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Providing Insight, Understanding and Community

February 2019 | Vol.15 No.1

Contracting

Professional

of the Year Dennis Mullins: Steering a vehicle for change at IU Health


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CONTENTS »» FEBRUARY 2019 The Journal of Healthcare Contracting is published bi-monthly by Share Moving Media 1735 N. Brown Rd. Ste. 140 Lawrenceville, GA 30043-8153 Phone: 770/263-5262 FAX: 770/236-8023 e-mail: info@jhconline.com www.jhconline.com

Editorial Staff

Editor Mark Thill mthill@sharemovingmedia.com Managing Editor Graham Garrison ggarrison@sharemovingmedia.com Art Director Brent Cashman bcashman@sharemovingmedia.com Publisher John Pritchard jpritchard@sharemovingmedia.com Vice President of Sales Jessica McKeever jmckeever@sharemovingmedia.com Director of Business Development Alicia O’Donnell aodonnell@sharemovingmedia.com Sales Executive Lizette Anthonijs Lizette@sharemovingmedia.com Circulation Wai Bun Cheung wcheung@sharemovingmedia.com

The Journal of Healthcare Contracting (ISSN 1548-4165) is published monthly by Share Moving Media, 1735 N. Brown Rd. Ste. 140, Lawrenceville, GA 30043-8153. Copyright 2019 by Share Moving Media. All rights reserved. Subscriptions: $48 per year. If you would like to subscribe or notify us of address changes, please contact us at the above numbers or address. POSTMASTER: Send address changes to Share Moving Media, 1735 N. Brown Rd. Ste. 140, Lawrenceville, GA 30043-8153. Please note: The acceptance of advertising or products mentioned by contributing authors does not constitute endorsement by the publisher. Publisher cannot accept responsibility for the correctness of an opinion expressed by contributing authors.

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pg

Contracting Professional of the Year

4 Publisher’s Letter

My Top 5 Hopes for 2019

6 Fiercely Independent

IHN Sourcing Group members maintain their independence through cooperation

14 Nine Years of the ACA 26 Todd Ebert Reflects on 40 Years of Healthcare 28 HSCA

Key trends to watch

36 Michele Tarantino: Up for the Challenge

The Journal of Healthcare Contracting | February 2019

Dennis Mullins: Steering a vehicle for change at IU Health

40 The ‘C’ Words

Cancer’ and ‘chronic’ were rarely used in the same breath … until now

42 A Resident-Centered Plan

New reimbursement method will compensate SNFs for caring for medically complex residents

46 Ask Your Distributor for Help Meeting Your Savings Targets 47 Calendar of Events 48 Industry News 50 The Talent Pipeline

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PUBLISHER’S LETTER

John Pritchard

My Top 5 Hopes for 2019 In years past I have done predictions for a new year. For 2019, I am going to change it up a little and switch from predictions to hopes. 1. Cybersecurity is here to stay. Everything is on the network today, from handwashing technology to coffee machines to wearables and devices. I hear so much concern and angst about the terms and conditions that cybersecurity adds to the contracting process. Hopefully, some governing body or association will get involved and help trade partners implement a best-in-class practice and protocol for stakeholders to follow. 2. R  isk-based contracting has a bright future in healthcare, and can be the next great iteration to create substantial value in the contracting arena. I’ve often asked Supply Chain Leaders and Suppliers for examples of risk-based contracts they have in place, and the examples to date have been underwhelming. It is my hope that in 2019 we start to see some meaningful collaborations that demonstrate the possibilities that risk-based contracts can bring. 3. P  urchased services has been high on many Supply Chain Leaders’ radar for the last few years. I worry there has been a lot of talk about reigning Purchased Services in, but the progress has been underwhelming. My hope is that we start to see meaningful progress in this area by some of the marquis IDNs, and that they share their stories. There is no better way for IDNs to launch a meaningful initiative than by using a roadmap from a best-in-class system. 4. C  areer laddering is so important to Supply Chain departments for successful secession plans. With 3-4 generations in the workforce, it is more important than ever to get tomorrow’s leaders engaged today, and career laddering is a great way to do that. My hope is we see more of today’s leaders mentoring and nurturing tomorrow’s shining stars. Supply Chain Leaders will find this to be a competitive advantage in attracting and retaining the nation’s best and brightest. 5. Complexity seems to have crept into the contracting process the last decade, as IDNs chase more value. You see this in many ways, whether it’s IDNs starting their own GPO or a distribution center. This gives the IDN more control on what product comes in, but I think an argument can be made that it might increase the cost of doing business for Suppliers to do business with that system. My hope is that we see more collaboration in finding ways to reduce complexity in the contracting arena. I’d love to hear your hopes for 2019! Thanks for reading this issue of The Journal of Healthcare Contracting!

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February 2019 | The Journal of Healthcare Contracting


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RPC PROFILE

Shawn Katusin

Fiercely Independent IHN Sourcing Group members maintain their independence through cooperation

A well-run IDN supply chain probably wouldn’t tolerate purchasing 50-some unique IV start kits from six or seven suppliers. But spread those numbers over 20+ independent hospitals and contracting teams, and they make more sense – if not more savings. IHN Sourcing Group – a network of 26 independent hospitals in Ohio, Indiana, Michigan, Virginia and New Jersey – tackled the IV-start-kit challenge a couple of years ago, and after several months of research and interaction, contracted for just three kits from one supplier. “We generated significant savings,” says Executive Director Shawn Katusin. “And the benefits weren’t just financial, but clinical as well, because those three kits contain best-in-class products.” Founded by five hospitals in 1996, IHN gives independent hospitals a choice in how they can better serve their local communities while providing affordable healthcare, says Katusin. “The IHN is a conduit that allows independent hospitals to remain independent while achieving great savings in many different buckets, from med/surg, to commodities, physician preference items, distribution, lab, pharmacy and purchased services.” Managing 80 to 100 new contracts on an annual basis, IHN takes care of a large percentage of its members’ contracting needs, Katusin points out. In addition, IHN offers clinical quality value analysis (CQVA), onsite support and help organizing CEO

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and physician committees to help drive contract decisions and compliance. Although independent, IHN has strategically aligned itself with Vizient. All members participate in Vizient contracts, and Vizient offers IHN dedicated resources, such as subject matter experts, purchased-services consultants and even assistance with membership recruiting. That said, Vizient does not manage or hold a vote on IHN operational decisions. IHN improved its analytics capabilities in 2015 by implementing Vizient DataLYNX™, which provides IHN an overview of total spend by category for the network, with the ability to drill down by member and provide line-item detail, says Katusin. “DataLYNX has allowed the data to be cleansed so that the IHN and its members have good clean data to review,” he says. The data gathered in DataLYNX allows the IHN to review pricing discrepancies between members by product category or by contract, and identify price parity opportunities. “Our members want to stay fiercely independent, so we have to get creative in the future,” says Katusin. Best-product-best-price will always be important to them. But IHN will continue to look at creative contracting methodologies and strategic partnership opportunities. “We’ll continue to grow our network strategically, and we’ll provide more resources to our members to ensure their long-term success in our network. The motto of our network is to ‘Embrace the Challenge and Opportunity.’ This is even more important today as we try to navigate the difficult terrain of healthcare supply chain.”

February 2019 | The Journal of Healthcare Contracting


Rx Only ©2016 B. Braun Medical Inc. Bethlehem, PA. All rights reserved. 16-5430_JHC_5/16_RTS3


Dennis Mullins: Steering a vehicle for change at IU Health Strategic thinkers: The healthcare supply chain needs more of them.

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February 2019 | The Journal of Healthcare Contracting


However, a strategic thinker who lacks good communication skills or change-management skills risks either failing in whatever initiative they are involved, or succeeding painfully, says Dennis Mullins, senior vice president of supply chain operations at Indiana University Health. Mullins is the Journal of Healthcare Contracting magazine’s Contracting Professional of the Year for 2019. Mullins learned the importance of clear communication and organizational change management through his experience in the armed forces, and supply-chain positions at Columbia/HCA, Shands at the University of Florida, and Baylor Scott & White in Dallas, Texas. In May 2015, he joined IU Health to help direct the design, construction and implementation of that IDN’s Integrated Service Center, which opened for shipments in May 2018 – the first such center he was able to build from the ground up. The 300,000-square-foot service center, located in the western Indianapolis suburb of Plainfield, is equipped with robotic goods-to-person picking technology, which allows staff to pick low-unit-of-measure supplies at a rate currently exceeding 130 lines per person per hour. “We transformed our entire supply chain, and moved to self-distribution and self-contracting,” he says. “I’m not sure everybody totally understood what it was we were doing. But knowing we have an impact on over 30,000 people who work here, we knew it was important that they understood at a high level – and some at a more granular level – what was going on, and what was to come.”

asked my oldest brother – who was an active duty Marine – for his advice. He told me to make sure I got a job that I could use on the outside.” But the Marines wouldn’t commit to anything other than what he had been trained on – driving a tank. “So I walked outside and went next door to the Air Force recruiter.” Though he would have preferred training in air traffic control, he was assigned to medical supplies. “Needless to say, I grew to love the job, and am thankful that I’m not an air traffic controller,” he says. “Life has a funny way of just happening,” he continues. After serving eight years of active duty service that included a deployment to Saudi Arabia in support of Desert

“Taking time to let people know what we were working on set us up for success.”

