Revolutionizing Healthcare Supply Chain: Northside Hospital’s Strategic Transformation

Recognized for its outstanding maternity and imaging services, among others, Northside Hospital’s new supply chain strategy promises to make the Metro Atlanta institution even more efficient. Northside Hospital operates three hospitals with a total of 838 beds and a large network of hospital-affiliated outpatient centers and medical offices in the area. Highly regarded for its maternity, oncology and surgical services, the hospital has more than 2,300 physicians and more than 11,000 employees.

In its most recent fiscal year ending September 30, Northside Hospital had nearly 2 million patient encounters across all its facilities in the Atlanta Region and North Georgia.

Northside has experienced much of its dramatic growth over the last several years through acquisition. Along with the growth, Northside has seen a significant shift in patient mix from inpatient to outpatient. Approximately two-thirds of patients are served through Northside’s physician office network, surgery centers, imaging facilities or infusion centers.

“Obviously, this creates a significant challenge,” Carl Waller, Northside’s vice president of supply chain points out. Previously, the supply chain primarily supported three hospital campuses. Now it must also supply more than 125 remote locations with more on the way.

“Northside’s current and projected growth trajectory coupled with the anticipated impact of the Affordable Care Act has put tremendous pressure on our supply chain. We need to strike the right balance between our top priority of acquiring products and services that lead to innovative and unsurpassed patient care, while optimizing the system’s cost structure,” Waller says.

This balance can only be achieved by building an agile supply chain that is capable of accommodating rapidly changing needs in a cost-effective manner, he says.

“We made the decision two years ago to embark on a supply chain transformation that would help put Northside in a good position to accommodate and sustain growth in a volatile regulatory environment,” Waller notes.

The transformation started with the “development of a supply chain strategy that closely aligns with the overall strategy of the organization,” he explains. Once the strategy was established, Northside’s supply chain leadership team developed supply chain metrics and targets “that enable us to measure progress towards achieving our objectives.”

Northside’s supply chain objectives include:

    + Streamlining and integrating the supply chain process;
    + Optimizing decision-making;
    + Achieving the “best delivered” pricing for supplies, capital and services;
    + Optimizing standardization of the portfolio;
    + Retaining and enhancing supply chain expertise;
    + Procuring high-quality products that facilitate positive clinical outcomes.

Waller has overseen several ambitious initiatives in the deployment of the strategy.

Third-Party Distribution

Northside has four distinct supply chains: acute care hospitals, the outpatient network, pharmaceuticals, and services. Each supply chain has very different and distinct characteristics. To achieve the objectives of streamlining supply chain processes and best delivered pricing, the hospital conducted an extensive analysis to determine the optimal distribution and logistics strategy for the future.

Options that were assessed ranged from outsourcing to self- distribution. But a scalable and agile model for each of the physical supply chains would have been difficult to accomplish through self-distribution. “We settled on a ‘best of breed’ strategy by outsourcing each supply chain to a partner with the deepest capabilities in each area,” Waller says.

After about a-year-and-a-half, its new strategy seems to be paying off. “We have found that having different partners for each supply chain has exceeded our expectations,” Waller says. Its partners’ people, processes and systems are completely integrated with Northside’s. Waller believes the hospital will continue to source a broader array of supplies and capital through its distribution partners, enabling the supply chain to resemble distribution networks commonly seen in the retail industry.

Strategic Sourcing

The U.S. Affordable Care Act reduces reimbursements even as Northside invests in quality improvements. “We will never sacrifice on quality. That remains a given,” Waller says. “Accordingly, we need to be adept at identifying opportunities to achieve savings and quality standards.”

Northside has centralized sourcing. It implemented a rigorous competitive performance-based bid process that not only focuses on opportunities for cost savings, but more importantly the identification of value-added opportunities that increase the hospital’s return on investment, quality of patient care, and reduce disruption to the system.

Value analysis committees and rigorous clinical trials are deployed to ensure only the highest-quality products and services are procured, “Because of what we do and who we serve, there is no margin for error,” Waller says.

Supply Chain Transparency

Prior to 2012, the supply chain processes for the Northside Hospital System were largely manual. Very little transactional transparency existed.  The launch of automation was critical to achieving the desired level of agility and responsiveness that was required.

Today, Northside has significant investments in supply chain technology, especially in the requisition to payment process:

    + It continues to increase EDI usage with key vendors, and to expand auto replenishment capabilities.
    + RFID technology is being rolled out to better manage linens.
    + Clinicians soon will be able to order supplies on a cloud-based application similar to retail on-line ordering platforms. The application also will measure and monitor purchasing trends to identify opportunities for additional cost savings through standardization or selection of product alternatives.
    + A virtual item master – continually updated based on purchasing patterns – is being planned.
    + Deployment of mobile apps for ordering is also a possibility.

Waller explains he is confident in the operation’s success. “From a corporate perspective, I am most proud of the significant contribution that Northside makes to the community in providing an unmatched level of care,” he says. “From a supply chain perspective, I am delighted with how much the team and our partners have accomplished in a relatively short time, especially given the dramatic growth and changes in healthcare. We are changing the tires while the car is moving at 100 mph.”