For the better part of a decade, Charles Agins has been on a mission. As the vice president of finance for Montefiore, he has been focused on helping the organization find ways to reduce healthcare costs by having stricter control over the supply chain. After finding many avenues for success, he is aiming to bring a similar level of efficiency to all parts of the Montefiore Health System.
Today, Montefiore Health System is one of the nation’s premier academic medical centers and the University Hospital for Albert Einstein College of Medicine. The system consists of eight hospitals, an extended-care facility, and a School of Nursing, with a total of 2,741 beds. It also includes state-of-the-art primary and specialty care provided through a network of more than 170 locations across the region, including the nation’s largest school-based health program and a home health program.
Among the key areas of focus for Agins and his team has been the introduction of more effective supply chain management principles. This practice has helped save the medical center millions of dollars each year.
“We want to add value for our internal customers,” Agins says. “We first implemented our SAP system 18 years ago. It used to take 38 days to get a purchase order through, and now it takes 12 hours. We now have system that allows our internal customers to order just about anything they need online in real time.”
The challenges Agins has faced along this road of transformation have been internal and external. Internal challenges have included everything from inventory management, centralizing and aggregating purchasing, and standardizing software and hardware. In some areas, it may make sense to add cost for a clinical supply that has a marked effect on improving care.
“Montefiore achieved great success in delivering quality care and improved outcomes at a lower cost for Medicare patients as one of 32 Pioneer Accountable Care Organizations (ACO) nationally,” says Agins. “For non-clinical supplies, the ability to control price/value and negotiate is similar to any business. As you gain size and dominance, the opportunities become multi-tiered.”
On the external side, Montefiore works closely with a number of manufacturers and distributors. Agins and his team works to get the best possible pricing for every purchase possible.
“We have much more flexibility on the non-clinical side,” Agins says. “On the clinical side, the focus is on clinical outcomes, as well as price. We will pay more if it helps improve clinical outcomes, but we must be able to justify the expense. We work with department chairs and clinical leadership to make decisions regarding various clinical supplies.”
Part of the supply chain transformation that has taken place at Montefiore has centered on the creation of internal standardization to find ways to seek out opportunities and share savings. Agins and his team work with various departments throughout the organization to find opportunities that could translate into significant savings and apply a common sense approach to implementing a formal, structured approach to bring opportunities forward.
“If a physician wants to use a certain product that is standardized across a specific procedure, we can do it,” Agins says. “We work collaboratively with the physicians and department leaders. In pharmacy, we have tried to develop different programs and ways of using less-expensive drug equivalents and still ensure strong outcomes. We always have to ask ourselves what we are doing and why.”
Continued investment in the organization’s SAP deployment has provided Montefiore’s management team with the tools to overhaul all purchasing processes and policies. The system is set up to help people within the organization with purchasing authority to purchase preferred items.
“The system is point and click and codes illustrate the level of preference for a product,” Agins says. “It knows who you are and where you are. Orders are transmitted electronically and purchased items are delivered directly back to the purchaser. This is a state-of-the-art system, and most of the items that we purchase are under contract with vendors.”
There are exceptions to this rule, such as capital investments like MRIs. But for the most part, the SAP technology has played a key role in making the organization’s purchasing procedures operate at optimal levels.
Agins continues to look for ways to evolve supply chain operations at Montefiore, having recently presented a plan for the future to the organization’s leadership. Among the key elements of the plan were strategic thoughts and outlined steps for success.
“The plan included a thorough business understanding and full awareness of Montefiore’s strategic sourcing,” Agins says. “It involved the presentation of a vision to identify and seize financial opportunities based on our past track record for success to fit Montefiore’s strategic plan.”
This plan raises the level of strategic sourcing throughout the entire Montefiore Health System by offering innovative and significant savings opportunities along the entire supply chain. It will centralize the contracting process and it will facilitate standardization of goods, services and equipment. The plan will also allow Montefiore to aggregate purchases from all of the Montefiore entities and affiliates.
“We will then utilize the aggregated volume to create value and implement strategic sourcing throughout Montefiore, continually measuring value, growth and outcomes as we progress and expand,” Agins says.
Agins was able to succeed in the presentation of this plan to the organization’s key stakeholders, thanks to his awareness that the art of presentation requires skill, an understanding of business requirements and the knowledge to create a plan to assure success. Presentation remains an ongoing, encompassing process to attain buy-in and finally compliance, he says. “One strong centralized procurement function will effectively replace individual siloed operations and simultaneously generate overall savings to all participants,” Agins says.
Agins and his team will now go about implementing the various stages of the plan, which will require years to be implemented at the ground floor level. Legal challenges may arise as the immense benefit potential eventually becomes more apparent. Skillful negotiations will be required to address group purchasing organization (GPO) concerns as well as legal issues that will need to be resolved to assure the success and viability of the plan.
“The plan needs to incorporate a common sense approach based upon opportunity,” Agins says. “Over the next five years, the value of the implementation will become more apparent. The legal challenges may come from vendors, distributors, manufacturers and possibly from the existing GPOs, as this will require them to change their operations.”
As the system grows, the GPOs will recognize the need to change. Additionally, the work Montefiore will be doing around strategic sourcing will afford the organization the opportunity to rethink external purchases and then analyze each situation and determine the feasibility of bringing them in-house.
“The financial issues to record and report the information as required will mandate massive change,” Agins says. “Various legal entities within the structure will require skillful address.”
Age of Revolution
Agins believes the steps his organization is taking will revolutionize the purchasing organization methodology in healthcare. In understanding opportunities, analysis indicates that over one-third of the cost in any institution – even things like travel costs and plans – are in the scope of the supply chain. Agins believe Montefiore must determine ways to reduce these over time, leading to eventual capitation.
Historically, GPOs have been a staple throughout the healthcare arena. These groups have been financially successful, and huge sums of money are on the table. Agins is proud to be a leader in the effort.
“Implementation of this plan will require determined resolution, masterful addressing of issues and a professional desire not to destroy previously accepted business practices, but to build a new combined collaborative environment where all parties can operate and develop a long-term, mutually beneficial business operation for the future,” he says.
With one entity now buying for all segments of Montefiore, many changes and challenges will be coming in the years ahead. But as a $4 billion entity, Montefiore will surely get more attention from manufacturers and distributors.
“Internally, it will be a challenge to get everyone to standardize, so we will centralize, standardize, aggregate and leverage,” Agins says. “The products we buy can be standardized and servicing becomes cheaper. As we expand our system, anyone who affiliates with us may be able to use our contracts.”
As an industry, healthcare is complex, heavily regulated and expensive. But with forward thinkers like Agins at the helm, it is hopeful that some positive changes can be made. “Healthcare changes, but not very quickly,” he says. “We are focused on are internal and external relationships. We must be able to form teams to better manage the care of our patient population. You do that by looking at what works from a patient-care perspective and work with vendors to devise economic models that generate value. Externally, you must work with creative manufacturers and distributors that have a model for growth and the future.”