Air Force training Mullins was born and raised in The Bronx, New York. He holds an MBA from Amberton University and is a candidate for a doctorate in business administration from Grand Canyon University. He served in the United States Air Force for 10 years as a medical materials specialist. “I’m the youngest of four boys,” he says. “All of my brothers enlisted in the military right after high school, so it seemed like the logical thing for me to do at 17 years old.” He received training as a tank driver while a reservist in the U.S. Marine Corps. “I wanted to go to active duty, so I

The Journal of Healthcare Contracting | February 2019

Shield and Desert Storm, Mullins became a single parent of a three-year-old girl. “I continued to serve two more years with her by my side, but I came to realize that being a single parent in the military wasn’t the ideal situation for my daughter. It all worked out though. She’s 29 now, and I met my beautiful wife of 22 years, Audrey, because of it, too. “I would have to say that my time in the Air Force gave me a sense of purpose and a realization that the work we do in healthcare supply chain is bigger than ourselves. We provide vital care to those in need. I tell my staff that even though we are not in patient-facing jobs, we still provide healthcare, because we support the hands that heal.

When it rains, it pours Indiana University Health is the largest hospital system in Indiana by revenues, with 16 acute care hospitals, physician offices, ambulatory care ranging from home health to surgery centers,

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Contracting Professional of the Year and a health plan. It has a partnership with Indiana University School of Medicine, the largest U.S. medical school by enrollment. The Academic Health Center in downtown Indianapolis includes Riley Hospital for Children at IU Health, the state’s most comprehensive children’s hospital; and IU Health Methodist Hospital, the largest hospital in the state. Mullins joined IU Health in 2015, attracted by what he calls an opportunity to strategically make a difference. “During my interview process, I got the sense from the executive team that they would be supportive of my vision of a world-class supply chain. We are still moving toward that goal, but I

“I believe the ability to pick low-unit-of measure at high accuracy and velocity sets us up well to support our 400plus non-acute locations around the state.”

believe that through the support they provide and the hard-working team that I have, we are well on our way.” A rainstorm was the event that expedited IU Health’s decision to move ahead with an integrated service center. “Our building that held medical records and equipment was badly damaged, and we needed to make some short-term and long-term decisions,” says Mullins. “I felt that the integrated service center was the best business model.” Despite prior experience with service centers throughout his career, Mullins took nothing for granted at IU Health, touring what he considered to be the best-in-class consolidated centers around the country.

He took a journalist’s approach to helping his team and others at IU Health understand the scope of the project, framing it in three simple questions: • What are we doing? • Why are we doing it? • How will we achieve it? He posted placards with those questions – and answers – in every supply chain department. After that, he shared them with administration and clinical leaders. “Taking time to let people know what we were working on set us up for success.”

Robotically controlled system The bulk of the IU Health’s investment in the service center was a robotically controlled picking system. Robots on rails operate on top of a cubic grid. After receiving orders wirelessly, the robots lower their gripper plates into a stack, grab the bin and lift it to the grid surface. If the robot needs a bin on, say, level 9, it digs out eight bins and places them on top of nearby stacks, using the space

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February 2019 | The Journal of Healthcare Contracting


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Contracting Professional of the Year as a temporary placeholder. When finished, the robot puts the bins back in the same order. Orders are delivered to the port, and the operator picks up the product and prepares it for further processing. “When you look at supply chain organizations in other industries, they’ve been using technology like this for years,” he says. “Anyone who knows me knows I’m a tech-y person, so robots picking supplies fits right in.

supplies directly from manufacturers, while continuing to rely on distributors for secondary support. In 2019, Mullins and his team will explore and act on opportunities for product standardization across the system, as well as on reducing operating costs. “Every truck that leaves our dock costs money,” he points out. “If we can streamline deliveries and routes, thereby reducing the number of deliveries, we will save money.” In fact, Mullins believes that the Integrated Service Center will help IU Health save up to $3 million annually, considering pricing discounts (through direct purchasing from manufacturers), product standardization, inventory reduction and improved logistics. “And the self-distribution of medical supplies is only the first step,” he says. With approximately 120,000 square feet of the Integrated Service Center yet to be built out, the center can offer IU Health’s acute- and non-acute-care facilities pickup-anddelivery services for many other kinds of goods. “It is the vehicle for change,” he says. “There’s so much more value this business model can bring to IU Health.”

“My time in the Air Force gave me a sense of purpose and a realization that the work we do in healthcare supply chain is bigger than ourselves.” “Seriously, though, we selected a great partner at the Integrated Service Center, whose vision aligned with ours. I believe the ability to pick low-unit-of measure at high accuracy and velocity sets us up well to support our 400-plus non-acute locations around the state.” In 2018, the supply chain team focused on bringing all of IU Health’s 16 hospitals into the integrated service center. Today, supply chain purchases the majority of the IDN’s

One Goal As hospitals and non-acute-care sites merge to form large health systems, supply chain leaders face some human-relations challenges, says Dennis Mullins. “Over the past 30 plus years, I’ve watched and experienced the transformation of the healthcare supply chain,” he says. “Our career field has essentially gone from being just a support service department in the basement, to a strategic partner poised to help hospitals stay in the black. That’s a very exciting place to be. “However, that transformation has created a talent gap between facility operations and corporate operations. I’m passionate about my career, and I love helping those around me who have the

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ambition to grow their careers. I feel strongly that if they are not able to gain experience on both sides, we run the risk of having future leaders making strategic business decisions without the perspective to maximize patient care.” Newly hired supply chain employees at IU Health facilities visit the IDN’s Integrated Service Center and gain exposure to related functions, such as value analysis and contracting, explains Mullins. “We hardwire what we’re doing at the Integrated Service Center with what they will be doing at the site level. “It’s a constant reminder: One team, one mission, one goal.”

February 2019 | The Journal of Healthcare Contracting


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TRENDS

development for Direct Supply Inc. Add to that the generational challenges facing long-term-care providers. On the one hand, patients and residents are becoming more demanding, a trend that will only intensify as Baby Boomers start entering nursing homes. On the other hand, nursing home administrators and directors of nursing will have to learn how to communicate and motivate a younger generation of workers.

New to the healthcare lexicon February 2010: “The trend is clearly moving toward outcomes and performance-based care,” says Tom Schwieterman, M.D., director of research and development for Midmark. “Doctors will be increasingly incentivized and paid based on how well they manage their disease management programs,” he says.

Cancer, reconsidered

Nine Years of the ACA Editor’s note: A year from now, the Affordable Care Act will be 10 years old. How could the 2010s have been anything other than fascinating, considering what started the decade? Repertoire magazine – a sister publication of the Journal of Healthcare Contracting – selected some articles that reflect the bumps, turns, sudden stops and jumpstarts experienced by an industry trying to navigate in new territory.

Long-term collision course January 2010: Nursing homes and other long-term-care providers may be adequately staffed today, but as we move closer to 2020, the aging population will far outstrip the workforce, said Brad Klitsch, senior vice president of marketing

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February 2010: “[W]hat we are learning – and this is very true especially in the molecular diagnostics space – is that cancer is a heterogeneous disease,” says John Blackwood, vice president and general manager of Beckman Coulter’s immunoassay business center. “Not all cancers are the same. So the question goes from, ‘Does the patient have cancer?’ to, ‘If they do, what is the likelihood that that specific cancer will spread or cause significant disease?’ That’s where cancer diagnostics is going today and in the future.”

The vendor credentialing tug-of-war March 2010: The vendor credentialing issue appears to be more of a

February 2019 | The Journal of Healthcare Contracting


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TRENDS

tug-of-war – some might say quagmire – every day. While providers make their case for the need for credentialing, vendors wish the whole thing would go away. One group trying to find the proverbial win-win is the Healthcare Industry Supply Chain Institute.

The decimation of primary care? April 2010: In a 2009 position paper called “Reforming Physician Payments to Achieve Greater Value in Health Care Spending,” the American College of Physicians criticized the current Medicare payment methodology. “Fee-for-service payments create incentive for physicians to provide more services, not necessarily the services that are most effective for a particular patient” it said. Furthermore, feefor-service reimbursement has decimated primary care by rewarding doctors who perform procedures, while financially penalizing those who provide more consultations, counseling and long-term health management.

Physicians punch the clock June 2010: More physicians are breaking out of the mold of the independent, lone medical provider of yesteryear, and opting to punch a time clock instead. The employers of choice aren’t physician practice management companies, which were swallowing up physician practices 10 or 15 years ago. Instead, they are hospital-based integrated delivery systems.

Telemedicine: Ready for prime time July 2010: “I’ve been doing this 20 years, and every year, it’s ‘This is the year,’” says Steve Normandin, president of AMD Global Telemedicine, Chelmsford, Massachusetts. “But the industry has made more progress in the last 18 months than in the previous 18 years. You have a new generation of doctors who are much more exposed to technology. All the technology we’re using, 20 years ago was bleeding edge.”

