How A Health System Saved Over $70 Million Through Physician-Led Supply Chain Committees

Louisville, Kentucky-based Baptist Health has revealed that it has saved over $70 million dollars by taking a fresh approach to its supply chain. By focusing on clinically-led processes that include physicians in the decision-making, the health system has driven cost-savings that many can only dream of.

Using physician-led councils across its various service lines, the hospital has seen over $70 million dollar in supply chain savings over the last five years. As this article from Jack O’Brien at HealthLeaders continues:

“The Louisville, Kentucky–based system developed physician-led committees for the 11 service lines and 12 resource councils to assist in making supply chain decisions, such as vendor contracting and expense reduction. The service lines are overseen by the physician-led committees while the resource councils consist of director-level leaders who run various clinical departments within the organization.

The system has recorded significant supply chain savings in recent years through a clinically led effort to remodel its operations, garnering $36.5 million in savings since 2016 and $74 million since 2013.

Stratifying for savings

A majority of the savings have been related to risk stratifying product utilization and partnering with the right vendor for the right product, according to Cindy Gueltzow, executive director of supply chain services for Baptist Health, as well as standardizing use of the best product.

Gueltzow explained that risk stratifying involves a physician reviewing a product and determining which one the patient needs when presenting with an ailment. Similarly, standardization has involved Baptist clinicians agreeing to use the same product for the same use.

This could include antibiotic bone cement, where Gueltzow and her team work with physicians to identify whether the patient would need antibiotic bone cement as opposed to standardized bone cement. Baptist also made the decision to calculate how many doses per patient would be necessary for male patients as opposed to female patients, a project that saved the system $400,000.

“It’s clinically driven and frequently physician-led decision-making,” Gueltzow said. “When we can’t get the vendor to meet the price, we have physicians who are more than willing to sit down with me and the vendor to think through [what is needed]. It’s very powerful to have a supply chain executive sitting next to two or three physicians talking to a vendor about their pricing and their products.”

By fostering a trust that goes both ways, Gueltzow said the inclusion of physicians and clinicians in the process has been helpful for the supply chain operation due to subject matter experts participating in the process. Gueltzow added that this has driven efficiency in the organization, made it easier for clinicians to receive the supplies they need, and boosted negotiations with device manufacturers.

Generating supply chain savings

This approach to supply chain savings has paid off for Baptist in fiscal year 2017, when the system saved $12 million on supplies and in fiscal year 2018, when the organization saved $14.5 million. Baptist’s physician-led councils were integral in the standardization of its cardiac rhythm management devices, by narrowing down the system’s two main dual vendors for 90% of its market share, a move that saved the system $5 million last year.

In addition to the councils’ work, Baptist has also generated supply chain savings of $8 million over the past two and a half years from a partnership with Medline, $4 million from partnering with pharmacies, as well as savings derived from standardizing capital equipment, cardiac catheter lab scanners, MRIs, and ultrasounds.

Baptist also relies on financial goal setting as well, charging each resource council to identify areas for potential savings going into each fiscal year.

Gueltzow told HealthLeaders that the success of the savings initiatives has spread across Baptist Health.

“Saving money is contagious; people get very excited about saving money, and they find all kinds of projects,” Gueltzow said. “The way Baptist is positioned with supply chain, resource councils, and service lines is that we no longer have to be the only ones coming up with great ideas. We have plenty of people out there now who are looking for all kinds of great ways to improve quality, drive value, and save money.”

Download a copy of the case study here: Want to Save Money on Supply Chain? Use Physician-led Councils

Most hospitals are learning to live in the new value-based care environment in real-time and adjusting on the fly. Many hospitals and health systems are looking to achieve significant savings by eliminating waste in their supply chain. Making substantial improvements to supply chain spend requires powerful and accurate data about spending patterns. One place that hospitals may find immediate opportunities for reducing their costs is by better managing their implants and supplies, which make up the second biggest component of procedure costs after labor. If your organization lacks the proper tools to provide powerful data around your supply chain spend, consider systems such as iRISupply which can collect real-time data around supply and implant usage using RFID technology and provide actionable insights to help with vendor negotiations, on-hand inventory levels and owned-consigned item mix. Powerful data analytics included with the software will give specific recommendations on which items to reduce or eliminate, and which items should be owned vs. consigned, leading to millions of dollars in cost-savings opportunities. These cost-savings opportunities can help hospitals increase their margins and provide valuable dollars to the bottom line.