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How new partnerships transform the supply chain

por Valerie Dimond, Contributing Reporter | September 08, 2020
From the September 2020 issue of HealthCare Business News magazine

Healthcare merger and acquisition activity continues to teeter this year, but among organizations that shook hands before COVID-19 rocked the supply chain, some have cause to celebrate. In 2018, Georgia-based Navicent Health joined forces with Atrium Health in North Carolina — not exactly a merger or acquisition, but a solid partnership that continues to thrive.

“The term M&A may not be accurate for our situation,” asserted Charles Platt, director of supply chain services at Navicent. “Navicent Health is in a strategic combination with Atrium Health.”

One thing is certain: when two major health systems come together, big changes are bound to happen, especially in supply chain, as each organization brings something to the table — strengths, weaknesses, commonalities, and redundancies. Upholding shared goals throughout the process can pave new avenues to success.

Embracing change
Since Atrium already had experience performing a high-level review of new partner systems and processes, the collaboration was off to a good start, albeit major adjustments were in store.

After a thorough assessment of their purchase order (PO) and accounts payable (AP) data, numerous areas for improvement were identified, including physician preference items (PPI), commodities, med/surg distribution, pharmacy, capital, food service and other purchased services.

“I think the biggest challenge was change,” Platt said, noting most major modifications were made in 2019. “We changed GPOs (national and regional) and med/surg distribution. We changed nearly every item in our system. We converted PPI to Atrium Health Supply Chain Alliance (AHSCA) contracts. This involved loading dozens of contracts with almost 45,000 items with new pricing.”

The effort paid off, having saved the organization nearly $5 million last year.

“We converted the remaining non-PPI items, [which] involved loading hundreds more contracts with over 15,500 items with new pricing, saving us hundreds of thousands of dollars in the back half of the year. Navicent was able to improve EBITDA (earnings before interest, taxes, depreciation, and amortization) by more than $100 million.”

Navicent also took an active role in AHSCA’s process enhancement and product standardization (PEPS) teams, which led to increased focus on clinical integration.

“Navicent Health has clinical representation on all of the PEPS teams and the clinical leaders make the decisions, not supply chain,” Platt said. “The PEPS teams aid in our value analysis process and reduce the work we were previously expending. After only two quarters with AHSCA — and a lot of work — we reached a 90% compliance level to AHSCA monitored agreements. All of the AHSCA PEPS teams are achieving savings in contract negotiation and product standardization and alignment, even during this pandemic.”

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