Partner using supply chain, labor apps identifies savings of $5M for OH hospitals Last Updated: September 22, 2014
Filed under:
Print Friendly, PDF & Email

Challenge

A healthcare organization today must examine every position and every process to ensure first that they are necessary and second that they are employed as efficiently as possible. The leadership of the Northern Region of Mercy Health Partners (part of Mercy Health) in 2012 decided that pharmacy operations of its 3 hospitals in Toledo, OH, should be reviewed.

Solution

Mercy engaged a Premier, Inc. performance partner to review staffing and processes, use of existing technology, potential consolidation of functions and best use of Premier pharmacy contracts at Mercy St. Vincent Medical Center, Mercy St. Anne Hospital and Mercy St. Charles Hospital.

Based on benchmarking of labor productivity with Premier’s OperationsAdvisor labor app, staff reductions would be necessary to meet the system’s median quartile standard.

St. Vincent, the largest of the three hospitals, was not using its McKesson robot cart to maximum advantage. With some adjustments the Premier partner found the robot could be used to supply drugs to St. Anne and St. Charles.

The partner found that pharmacy buyers were not taking maximum advantage of the Premier PharmacySpend app to identify off contract purchases because they had not had appropriate training. By using PharmacySpend, the partner found that the St. Vincent pharmacy was not using Premier’s Auto-Sub program through which pharmacy distributors automatically substitute Premier’s authorized generic injectable drugs to obtain significant savings.

The partner also discovered that inventory was not tracked and audited regularly and that consistent stock levels are not maintained. By increasing inventory turn rates, cash flow could be increased with a significant savings from a 7% reduction in inventory.

Result

Total identified savings were in excess of $4.8 million as follows:

  • Inventory turn improvements: more than $337,000 in savings
  • Participation in the Premier Auto-Sub program: more than $233,000 in savings
  • Reduction in a tech position: almost $52,000 in savings
  • Reduced McKesson maintenance agreement with implementation of envelop automation: savings of almost $250,000
  • FTE reduction at St. Anne and St. Charles from consolidation of pharmacy robot at St. Vincent: more than $681,000 savings
  • Savings of McKesson inventory management over 10 years: more than $3.2 million

Further, if other changes were implemented, the hospitals could improve tracking of missing drug doses with a potential soft savings of $2.5-plus million and avoid buying a new McKesson robot at a cost of about $1.3 million.