Act 2 for retail clinics? September 2010: Back in 2006 and 2007, pundits were predicting that as many as 5,000 retail clinics would dot the country in just a couple of years. Today [in 2010], there are approximately 1,200 clinics in 38 states. Yet clinic operators aren’t glum. To date, clinics have accounted for 12 to 13 million patient visits. And they are looking toward a bright future, one that will likely see an emphasis on chronic disease management, as well as more partnering with hospitals and hospital systems.

The danger of opioids – already, in 2010 October 2010: Once used primarily to relieve pain following surgery or cancer, or at the end of life, opioids today are used widely to relieve severe pain caused by chronic low-back injury, accident trauma, arthritis,

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sickle cell, fibromyalgia and other conditions. With the increase in opioid usage, however, concerns have grown about abuse, addiction and diversion. The American Pain Society guidelines call for clinicians to continually assess patients on chronic opioid therapy by monitoring pain intensity, level of functioning and adherence to prescribed treatments. The society recommends periodic drug screens for patients at risk for aberrant drug behavior.

Should distributors be worried? November 2010: It’s unlikely that self-distribution [by health systems] will ever blossom into a full-blown “trend.” Most IDNs seem satisfied to “buy” rather than “make” distribution expertise. And how many have the capital to make the necessary investments in facilities, equipment, labor and inventory? Still, distributors can’t afford to be complacent.

The good and the bad for lab January 2011: Political and market trends appear to be smiling on the lab market – including the physician office lab – in 2011. After all, the government has listed a number of services, including screening for breast cancer, cervical cancer, cholesterol abnormalities and colorectal cancer, that insurers must provide to their customers without a co-pay. And a major emphasis of healthcare reform is disease prevention and wellness, which certainly plays into the hand of the diagnostics industry.

Who will service the non-acute customer? May 2011: If hospital systems and IDNs acquire physician practices or employ physicians in large numbers, who will service them? Will supply chain executives insist that their acute-care distributor service these new accounts, or will they back off and let the nonacute-care distributor continue to take care of that side of the business? Both acute-care and non-acute-care distributors have reason to be

February 2019 | The Journal of Healthcare Contracting


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TRENDS

hopeful…and apprehensive. Hospital distributors have an “in” with supply chain executives, but they lack expertise in distributing to nonhospital sites.

what results. They are starting to exercise their strength in the market, either by acquiring or merging with providers, or forming strategic partnerships with them.

The 2.3 percent hot potato July 2011: With medical device manufacturers facing a 2.3 percent excise tax on sales beginning Jan. 1, 2013, the question comes up, “Who’s going to get stuck holding the bag?” Will manufacturers take the hit to their bottom line? Will they try to pass along the cost of the tax to buyers? Or will buyers and sellers come together to create efficiencies that will reduce the pain that the tax may inflict on any one member of the supply chain?

Drug shortages August 2011: Shortages of drugs – including injectables – are cropping up unannounced more than ever. The issue has become serious enough to capture the attention of federal lawmakers, who have proposed legislation that would give the market a heads-up when shortages occur or are anticipated.

Our own worst enemy? December 2011: For many years, our industry has resisted the obvious efficiency of rationalizing pricing between markets, said Ted Almon, president and CEO of Claflin Co., Warwick, Rhode Island. Yes, nearly infinite price discrimination can enhance profit [for suppliers], but does it do so at a rate greater than the cost of rebate administration, reconciliation, and auditing?

Total cost of care February 2012: Concerns about the cost of healthcare and the quality of healthcare – expressed in terms of patient outcomes – have never been as severe as they are today. Concepts such as “value-based purchasing,” “technology assessment” and “comparative effectiveness” are raising the stakes. And government and private payers are beginning to demand that providers address the total cost of care, rather than care delivered just in the acute-care facility, or the doctor’s office, or the longterm-care facility, or the home.

Payers, providers join together April 2012: A lot of ink has been shed about hospitals and hospital systems acquiring physician practices. But there’s another player elbowing its way to the table – insurers. With years of experience monitoring and paying claims, insurers have developed the management expertise and databases to affect how – and what – care is delivered, to whom, and with

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Smartphone medicine May 2012: True, many health apps are designed to help people track calories consumed, calories burned, miles run, etc. But increasingly, devices and accompanying apps are helping people – particularly those with chronic conditions – monitor their health and communicate with their caregivers. The implication for physicians and physician office traffic could be huge.

Physician, stop thyself from doing stuff June 2012: In April, nine leading physician specialty societies published a list of 45 tests or procedures that they say are commonly used but not always necessary. The lists of “Five Things Physicians and Patients Should Question” are said to provide specific, evidence-based recommendations that physicians and their patients should discuss to help make wise decisions about the most appropriate care based on their individual situation. The nine organizations releasing lists as part of the “Choosing Wisely” initiative represent nearly 375,000 physicians.

Readmission reduction: The new game March 2013: The federal government is trying to change the rules of the game of U.S. healthcare. Traditionally, providers get paid for doing more procedures and providing more care. But spurred on by the Patient Protection and Affordable Care Act, the feds are trying to turn that formula around. One vehicle they are using to do so is the Hospital Readmissions Reduction Program.

The retail clinic challenge March 2013: There are more than 1,400

February 2019 | The Journal of Healthcare Contracting


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TRENDS

MinuteClinics, Take Care clinics, Little Clinics, clinics at Walmart, and other retail clinics in the United States today, according to Shoreview, Minn.-based Merchant Medicine. Should doctors be worried? “I would say they ought to be more aware than concerned,” says Ken Hertz, principal, Medical Group Management Association Health Care Consulting Group. The retail clinic does indeed present competition to the classical practice model, offering greater price transparency and better hours. Retail clinics also address walk-ins far more efficiently than the traditional physician office. “These are all customer-centric issues,” he says. “At the very least, [physician practices] have to be able to handle appointments in a timely manner. They have to understand the competition and what they can do to provide a competitive advantage.”

Linking products and outcomes July 2013: If there is a difference between the way providers buy products today and how they did so in the past, it can be summarized in one word: Data. Today, with purchasing groups such as Premier, VHA, Amerinet and others as catalysts, millions of bits of data can be aggregated and massaged to help providers do what they have always wanted to do – link products to outcomes. “We’re helping our members prepare for and adapt to a post-reform world that increasingly links costs and quality, and pushes providers to be more accountable for the overall health of populations,” says Bill Marquardt, vice president of portfolio management, Premier healthcare alliance.

FDA and mobile apps December 2013: It’s a sign of the times. The Food and Drug Administration issued in September final guidance for developers of mobile medical applications, or apps. The bottom line is, the agency won’t pay much attention to the majority of apps, because they don’t pose a threat to consumers. However, it will turn its attention to that subset of apps that present a risk to patients if they don’t work as intended.

IV shortages June 2014: From adversity can come good things. Take the current shortage of IV solutions – particularly normal saline and dextrose solutions. It’s true that distributors and manufacturers had their accounts on allocation. But as of press time, no adverse patient effects had been reported. And the Big 3 manufacturers were hustling to meet demand (with help from a German-based company shipping solution from its Norway plant). Meanwhile, healthcare providers were instituting conservation strategies that may change the way they use IV solutions in the future.

For physicians, a bigger picture August 2014: Since October 2012, hospitals have been penalized for readmissions within 30 days of discharge of Medicare patients with pneumonia, heart attack and heart failure. Effective October 2014, the Centers for Medicare & Medicaid Services will add elective hip/knee replacement and chronic obstructive pulmonary disease to the list.

New battleground: Urgent care

December 2013: It was years – no, decades – in the making. But in September, the U.S. Food and Drug Administration issued a final rule on unique device identification or UDI, as well as a global database for all medical devices. As expected, the highest-risk (class III) medical devices will be first out of the chute.

September 2014: Situated somewhere between physicians’ offices, retail clinics, and emergency rooms – in terms of the severity of illnesses treated as well as cost to the patient – urgent care centers are becoming part of the medical neighborhood. Hospital systems, private equity firms, insurers, doctors and private companies are betting that walk-in traffic will grow in the months ahead.

Tomorrow’s doctor

Henry Schein and Cardinal Health

March 2014: The American Medical Association wants to transform the way future physicians are trained. Judging from study grants AMA has awarded to 11 medical schools, tomorrow’s doctors will be more

February 2015: The recent acquisition by Henry Schein, Inc. of Cardinal Health’s physician office business demonstrates that the needs of the

UDI … theoretically

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team-oriented than many of those in past years. In addition, they will be technologically adept, community-health-focused, outcomesoriented, and business-savvy.

February 2019 | The Journal of Healthcare Contracting


INOMAX® (NITRIC OXIDE) GAS, FOR INHALATION

Because Every Moment Counts

INCLUD ALL ED * S ’ IT

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INOmax Total Care®

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A complete system with comprehensive care is included in your INOmax Total Care contract at no extra cost. When critical moments arise, INOmax Total Care is there to help ensure your patients are getting uninterrupted delivery of inhaled nitric oxide. • Over 18 years on market with over 700,000 patients treated1 • Continued innovation for delivery system enhancements • Emergency deliveries of all INOmax Total Care components within hours† • Live, around-the-clock medical and technical support and training • Ongoing INOMAX® (nitric oxide) gas, for inhalation reimbursement assessment and assistance included in your INOMAX contract (Note: You are ultimately responsible for determining the appropriate reimbursement strategies and billing codes)

Indication INOMAX is indicated to improve oxygenation and reduce the need for extracorporeal membrane oxygenation in term and near-term (>34 weeks gestation) neonates with hypoxic respiratory failure associated with clinical or echocardiographic evidence of pulmonary hypertension in conjunction with ventilatory support and other appropriate agents. Important Safety Information • INOMAX is contraindicated in the treatment of neonates dependent on right-to-left shunting of blood.

