Optimizing Contract Compliance: Putting ERP Data into Practice

According to a recent survey from Nexera and Acurity, 66 percent of hospital executives said that they tie clinically integrated initiatives to their budgets; however, only 5 percent indicated clinical integration as a supply chain priority. When asked if clinicians are involved in formalized supply chain utilization and procurement decisions, most senior and financial management professionals said yes – while the majority of clinical, operations and materials professionals said no.

As the supply chain becomes a bigger player in the overall healthcare system’s decision-making infrastructure, supply chain leaders must link up with clinical peers to ensure overall alignment and contract compliance, and to jointly lower costs and improve patient care.

A significant component of an effective clinical engagement and education effort should be geared toward reducing product variation and encouraging standardization. One key way to do this is with enterprise resource planning (ERP) technology, a business-critical platform to collect, store, manage and interpret data across an organization’s departments.

For most health systems, contract compliance is an uphill battle.

Even after difficult reviews have occurred and a standardization decision has been made, there invariably remain outlier clinicians who continue to order off contract. Identifying outliers and ensuring their compliance is an incredible challenge due to:

• Health system growth and complicated networks that span the care continuum.
• The presence of functional and/or communications silos within organizations.
• Incomplete or inaccurate data.
• A lack of staff and resources to effectively manage compliance.

True collaboration fueled by integrated data, analytics, contracting and ERP technology can ensure all savings are unlocked.

ERP technologies that digitize and automate internal processes have been around for decades, but next-generation ERPs that are combined with a robust data and analytics platform can better support standardization goals. Next-generation ERPs have the capabilities to limit order options, automatically suggest or substitute options and quantify the financial impact of non-compliance.

Moreover, the best ERP systems also provide real-time analytics that allow purchasing staff to:

• Spot new items and identify opportunity areas.
• Pinpoint outlier clinicians.
• Benchmark performance compared to peers.
• Forecast volume.
• Streamline the entire purchasing process.

The Power of the ERP to Drive Standardization is Real

An analysis of three Premier ERP implementations showed that contract compliance within medical and surgical products grew by more than 67 percent over a two-year period when compared to hospitals without them.

Take OSF Healthcare System, a 14-hospital health system based in Peoria, IL, as an example. The health system was looking to leverage ERP technology to manage contract standards and maximize cost-saving opportunities. Additionally, executive leadership wanted a partner that could go beyond the traditional ERP solution. They wanted the partner to provide other tools that integrate data and metrics to drive performance improvement efforts and more informed purchasing decisions.

OSF selected Premier’s ERP technology, and we worked with them to implement the technology within a 12-month timeframe.

“With the rapid deployment, OSF was able to drive a 23 percent increase in contract compliance within two years. It was a major shift for the health system, as it previously didn’t have full visibility into individual purchasing decisions, nor did it have the technology needed to drive compliance.” - Pinak Shah, SVP and Chief Supply Chain Officer, OSF Healthcare System

For any standardization effort to effectively realize all the potential gains, supply chain leaders need clinical engagement and holistic, intuitive and intelligent solutions that empower proactive decision-making to control purchasing costs with precision.

Top-performing hospitals leveraging Premier’s ERP technology can save millions through standardization and streamlined spend on supplies. Check out more information on our ERP technology, which is uniquely built for the needs of the healthcare purchaser.