Caldwell Memorial Hospital’s supply chain was struggling, as many hospital operations do, with multiple stock locations, excess and often incorrect inventory, and low accountability for what was on the shelves.
So the hospital’s leaders took action, and their successful initiative provides several steps that other providers may want to consider, too.
#1 Use Lean thinking
Caldwell leaders looked to their prior experience with Lean management tools to guide their efforts in the supply chain. A value stream assessment helped them pinpoint specific challenges, while data collection and analysis helped them develop a strategic plan for tackling them. This critical prep work revealed several key areas of focus: inventory visibility, demand flow optimization and management of physician preference items.
#2 Get visual
First up: inventory visibility and demand flow optimization. By introducing a new, Lean-based visual replenishment system, Caldwell gained the transparency needed to consolidate supplies, eliminate excess inventory and lower distribution costs. Plus, clinicians no longer had to spend valuable time managing supplies when they should be with patients. The combined annual savings from these initial activities totaled more than $3 million.
#3 Reign in requests
Next on the list: physician preference items. From supplies to lab resources to room and board, no two Caldwell physicians seemed to utilize assets in quite the same way. And these variations were adding up.
Digging into and analyzing resource usage data allowed Caldwell to break down the costs by clinician, case and location. This revealed just how much the inconsistency was costing the hospital — more than $4 million — and what Caldwell needed to do to convert those costs into cost-saving opportunities.
If you’d like more information on how this hospital achieved its remarkable result, please reach out to us.You can also read the full case study here.
Peer benchmarking could lead to the answer.
Tell us if this health system’s challenge sounds familiar: CHRISTUS Trinity Mother Frances Health System, located in Northeast Texas, was facing a staggering potential setback when a number of payer contracts changed. The difference amounted to a $25 million shortfall in their budget’s revenue.
The system’s first reaction might have been to issue an across-the-board expense reduction mandate to make up the budget difference. We all know that can happen a lot in the industry, but it doesn’t always produce the results healthcare organizations need, and quality of care can be impacted.
Instead, this system chose a data-driven, strategic savings approach as the path forward, with an eye on long-term financial independence from these types of shortfalls.
A look at the targeted expenses
Using a comprehensive comparative database, the system was able to benchmark costs, productivity and resource utilization against best-in-class facilities of similar size and demographics.
Leaders identified cost improvement opportunities in areas such as supply, labor costs, length of stay and purchased services — areas where the system was not at the same level as high-performing peers in terms of expenditures.
The benchmarking information from the database was also used as a call to action for staff to find methods of improving processes and cost management. CHRISTUS Trinity Mother Frances leaders formed teams and assigned financial targets. Teams then used the database to answer the question, “If another health system is able to keep supply costs at this level, what can we do to bring our costs to that level with no bearing on our patient care or satisfaction?” The health system also created a dedicated project management office to help guide the process. The results of these efforts (in box below) speak for themselves.
If you’d like more information on how the health system achieved this result, please reach out to us. You can also read the full case study here.
Having family members who are struggling to control their waistline, I am sympathetic to the issue of weight discrimination. But the Obesity Epidemic is a threat to our nation's health and budget. Studies suggest that it may even be causing a reduction in average life expectancy for the first time in over a century.
The question is not whether to call obesity a medical problem but rather whether to call it a disease itself, instead of just a risk factor. It is so closely tied to type II diabetes, heart disease and musculo-skeletal conditions and its is so difficult to correct once established that many experts are beginning to view obesity, particularly morbid obesity, as a chronic disease. Perhaps being overweight is a risk factor but at the point where someone reaches BMIs over 30 or 35 we should provide greater medical resources and contend with this as a recognized disease. And perhaps we need to address the segment of the population that is not obese and prevent them from unhealthy weight gain. To accomplish this will require cultural change. We can either soften our concerns about this great threat or get moving to reduce it.
Ray Fabius MD
Chief Medical Officer
I celebrate the efforts of the state of Massachusetts to advance price transparency within health care. With the wide variety of health plan alternatives and benefit designs it has never been easy for consumers to estimate what their out of pocket costs will be before accessing elective care. In many, maybe most cases, the information is not available.
Truven Health data analysis has shown wide and unexplained variation in the cost of the same service within metropolitan service areas - sometimes this variation can be three fold or more, and patients are generally unaware of this. Providing online tools to disclose a price is a good start. Enhancing these tools to allow for price comparisons is the next step. Studies show that tools like our Treatment Cost Calculator have the potential to significantly reduce total health care costs for employers by providing their workers the ability to compare prices.
The ultimate goal should be to offer the patient quality assessments as well as cost comparisons so consumers can select their providers based on value. Then the burden for better outcomes of care shifts at least in part to the consumer who needs to be accountable for evaluating the information available and making the best choice. If they exercise this ability, health care delivery will need to respond with a more healthy marketplace competition previously not seen in the medical industry. Providers will need to pursue the most efficient and effective pathways to attract patients and keep them.
Price transparency is an important step in this necessary direction.
Ray Fabius MD
Chief Medical Officer
While the early efforts to promote movement while working appear to be imperfect, the pursuit is laudable. Most disturbing is recent evidence that sedentary lifestyles are an independent risk factor, even for people who exercise regularly. Sitting uninterrupted for more than four hours a day is unhealthy. I know that many of my colleagues here at Truven Health are at their desks for four, five, six hours straight, every day, and I’m trying to change that.
At a minimum, regardless of their specific work content, office workers should be encouraged to get out of their seats frequently and walk around for a few minutes. The challenge for companies trying to promote simultaneous exercise and work is our own limitations on multi-tasking. It’s possible that typing and walking in place is simply a too-difficult combination of activities; perhaps the use of treadmills and elliptical trainers should be limited to conference calls. In the end it remains true that a healthy workforce is a competitive advantage and hard working employees who never leave their workstation may not be the best performers over time.
Ray Fabius MD
Chief Medical Officer