2017 EMERGENCY

DELIVERIES L INCL

1

UD ED

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CONTRACT

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AL DRUG &’SDEVICE IT

2,700+ IN YOUR NO EXTRA COST

• In patients with pre-existing left ventricular dysfunction, INOMAX may increase pulmonary capillary wedge pressure leading to pulmonary edema. • Monitor for PaO2, inspired NO2, and methemoglobin during INOMAX administration. • INOMAX must be administered using a calibrated INOmax DSIR® Nitric Oxide Delivery System operated by trained personnel. Only validated ventilator systems should be used in conjunction with INOMAX.

• The most common adverse reaction is hypotension. • Abrupt discontinuation of INOMAX may lead to increasing You are encouraged to report negative side effects pulmonary artery pressure and worsening oxygenation. of prescription drugs to the FDA. Visit MedWatch or • Methemoglobinemia and NO2 levels are dose dependent. call 1-800-FDA-1088. Nitric oxide donor compounds may have an additive Please visit inomax.com/PI for Full Prescribing effect with INOMAX on the risk of developing Information. methemoglobinemia. Nitrogen dioxide may cause airway inflammation and damage to lung tissues.

Visit inomax.com/totalcare to find out more about what’s included in your contract. *INOmax Total Care is included at no extra cost to contracted INOMAX customers. †Emergency deliveries of various components are often made within 4 to 6 hours but may take up to 24 hours, depending on hospital location and/or circumstances. Reference: 1. Data on file. Hampton, NJ: Mallinckrodt Pharmaceuticals.

Mallinckrodt, the “M” brand mark and the Mallinckrodt Pharmaceuticals logo are trademarks of a Mallinckrodt company. Other brands are trademarks of a Mallinckrodt company or their respective owners. © 2018 Mallinckrodt US-1800073 August 2018


INOmax®(nitric oxide gas)

Brief Summary of Prescribing Information INDICATIONS AND USAGE Treatment of Hypoxic Respiratory Failure INOmax® is indicated to improve oxygenation and reduce the need for extracorporeal membrane oxygenation in term and near-term (>34 weeks) neonates with hypoxic respiratory failure associated with clinical or echocardiographic evidence of pulmonary hypertension in conjunction with ventilator support and other appropriate agents. CONTRAINDICATIONS INOmax is contraindicated in neonates dependent on right-to-left shunting of blood. WARNINGS AND PRECAUTIONS Rebound Pulmonary Hypertension Syndrome following Abrupt Discontinuation Wean from INOmax. Abrupt discontinuation of INOmax may lead to worsening oxygenation and increasing pulmonary artery pressure, i.e., Rebound Pulmonary Hypertension Syndrome. Signs and symptoms of Rebound Pulmonary Hypertension Syndrome include hypoxemia, systemic hypotension, bradycardia, and decreased cardiac output. If Rebound Pulmonary Hypertension occurs, reinstate INOmax therapy immediately. Hypoxemia from Methemoglobinemia Nitric oxide combines with hemoglobin to form methemoglobin, which does not transport oxygen. Methemoglobin levels increase with the dose of INOmax; it can take 8 hours or more before steadystate methemoglobin levels are attained. Monitor methemoglobin and adjust the dose of INOmax to optimize oxygenation. If methemoglobin levels do not resolve with decrease in dose or discontinuation of INOmax, additional therapy may be warranted to treat methemoglobinemia. Airway Injury from Nitrogen Dioxide Nitrogen dioxide (NO2) forms in gas mixtures containing NO and O2. Nitrogen dioxide may cause airway inflammation and damage to lung tissues. If there is an unexpected change in NO2 concentration, or if the NO2 concentration reaches 3 ppm when measured in the breathing circuit, then the delivery system should be assessed in accordance with the Nitric Oxide Delivery System O&M Manual troubleshooting section, and the NO2 analyzer should be recalibrated. The dose of INOmax and/or FiO2 should be adjusted as appropriate. Worsening Heart Failure Patients with left ventricular dysfunction treated with INOmax may experience pulmonary edema, increased pulmonary capillary wedge pressure, worsening of left ventricular dysfunction, systemic hypotension, bradycardia and cardiac arrest. Discontinue INOmax while providing symptomatic care.

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ADVERSE REACTIONS Because clinical trials are conducted under widely varying conditions, adverse reaction rates observed in the clinical trials of a drug cannot be directly compared to rates in the clinical trials of another drug and may not reflect the rates observed in practice. The adverse reaction information from the clinical studies does, however, provide a basis for identifying the adverse events that appear to be related to drug use and for approximating rates. Controlled studies have included 325 patients on INOmax doses of 5 to 80 ppm and 251 patients on placebo. Total mortality in the pooled trials was 11% on placebo and 9% on INOmax, a result adequate to exclude INOmax mortality being more than 40% worse than placebo. In both the NINOS and CINRGI studies, the duration of hospitalization was similar in INOmax and placebo-treated groups. From all controlled studies, at least 6 months of follow-up is available for 278 patients who received INOmax and 212 patients who received placebo. Among these patients, there was no evidence of an adverse effect of treatment on the need for rehospitalization, special medical services, pulmonary disease, or neurological sequelae. In the NINOS study, treatment groups were similar with respect to the incidence and severity of intracranial hemorrhage, Grade IV hemorrhage, periventricular leukomalacia, cerebral infarction, seizures requiring anticonvulsant therapy, pulmonary hemorrhage, or gastrointestinal hemorrhage. In CINRGI, the only adverse reaction (>2% higher incidence on INOmax than on placebo) was hypotension (14% vs. 11%). Based upon post-marketing experience, accidental exposure to nitric oxide for inhalation in hospital staff has been associated with chest discomfort, dizziness, dry throat, dyspnea, and headache. DRUG INTERACTIONS Nitric Oxide Donor Agents Nitric oxide donor agents such as prilocaine, sodium nitroprusside and nitroglycerine may increase the risk of developing methemoglobinemia. OVERDOSAGE Overdosage with INOmax is manifest by elevations in methemoglobin and pulmonary toxicities associated with inspired NO2. Elevated NO2 may cause acute lung injury. Elevations in methemoglobin reduce the oxygen delivery capacity of the circulation. In clinical studies, NO2 levels >3 ppm or methemoglobin levels >7% were treated by reducing the dose of, or discontinuing, INOmax. Methemoglobinemia that does not resolve after reduction or discontinuation of therapy can be treated with intravenous vitamin C, intravenous methylene blue, or blood transfusion, based upon the clinical situation. INOMAX® is a registered trademark of a Mallinckrodt Pharmaceuticals company. © 2018 Mallinckrodt. US-1800236 August 2018

February 2019 | The Journal of Healthcare Contracting


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physician office differ from those of the acutecare hospital, and that healthcare leaders recognize as much, according to those involved. The two companies announced in late November that the physician-office-focused business of Cardinal Health’s Medical segment would be consolidated into Henry Schein’s Medical Group. As a result of the agreement, Henry Schein Medical gains service to more than 25,000 physician office customer locations, adds $300 million in annual sales, and brings on approximately 200 sales professionals.

Antibiotics: Too much of a good thing? July 2015: Since penicillin was discovered in 1928, antibiotics have been a “critical public health tool,” according to the Obama Administration’s recently published “National Action Plan for Combating Antibiotic-resistant Bacteria.” But the emergence of drug resistance in bacteria is reversing their beneficial effects. The Centers for Disease Control and Prevention (CDC) estimates that drug-resistant bacteria cause two million illnesses and approximately 23,000 deaths each year in the United States alone.

Nicoletti, MS, CPC. “But it won’t do one thing for physician practices, except slow them down.” Greg Dean, vice president, technology partners, McKesson Medical-Surgical, has a different perspective. “ICD-10 will increase specificity, which in turn provides more detail, and this can help to improve patient care and outcomes.”

Concordance: A national independent February 2016: The three independent distributors who announced plans in December to form Concordance Healthcare Solutions say they can service providers caring for about 70 percent of the U.S. population – and maintain their independent spirit while doing so. That means they’ll maintain local customer service, sales and warehousing, and continue to support the branded products that their customers prefer.

Interoperability: An impossible dream? April 2016: Individual providers – both inpatient and outpatient – have done a pretty good job of implementing electronic medical records within their four walls, but the system breaks down when a patient migrates from one care setting to another. “Beyond technical barriers, there are business barriers, complex privacy laws, workflow challenges, and misaligned incentives that conspire to slow progress,” according to the Health Information Technology Policy Committee in a December 2015 report to Congress.

