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Holding down costs a key materials management function

Management Health Solutions | Sunday 26 August 2012 ( 0 Comment)


Materials managers are reaching the C-suite


"What we've seen in the past year is that CEOs and CFOs have cut as much as they can with labor and they're getting the best product prices possible, yet their supply chain expenses continue to go up," said Pam Poshefko, consulting manager at Chadds Ford, Pa.-based IMA Consulting. "They want to know why and what they can do to get those costs out."


On the product utilization side, clinicians are often targeted for reductions and questioned about their practices, which understandably can put them on the defensive. It can also put the MM in an awkward position, Poshefko said.


"MMs have a lot of data from information systems, but not a lot of knowledge from that data," she said. "They have not been able to accurately gauge utilization, which makes it difficult to deal with those who use the products. Without knowing whether clinicians are over-utilizing products, there is not much to say because they are the clinical experts and know how to use the products."


Even so, Poshefko recommends that materials managers get together with clinicians to discuss product utilization in a non-confrontational way.


"There is a lot of low-hanging fruit  -  not in pricing, but utilization opportunities," she said. "The job is much more than just contracting; it is teaching everyone how to better manage resources."


MMs maturing


Bill Stitt, past president of the Association for Healthcare Resource & Materials Management (AHRMM), says the MM's job has evolved over the years to include many moreresponsibilitie
and is a key cog in the healthcare financial machinery.


"Materials management is so much more than purchasing today," said Stitt, who serves as vice president of Materials Management for Robert Wood Johnson University Hospital in New Brunswick, N.J. "Sure, we still manage that function and it is important, but that's really more an output of so many other activities, rather than a principal part of our job."


Slowly, materials professionals have become more strategic and they are now charged with planning and implementing solutions rather than just managing transactions, Stitt said. Along with purchasing and logistics, materials personnel are asked to provide value analysis, manage reimbursement and become more involved in directing general operations.


Stitt agrees that MMs need to work on diplomacy when it comes to dealing with clinician product usage.


"We need to develop our presentation skills, our ability to look at things strategically and learn how to talk with physicians and clinicians even if we are not clinical ourselves," he said.


Change agents


To be sure, the conventionalresponsibilitie
of purchasing, order placement and product fulfillment are still part of the MM job, but the leader of supply chain operations needs to focus more on strategic global issues for the healthcare organization, added Bill Donato, executive director of supply chain management for the Cleveland Clinic and past president of AHRMM.


"The materials manager is still evaluated on day-to-day efficiencies and responsiveness, but that is only one area of focus," he said. "You have to make sure the day-to-dayresponsibilitie
don't distract from the strategic global view."


While materials managers are held accountable for supply chain costs, Donato is quick to point out that much of what they are in charge of is beyond their control. The MM's job, he says, is to operate as a "change agent" for the supply chain.


"We introduce the data, analytics, published studies and business details of the supply chain into the decision making process," he said. "When you take that and work with physicians and clinicians to integrate clinical expertise, we become very influential in the decisions that are made on cost, quality and outcomes."


Redefining supply practices


Over the past seven years at Intermountain Healthcare in Salt Lake City, Utah, Brent Johnson has diligently analyzed the intricacies of materials management in order to institute meaningful change that will benefit the organization in the future. One interesting discovery he made is that there are common misperceptions about expenditures outside of labor.


"So many think med-surg products represent the major part of the spend, but it only makes up about 30 percent," said Johnson, vice president of supply chain and imaging services. "Non-clinical products make up 40 percent, along with IT and food and nutrition."


Johnson entered healthcare supply after working in the electric utility industry. As he assumed control of Intermountain's materials department, his bosses gave him plenty of latitude to build a "robust, strategic supply chain organization" seen in other industries.


His desire to transform materials management is evident: "I think healthcare needs to be run like a business and more often than not it isn't. That could be because of the non-profit focus and the mission of delivering care."


Still, Johnson says his organization is "making good strides" in reducing costs and non-labor expenses. And in the process, he says the MM position has gained in stature and influence.


Source: healthcarefinancenews

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