospital executives, consulting firms and GPOs. Leading the educational portion of the event was Greg Firestone, CEO of NCI, a healthcare consulting company specializing in supply chain management, information technology and professional education.

''We expect to see more change over the next three to five years than in the last 20,'' commented Firestone as he kicked off the meeting. ''As hospital systems become more financially distressed, executive management will be forced to take ownership of the supply chain, because it's a source of immediate financial relief.'' And according to Firestone, many of today's IDNs are already headed in that direction.

Arnie Kimmel, CEO Supply Chain Management at Ascension, a large St Louis-based IDN with $8.8 billion in purchases, was in agreement. ''Our system's CEO and board have committed to changing the way we do business,'' said Kimmel. ''They are even taking pride in how tough they are getting with the physicians. They have to, because this is where the money is! Combine this mindset with the data we are developing and peer pressure, and it's clear the trend will continue at Ascension.''

Kimmel believes that his IDN's real savings will be in standardization and utilization. ''The current model is difficult and expensive. We believe we can simplify the way we do business and save a lot of money in the process.'' At the top of Ascension's list is developing useful data, such as its new electronic global catalog, as well as moving towards a more centralized model of purchasing.

At Ascension, this means placing less emphasis on GPO relationships. Even so, a GPO executive in attendance said that he still believes GPOs will play a vital role for emerging IDNs, though one that is different than in the past. His point was that although IDNs can deliver higher rates of compliance, the GPOs still have the expertise in contracting, including data, knowledge, clinical initiatives and best practices – all things the IDNs need.

According to Terry Noetzel, Deloitte Consulting, every link in the supply chain has to come together. ''Supply and purchased services costs now equal or exceed payroll expense,'' said Noetzel. ''These costs are seriously eroding provider margins, meaning it will become a priority for many CEOs, like it has at Ascension.''

Noetzel believes partnering will be a key driver. ''Most providers won't make the investments Ascension has, because their balance sheets are simply not strong enough. That means everyone in this room has to think, ''How can I help?''' He says tomorrow's contracts will be shorter in length and solutions-based. ''It really comes down to designing the right processes, and then executing against them,'' says Noetzel. ''If you focus on high service levels and delivering bottom line benefits, and then measure the results, you have a big opportunity.''