MACRA reshapes physician payment Molecular testing: Now appearing August 2015: “Polymerase chain reaction” and “DNA sequencing” might not be part of industry vernacular today. But the fact is, they probably will be, in the not too distant future. This isn’t to say there isn’t – or won’t – be a continuing place for other point-of-care diagnostics, such as lower-cost lateral flow tests. But the accuracy of molecular tests as well as the attention being paid to personalized medicine and antibiotic stewardship, could push them into the mainstream, despite some concerns about cost.

May 2016: In January 2015, Health & Human Services Secretary Sylvia Mathews Burwell publicized her goals to improve the nation’s health delivery system. One of those goals is to tie 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018. The feds took a big step in that direction by passing the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, signed into law by President Obama in April 2015. The legislation repeals the Sustainable Growth Rate (SGR) formula and provides predictable payment increases, at least for awhile. By 2019, CMS will have implemented a new two-track payment system for providers (Alternative Payment Models, or APMs; and the Meritbased Incentive Payment System, or MIPS), which continue the move away from fee-for-service reimbursement.

ICD-10 … for better or worse November 2015: After years of delay, the deadline for providers to implement ICD-10 codes finally arrived on Oct. 1. “Maybe hospitals will like it, maybe epidemiologists will too,” says coding consultant, author and speaker Betsy

The Journal of Healthcare Contracting | February 2019

Social determinants of health December 2016: ProMedica and Concordance Healthcare Solutions have combined to take the concepts of post-acute care and population health to a new level. ProMedica’s Food at Discharge program ensures that patients in need get a three-day supply of nutritious food upon

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TRENDS

discharge. Toledo, Ohio-based ProMedica buys the non-perishable food items, and Concordance inventories, packs and ships them to each of ProMedica’s 12 hospitals.

Medical, meet dental. Dental, likewise. April 2017: In January 2017, Oakland, California-based Kaiser Permanente opened a pilot integrated medical-dental clinic in Beaverton, Oregon. The clinic, Cedar Hills Dental and Medical Office, makes Kaiser Permanente’s Northwest division “the first commercial health care organization to integrate [medical and dental] health records as well as offer coordinated services,” says Kenneth R. Wright, DMD, MPH, vice president of dental services for Kaiser Foundation Health Plan of the Northwest.

Obamacare: Still waiting for the big explosion. May 2017: Healthcare reform is a moving target. Congress and the president had hoped to make a clean break from the past this spring, but were unable to do so. “We’re going to be living with Obamacare for the foreseeable future,” said Speaker of the House Paul Ryan in late March, following the Republican party’s decision to pull legislation to repeal the Affordable Care Act from consideration on the House floor. Meanwhile, [President Trump] tweeted, “ObamaCare will explode and we will all get together and piece together a great healthcare plan for THE PEOPLE. Do not worry.”

Twenty-six years after the OSHA Bloodborne Pathogens Standard and 18 years after the Needlestick Safety and Prevention Act, people are still getting stuck with sharps – doctors, nurses, phlebotomists, environmental services staff, and others.

January 2018: It’s too early to tell how 3D printing will affect the medical device industry, but it could change the way in which devices are developed, manufactured and acquired. Already, the technology has affected the development and manufacturing of instrumentation, implants (e.g., cranial plates or hip joints) and external prostheses, such as hands. Some day, 3D printing may be used to create living organs. And when the U.S. Food and Drug Administration issues a draft guidance for the industry on the subject (as it did in May 2016), you know this thing is for real.

Stop making sense March 2018: The title of the afore-mentioned 1984 Talking Heads movie comes to mind when trying to interpret this winter’s flurry of healthcare-related announcements: • CVS Health to acquire Aetna. • Advocate Health to merge with Aurora Health Care. • UnitedHealth Group to acquire DaVita Medical Group. • Dignity Health to merge with Catholic Health Initiatives. • Ascension rumored to be talking merger with Providence St. Joseph. • Humana Inc./Kindred at acquire Home Division of Kindred Healthcare.

Employers get serious about telehealth

Blunt truth

July 2017: Telehealth may be talked about more than it is actually used, but that may change soon. According to a 2016 annual survey by the National Business Group on Health, nine in 10 large employers will make telehealth services available to their employees in 2017.

July 2018: Twenty-six years after the OSHA Bloodborne Pathogens Standard and 18 years after the Needlestick Safety and Prevention Act, people are still getting stuck with sharps – doctors, nurses, phlebotomists, environmental services staff, and others. Part of that is due to shortcomings in safety technology. But human factors – including inadequate staffing and a pressure to see more patients can result in a lack of concentration, a lack of knowledge or a failure to best prepare for adverse events – are also factors.

Tipping point August 2017: Less than half of patient care physicians have an ownership stake in their medical practice, according to an updated study on physician practice arrangements by the American Medical Association (AMA). This marks the first time that physician practice owners fell below a majority portion of the nation’s patient care physicians since the AMA began documenting practice arrangement trends.

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Print, pack and ship

February 2019 | The Journal of Healthcare Contracting


DEDICATION makes all the difference. Partnering with Terumo brings our expertise and care to you, your clients and ultimately where it matters most. Our SurGuard®3 safety hypodermic needle offers some very convincing benefits. Decrease healthcare costs: 20%* less expensive than the leading hinged safety hypodermic product. Standardize operations: A broad range of product sizes and three modes to meet every clinician’s style make it simpler to standardize with Terumo. Improve patient outcomes: Patients benefit from a more comfortable injection, as our needles are 10%* sharper than the market leader. Increase OSHA compliance and reduce liability: Safety mechanism includes a lock for both the needle and hub, and is designed to minimize the ability to be removed. We want to hear from you! Find your Terumo representative – call 1-800-888-3786, email TMPsupport@terumomedical.com or visit us online at www.terumotmp.com.

TERUMO and SurGuard are trademarks owned by Terumo Corporation, Tokyo, Japan, and are registered with the U.S. Patent and Trademark Office. ©2017 Terumo Medical Corporation 11/17. All rights reserved. Accession TMP-0325-11152017. *Data on file. Terumo Medical Products, April 2016.


PEOPLE

Todd Ebert Reflects on 40 Years of Healthcare Todd Ebert combined his interest in health sciences and business management to build a 40-year career in hospital and group purchasing organization (GPO) management, most recently as president and CEO of the Healthcare Supply Chain Association, the trade association for GPOs. Ebert will retire from the industry later this year.

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Born and raised in Salt Lake City, Ebert received bachelor’s degrees in pharmacy administration and business management, and a master’s in pharmacy administration, from the University of Utah. A registered pharmacist, he began his healthcare career in the pharmacy at St. Marks Hospital and then Pioneer Valley Hospital (now Jordan Valley Medical Center) in Salt Lake City. Already back then, he was impressed by the savings that group purchasing could bring to hospitals. “What you saw relative to the value was huge,” he says. “And it has increased exponentially since then.” In 1990, he was recruited to manage ValuPharm, the pharmacy membership program of Amerinet (now Intalere) in the territory west of the Mississippi for Intermountain Healthcare. One year later, he moved to St. Louis to become vice president of the national ValuPharm program. He assumed a variety of leadership roles with Amerinet, including executive vice president of contracting operations and senior vice president of marketing and non-acute-care program sales, and was named its president in 1998. In 2007, he became its president and CEO. He became president and CEO of HSCA in 2015. From its beginning, the group purchasing industry has evolved to meet and exceed the needs of its provider members, says Ebert. “When I started, group purchasing was all about a competitive price in a contract portfolio. You still need a strong catalog, because sooner or later, someone is going to ask, ‘What’s

February 2019 | The Journal of Healthcare Contracting


your price?’ But more important is the ability of GPOs to become strong players and managers in the entire supply chain and beyond.” The data collected by GPOs can be used to affect not only the economic side of healthcare, but the clinical side as well, as it can help providers reduce the variability of certain procedures, he says. Additionally, hospitals and healthcare providers are increasingly relying on GPOs for a broad range of services integral to cost-effective patient outcomes, including shortages, emergency preparedness and disaster response, drug utilization and healthcare cybersecurity. Group purchasing has gone through its set of challenges. “In 2000, when dot-coms were coming on strong, there was a feeling that GPOs could become a thing of the past,” he recalls. “But we have continued to evolve and enhance our value to our customers and their patients. “I’ve always said, listen to your customers. If you don’t, someone else will. Then provide

the best value you can to meet their needs. To do that, you have to be strategic and nimble.” These are lessons he learned first from his parents, Ray and Grace Ebert. “They taught me the value of ethics, of doing the right thing, of working hard and accepting responsibility and accountability,” he says. And he credits Bud Bowen, industry consultant and himself one-time president of Amerinet, with teaching him about group purchasing and

“When I started, group purchasing was all about a competitive price in a contract portfolio. You still need a strong catalog, because sooner or later, someone is going to ask, ‘What’s your price?’ But more important is the ability of GPOs to become strong players and managers in the entire supply chain and beyond.” about how to conduct oneself in business. “First of all, values are important to Bud,” says Ebert. “Number 2 is Bud’s business acumen. And Number 3 is something I call the fairness principle. For an agreement to be a long term success, everyone must be able to shake hands, confident that it works for all involved.”

A Fair Return “What about those #@$@#!! drug-makers who are pillaging our healthcare system?” Given his background in pharmacy and group purchasing, Todd Ebert has come to expect such questions from friends and neighbors. “My response is twofold,” he says. “The industry needs a robust and competitive generic drug marketplace. We have to make sure we have plenty of competition with a fair return on products, so consumers have access to high-quality generic medication.

The Journal of Healthcare Contracting | February 2019

“However, when we get into the discussion of patent-protected products, I remind people of the new drugs and products that are just fascinating; and I think pharmaceutical research is on the cusp of doing more. Pharmaceutical firms deserve a return, as long as it’s fair. We want to make sure they don’t game the system by artificially lengthening patent protection, and we need to ensure safe and affordable access to life-saving treatments through biosimilar drugs. “There has to be a fair return, but not one that’s excessive.”

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HSCA

The Healthcare Landscape in

Key trends to watch The year 2018 presented the healthcare sector and supply chain a year of challenges and opportunities for transformation. Natural disasters, other emergencies and critical shortages of prescription drugs, including injectable opioids, jeopardized the wellbeing of patients across the country. Policymakers also pursued solutions to the issue of rising drug prices, including the administration’s release of the HHS “Blueprint to Lower Drug Prices and By Todd Ebert Reduce Out-of-Pocket Costs.” The Healthcare Supply Chain Association (HSCA) represents leading healthcare group purchasing organizations (GPOs), the sourcing and purchasing partners to virtually all of America’s 7,000+ hospitals, as well as the vast majority of the 68,000+ long-term-care facilities, surgery centers, clinics, and other healthcare providers. Given our unique line of sight over the entire healthcare supply chain and our experience working on the front lines of the healthcare industry, HSCA has an intimate understanding of the challenges the healthcare industry will continue to face in 2019. Here are a few of the trends we are seeing, as well as areas of focus and policy priorities that HSCA will continue to pursue in the coming year, building on the progress HSCA made in 2018.

Drug pricing and generic drug competition Significant price spikes for critical generic drugs and ongoing prescription drug shortages continue to jeopardize patient access to care. Patients have

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long relied on generic drugs to reduce costs and increase access to essential medications, and price spikes for commonly used drugs create hardship for patients and providers alike. In 2018, HSCA submitted comments on the HHS “Blueprint to Lower Drug Prices and Reduce Outof-Pocket Costs.” HSCA applauded the Senate Judiciary Committee for advancing the CREATES Act, important legislation that would reduce prescription drug prices for patients by encouraging competition and innovation in the marketplace and end anti-competitive abuses utilized by some brand-name manufacturers. HSCA also submitted comments to FDA encouraging the swift uptake of biosimilars that prioritizes patient safety. In 2019, HSCA will continue to work with policymakers and supply chain stakeholders to increase competition in the generic drug market and find solutions to generic drug price spikes.

February 2019 | The Journal of Healthcare Contracting


Drug shortages Despite some progress and a decline in the number of new shortages, critical drug shortages continue to jeopardize patient access to medications. These shortages have been exacerbated by several natural disasters and some manufacturing delays that have occurred over the past year. GPOs are important partners in helping hospitals and providers navigate these drug shortages to provide patient care. In 2018, HSCA called on the DEA to temporarily adjust production quotas to allow the other manufacturers to step in. The DEA subsequently did lift the production quotas for certain manufacturers, an important step for mitigating potential shortages. HSCA also submitted comments to FDA on the causes of critical prescription drug shortages and potential solutions. HSCA also convened a multi-stakeholder effort comprising leading healthcare provider organizations to develop recommended policy proposals to help prevent and address drug shortages. This Drug Shortage Working Group presented initial policy recommendations at the FDA’s public hearing on drug shortages in November of last year.

medical device manufacturers and service providers to help protect patient health, safety and privacy. In conjunction with the release of the key considerations, HSCA also published ‘Recommendations for Medical Device Cybersecurity Terms and Conditions,’ which details potential purchasing contract terms and conditions that could help ensure rapid adoption of rigorous cybersecurity measures.

Emergency preparedness In 2018, the country experienced a wave of natural disasters and other emergencies that put stress on hospitals and healthcare providers as they served affected communities. GPOs were on the front lines of

With the recent wave of cyberattacks in various industries, cybersecurity will continue to be a focus and priority in the years ahead. In 2018, HSCA released key cybersecurity considerations for healthcare providers, medical device manufacturers and service providers to help protect patient health, safety and privacy.

Cybersecurity Advances in technology have led to unprecedented developments in the healthcare sphere; medical device and service technology are improving patient care and creating efficiencies in the healthcare system. However, medical devices and services, like any computer system, are vulnerable to cybersecurity threats that could jeopardize patient health, safety and privacy. With the recent wave of cyberattacks in various industries, cybersecurity will continue to be a focus and priority in the years ahead. In 2018, HSCA released key cybersecurity considerations for healthcare providers,

those emergencies, providing support to healthcare providers and working with manufacturers to identify and locate supplies of much-needed resources. HSCA member GPOs took steps ranging from increasing communication with members and suppliers, to identifying product availability and potential shortages, to collaborating with government agencies at the federal, state, and municipal levels. To help address the broader public threat of emergencies such as Ebola, GPOs are creating centralized response systems, conducting full-scale exercises of emergency management programs, and serving as clearinghouses of product information, educational programs, and treatment protocols. As we head into 2019, HSCA and its members remain committed to helping hospitals and healthcare providers deliver the most effective and affordable care possible to the patients they serve.

Todd Ebert, R.Ph., is president and CEO of the Healthcare Supply Chain Association.

The Journal of Healthcare Contracting | February 2019

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SPONSORED: MCKESSON

The Roadmap to Non-Acute Success How an experienced strategic partner can help health systems create – and navigate – an effective non-acute strategy

Changes in virtually every facet of the healthcare industry – including legislation, health insurance, technology, and clinical innovation – continue to create new challenges for healthcare systems to navigate. No one is feeling the impact more than that of supply chain leadership, whose responsibilities now include everything from surgery centers and physician’s offices to nursing homes and the patient’s home. Managing the non-acute continuum can be particularly challenging due to the complexity and fragmentation across so many care settings. Quite often you are dealing with locations that are geographically dispersed, have different care requirements, and operate separately from one another, even acting like micro-supply chains. The non-acute supply chain may represent a small portion of total spend, but can have many more people placing orders, adding complexity. Each health system faces new, evolving challenges in streamlining the way they manage and coordinate logistics for their non-acute continuum. Challenges abound

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within supply chain management, handling multiple clinical infrastructures across different specialties, with various value-based-care driven financial models. To get the most out of your health system’s investments in the care continuum, supply chain leaders need a comprehensive strategy to address the many facets of non-acute. The Journal of Healthcare Contracting has worked with McKesson Medical-Surgical, a leader in non-acute care supply chain strategies, to develop a roadmap for driving out costs and providing better care.

February 2019 | The Journal of Healthcare Contracting


The Roadmap to Success in Health Systems for Non-Acute Continuum The acute care supply chain involves a team of people trained to handle the influx of products, breakdown of pallets and putaway in the hospital. It is a carefully synchronized production. As health systems acquire alternative care sites, these care sites have their own supply chain requirements, separate technology, and ways of handling their supply chain. It becomes more difficult for operations leadership to manage a fragmented and complex non-acute supply chain. There can also be more risks involved: •D  elivery challenges with few or non-existent loading docks, more putaway locations • Not meeting regulatory requirements; clinical quality might be impacted • Multiple purchase orders and invoices per site • High carrying costs, more inventory and product expiration costs associated with more inventory To deliver better outcomes for their patients, health systems should maximize the performance of their non-acute settings with a multipronged approach incorporating ten key areas of optimization. This will allow health systems to: • Take control of their supply chain and financial performance • Improve their clinical infrastructure as required by today’s patients and current reimbursement models • Take the next step to deliver the highest quality of patient care possible • Lead organizational change to execute initiatives and achieve goals 1. Operations: Operational Expenses and Productivity How many different vendors are providing supplies across your non-acute care settings? The more suppliers involved in your ambulatory and post-acute supply chain,

The Journal of Healthcare Contracting | February 2019

the more likely you are missing cost savings opportunities, losing valuable staff time, and providing inconsistent quality of care. There is more time and labor involved in handling multiple deliveries. There are varying price structures across the non-acute sites. There can be incorrect tier rostering and more. The single most important consideration is to make sure your operational model is designed to meet the specific needs of each of the individual care settings. In the non-acute settings, it’s not a one-size-fitsall model. From the delivery model to the enabling technologies, supply chain has to evaluate and make critical decisions on which solution helps to drive down operational expenses while improving staff productivity. It’s extremely important that clinic staff spend their time on patient care and not on PAR levels. 2. Analytics: Visibility and Insights Without proper technology and expertise, it’s nearly impossible to gather accurate, comprehensive data across all non-acute sites within a system. It’s important to have a tool that can bridge the data gaps within your health system. It’s not uncommon for non-acute sites to have different technology than the hospitals, and even different technology from each other. A supply chain solutions partner should bridge the gap to provide the breadth of visibility that goes beyond the operations within one’s own facility to help consultatively provide insights on additional cost-saving measures and process improvements to enact across the health system. What are the ordering trends across your non-acute settings? Do you know the rate of usage of your most frequently ordered supplies? Having this data readily accessible can enable you to predict and automate future orders so that clinicians can focus on patient care instead of on product inventory. What are similar facilities and clinicians ordering? Insight and access to peer analytics can be invaluable for supply chain decision support and standardization. Standardizing leads to optimum quality of care and efficiency. Having this data at your finger tips can enable better decision making. 3. Process Automation: Productivity, Accuracy and Speed of Business How automated are your current non-acute supply chain processes? Automation is paramount to keeping costs down, and the quality of care up, according to Liz Hayes, Health Systems Technology Manager at McKesson. “Connectivity across the non-acute supply chain is critical, including connectivity to EMR, EHR, and ERP systems,” she explains. “Any point that we can assist in automating a process to remove

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SPONSORED: MCKESSON

manual labor from that equation assists the health system in achieving their goals, including formulary compliance, increased efficiencies, and software integration.” If you can automate back-end office functions, like procurement, you give more time back to the clinicians to spend on patient care and improve provider satisfaction.

Finally, aligning stakeholders and agreeing on a project plan can be critical to the success of these programs. Having an experienced partner solely focused on non-acute can help you take advantage of cost sourcing opportunities.

4. Strategic Cost Management: Contract Leverage Do you have a strategy that drives your underlying product cost decisions? Is it based on GPO compliance or on the lowest cost? How are you leveraging your aggregated volume to negotiate vendor contracts? How are you operationalizing these cost source strategies? Negotiating a great contract is just the beginning when it comes to driving down the cost of products. There are several areas to consider when tackling strategic cost management. First is access to the data necessary to make informed decisions. With the right data you can match product ordering to usage in order to standardize products across your nonacute settings. This can lead to greater leverage with suppliers when it comes to cost negotiations. Many health systems focus on getting the lowest price for a given item, but there is so much more that factors into overall supply chain costs. For example, issues such as late, inaccurate or damaged deliveries and storage issues can impact clinical outcomes in addition to financial performance. As you consider the total cost of your operations, be sure to factor in these costs. Be careful with activity-based pricing models that are not aligned with your system needs. These may cost you more in the long run.

5. Visibility: From Physician’s Office to the Patient’s Home How does visibility into your system’s nonacute settings drive overall business goals? “As care moves out of the acute setting and into specialized non-acute settings, it becomes even more critical to ensure supply chain financial and decision support in those care settings,” states Jacob Hookom, Vice President of Customer Experience, Information Technology at McKesson. “This visibility helps improve your bottom line, and can help identify and measure operational efficiencies, care standardization, and contract compliance outside the four walls of the facility.” Hookom and his team help health systems manage data for their non-acute facilities to implement initiatives like product standardization. Implementing standardization and

Key building blocks for non-acute success ✓

Operations Operations

Standardization

Standardization

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Analytics Analytics

ProcessAutomation Automation Process

Post-Acute Care

Post-Acute Care

Laboratory

Laboratory

Supply Cost Management Management Strategic

Pharmaceuticals

Pharmaceuticals

Visibility Visibility

Leading Change

Leading Change

February 2019 | The Journal of Healthcare Contracting


reducing clinical variation can help drive down costs and improve patient outcomes. “Product standardization leads to care standardization which impacts costs,” he explained. Having an integrated system that provides access and visibility to the right data can drive clinical decisions at both a macro level, across the health system, and at the micro level, within the individual specialty setting. It helps to contain costs and prevents discrepancies in patient care. 6. Standardization: Product and Processes How does your system ensure that all nonacute locations are on formulary, and are meeting compliance goals? Although non-acute settings vary, there is still room for standardization of supply chain processes. The process of standardizing non-acute supply chain operations begins with the quality and scope of the data and analytics available to those responsible for supply chain operations. A successful standardization effort can lead to better financial, clinical and operational performance. This leads to reduction in clinical variation. Standardization should happen across all product lines: medical/surgical, pharmaceutical, equipment, and lab. Utilizing non-acute specialists can help take some of the emotional decision-making out of the process. How do clinicians know what is the best product, application, and utilization of supplies for each non-acute episode of care? New technology, new products, and equipment are continuously entering the market. Often these new supplies require clinical training. With analytics and decision support, you can better train your clinical population to provide a more consistent level of care.  ost-Acute Care: Meeting Care 7. P Requirements Post-Discharge How and where are medical supplies

The Journal of Healthcare Contracting | February 2019

currently delivered to your organization’s post-acute care settings? If post-acute supplies are not being delivered directly to clinicians or patients at the point-of-care (including home health settings), clinicians may be wasting valuable time chasing down supplies, or patients may not have the necessary products to care for themselves properly at home. Is your post-acute supply chain process designed for optimum efficiency, effectiveness, and quality of care to prevent patient readmissions? Patients who are released from a hospital to a post-acute facility, and then end up being readmitted due to an infection or post-surgical complications, can negatively impact a health system’s reimbursement. Twice: initially at the hospital, and again in the post-acute setting. 18 percent of patients discharged to a post-acute care facility are readmitted to the hospital within 30 days.* [https://www.ncbi.nlm.nih.gov/pubmed/27981557] “Technology and product formulary management play a significant role with our post-acute care providers – it’s the key to reducing hidden costs,” said Deborah Haywood Vice President of Strategic Segments for Extended Care at McKesson. The Extended Care team helps providers develop a strong post-acute strategy that optimizes two key facets of care: distribution of the medical supplies to the point of care and proactive product formulary management. 8. Laboratory: Diagnosis and Convenience How focused is your lab strategy on workflow efficiency as it relates to operational, clinical and financial feasibility? How integrated are your supply chain and lab functions – do they work together to impact revenue, increase patient satisfaction and clinical outcomes? Lab represents two percent of healthcare spending and influences 70 percent of medical decisions*. [http://www. clpmag.com/2016/03/value-diagnostics/] “Supply Chain often doesn’t understand that they can have a significant impact on lab,” said Lynn Glass, Vice President of Strategic Accounts for McKesson. “Set up properly, lab can generate revenue,” as opposed to being a cost center, according to Glass. Her team at McKesson offers strategies and solutions for laboratory supply chain professionals to implement in non-acute settings, including point-of-care testing, cutting-edge tools and technology, and comprehensive data and analytics. These cutting-edge solutions help laboratory clinicians and administrators integrate corporate supply chain and lab processes to achieve best practices such as standardization, SKU optimization, and supply chain utilization strategies that incorporate input from the biomedical board or clinical representative.

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SPONSORED: MCKESSON

9. Pharmaceuticals: Availability and Regulatory How does your health system ensure that non-acute clinicians are meeting formulary and regulatory requirements for ordering, managing, dispensing pharmaceuticals, as well as disposing of unused drugs? How many suppliers are involved in providing pharmaceuticals to non-acute sites? The pharmaceutical supply chain is yet another area in which consolidation of suppliers and standardization leads to synergies across all settings. It can provide valuable cost savings, increase quality of care, improve patient experience, and streamline processes for optimum efficiencies. How do your non-acute sites operate around backorders and varying availability (or unavailability) of products, without impacting patient care or financial outcomes? Each non-acute setting needs the right drug available to complete each patient encounter appropriately. According to Patrick Baranek, Director, Pharmaceutical Sales at McKesson, a reputable distributor can help health systems achieve many efficiencies among their non-acute pharmaceutical supply needs. Having a pharmaceutical distribution strategy will help systems establish and manage a set formulary that considers all variables such as unit of measure, chain of custody, temperature requirements, and other regulatory requirements, such as USP800, and financial considerations. Having a pharmaceutical supply strategy is an important piece of the bigger non-acute strategy. By streamlining the way health systems manage pharmaceuticals in their non-acute continuum, they are better able to have a streamlined system with fewer invoices, fewer deliveries, and increased compliance in electronic ordering. This can help reduce administrative costs, and overhead, while maintaining the highest level of quality, safety, and patient care. 10. Leading Change: Stakeholder Alignment and Initiative Execution Healthcare is always changing. Effectively managing through these changes requires great alignment of stakeholders and processes. Do you speak the same language as your stakeholders? Do you understand their goals? Do they understand how you can help them achieve those goals? One of your greatest challenges might be getting buy-in from the many stakeholders across the non-acute continuum. If so, you’re not alone. Greg Colizzi, Vice President of Health Systems Marketing for McKesson, explains: “For an organization to implement a comprehensive non-acute strategy, it requires the disciplines inherent to the supply chain – stakeholder alignment,

process planning, analytics and project management. This evolution in healthcare represents a great opportunity for supply chain leaders to use their unique talents to take a broader leadership role across the health system.” Colizzi’s team created this roadmap to improve operational performance. “Very few systems have the tools, resources and capabilities in-house to execute initiatives across the entire non-acute continuum effectively and efficiently.” “Doing so requires expertise in the many facets of these individual care settings. We work closely with health systems to understand their unique challenges, assess processes, identify areas for improvement and help them lead change in their organization. We do this by deploying our specialized resources to execute on this roadmap, including operations, Six Sigma, laboratory, pharmaceuticals, process automation, post-acute care, analytics, standardization, and many more.” Colizzi added. His team helps systems perform these assessments efficiently, objectively, and comprehensively allowing for more informed decisions. “We help systems overcome organizational inertia by providing a vision that all team members can rally around.” Colizzi explained. Take control of your fragmented and complicated non-acute supply chain. Do any of these non-acute supply chain challenges sound familiar to you? This is where an experienced, strategic non-acute specialist can provide invaluable resources for health systems. We will explore opportunities for supply chain enhancement in upcoming articles featured in the weekly e-newsletter that will go in-depth into each of the ten key components of a strong non-acute supply chain. Each chapter will examine specific examples of how the roadmap will impact your health system’s operational, clinical, and financial performance and outcomes. JHC

To learn more visit www.mckesson.com/takecontrol

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February 2019 | The Journal of Healthcare Contracting


The Supply Chain Leader’s Dilemma:

Health systems’ non-acute care sites may only account for 2% of your spend but could be causing

30% of your headaches Post-Acute Care Standardization

Strategic Cost Management

Operations

Visibility

We Can Help You Take Control

Process Automation

Leading Change

Analytics

Pharmaceuticals

Laboratory

As the leader in the non-acute continuum, McKesson can help you take control of your supply chain to streamline and standardize operations, improve financial performance, support better clinical infrastructure and lead change across your health system. Let us help with that headache.

McKesson.com/TakeControl Medical-Surgical. Rx. Lab. Equipment. © 2019 McKesson Medical-Surgical Inc. All rights reserved. 2019_0010


CONTRACTING PROFESSIONALS REVISITED

Michele Tarantino: Up for the Challenge Editor’s note: Where do JHC’s past Contracting Professionals of the Year go? Up. We are checking in with the people we’ve recognized since 2007. This month: Michele Tarantino.

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Michele Tarantino is not one to avoid the new and the unexplored. Originally from Queens, N.Y., she grew up in Westchester County and graduated from The King’s College in Westchester County. Following graduation, she began a career in auditing while pursuing a master’s degree in public administration at New York University. (She ultimately completed a master’s degree in health promotion at Virginia Tech.) Working for Merrill Lynch, Tarantino focused on auditing its commercial real estate portfolio. Later, she worked for Corporate Property Investors, a real estate investment company, for whom she audited tenants of the shopping malls owned by the company. In 1997, for family-related reasons, Tarantino and her husband, Jim, a radio personality, took a leap of faith, moving from New York to Roanoke, a city of approximately 100,000 people in the western part of the state. Largely because of Tarantino’s analytical skills, Carilion Health System (later named Carilion Clinic) hired her as part of its healthcare consulting department, focusing on process improvement projects. Her first challenge was working with the OR to improve turnaround time, start time, and other processes. Approximately two years later, she was hired as Carilion’s corporate purchasing director as well as OR materials director for two of the system’s largest hospitals. She did that for seven years, and then, in 2006, she decided to join Aspen Healthcare Metrics, whom she had

February 2019 | The Journal of Healthcare Contracting


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engaged to help Carilion with its implant contracting program. Two years later, she got a call from Carilion, which needed someone to head up its supply chain and contracting programs. In 2011, when Tarantino was named Contracting Professional of the Year by the Journal of Healthcare Contracting, she was vice president of corporate contracting for Carilion Clinic, which at the time comprised eight acute-care hospitals, one surgery center, and about 90 physician offices. In FY 2010, through the efforts of Tarantino’s team, the clinical staff, Premier healthcare alliance and the consulting firm Deloitte

Reno itself is in the midst of a transformation. Industry, job-seekers and retirees are increasingly attracted to area. “The population growth has opened up new opportunities to expand our services and purchase new technologies,” she says. For example, in the past year, Renown has opened six new physician offices, and is building a new inpatient med/surg unit. For the new buildings, supply chain is responsible for FFE, that is, furniture, fixtures and equipment. The department has a business analyst embedded in the construction group, who reports to Tarantino with a dotted line to the director of construction, as well as a medical equipment acquisition committee. Working on facilities and construction, cybersecurity, sourcing/contracting and the “Internet of Things” (that is, the fact that virtually all medical equipment today is networked) has been “fun and dynamic,” she says. In July, the supply chain team moved its Distribution Center operations to a new, 60,000-square-foot facility about two miles from the hospital. The center is actually a forprofit operation, because it distributes products not only to Renown’s inpatient and outpatient facilities, but to local ambulance services and community colleges. “It’s pretty remote here,” she says, so additional logistics providers in the region are welcomed. Tarantino has learned much about herself and about leadership since being named Contracting Professional of the Year. “People need to feel they can trust your motives,” she says. “Supply Chain leadership positions can be challenging, because many of us have a passion for cost reduction. I have learned that you can expend a lot of political capital by focusing solely on expense reduction, meaning, this can be a threatening concept to those who may not understand your world. If physicians, caregivers and other leaders see that financial improvement is your only focus, then it will be impossible to be effective. “Trust comes in many ways. Transparency and humility go a long way. Leadership is a privilege. “I am definitely more self-aware of the impact my management style has on the team,” she continues. “I try to moderate, although it is still difficult to let go of the detail. “I have slowed down considerably and try to spend more time listening rather than making assumptions. I think this makes it easier for others to work with me, and helps build relationships.”

“Trust comes in many ways. Transparency and humility go a long way. Leadership is a privilege.” & Touche, Carilion identified $15 million in supply chain opportunities and implemented $8 million in recurring and one-time cost reductions. Tarantino also formed a department to centralize sourcing, value analysis and contracting. And she embarked on a program to centralize non-clinical and purchased-services sourcing and contracting. In May 2016, she and her husband made another big move – to Renown Health, in Reno, Nevada.

Transformation “I chose Renown Health for an opportunity to lead the supply chain team through an exciting and rapid transformation,” she says. (She and her husband also love the beauty of the area, including Lake Tahoe hiking.)

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February 2019 | The Journal of Healthcare Contracting


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PATIENT CARE

INTERVENTIONAL CARE

ENVIRONMENT OF CARE


CHRONIC CARE MANAGEMENT

By David Thill

Caring for survivors “My primary concern is secondary prevention,” says Aarati Didwania, an internist and director of the STAR Program at Chicago-based Northwestern Medicine. STAR – which stands for Survivors Taking Action & Responsibility – serves childhood cancer patients who are now adults, as they transition from cancer care to longterm follow-up care. Many of Didwania’s patients come to her hoping they’re finished with cancer treatment, she says. They may have been referred by their oncologist, but they’re not actively being treated for cancer. She wants to keep it that

The ‘C’ Words Cancer’ and ‘chronic’ were rarely used in the same breath … until now Editor’s note: Chronic diseases and conditions – such as heart disease, stroke, cancer, type 2 diabetes, chronic obstructive pulmonary disease, obesity and arthritis – are among the most common, costly and preventable of all health problems. As of 2012, about half of all adults – 117 million people – had one or more chronic health conditions. One in four adults had two or more chronic health conditions. Seven of the top 10 causes of death in 2014 were chronic diseases.

Chronic disease isn’t just for old people. Conditions like osteoporosis can hit much earlier than a person’s golden years, and for former cancer patients, the risk is often higher. What’s more, as cancer treatment advances, patients live longer, and their cancer conditions often become “chronic” themselves. This means caregivers – from primary care doctors to oncologists – must consider more factors now when administering treatment to former and current patients with cancer than they have in the past. It also means they have to coordinate their efforts more closely.

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“You’re not just surviving; you’re surviving with a good quality of life” way by looking out for any adverse effects they may experience as a result of the treatment they received, which was often years before they arrived at the STAR Program. Patients aren’t typically screened for many chronic conditions until later in life. But this isn’t the case for patients with a history of cancer. If they received cancer treatment as a child, they may be more at risk depending on how they were treated. Before she meets her patients, Didwania tries to learn as much as she can about their previous treatment, so that she knows what to look for. For example, if a person received cranial radiation as a child, Didwania might monitor them for hypothyroidism.

February 2019 | The Journal of Healthcare Contracting


If they received steroids as part of a bone marrow transplant early in life, they’ll be at higher risk for osteoporosis in young adulthood. Doctors face a small challenge in reading test results for younger patients, says Didwania. Since those tests were often developed to screen older adults, she has to interpret results in light of the patient’s age. But the earlier she detects it, the better the outcomes. “I’m a big fan of talking about secondary prevention,” she says. “I can’t take away your past treatments, but I can try to find things before they become a problem.”

“In some cases, we may not be able to completely eliminate a cancer, but patients live longer and have functional lives,” says Koh. This is especially true as treatment technology advances. For example, breast and prostate cancer patients can undergo continuous therapy, and while their cancers aren’t necessarily “cured,” they can be managed, he says. “In that case, cancer as a chronic disease is maybe more similar to diabetes and other chronic diseases.”

The intersect Cancer care has traditionally been “somewhat of a silo,” Koh says: The patient gets treated by their oncologist, and other doctors don’t have much of a role in the process. But treatment now is so multifactorial that other providers need to be involved in the patient’s cancer care, he says.

Cancer as a chronic disease “Even though we would like to believe that we cure [cancer] patients with a minimum of side effects, we are learning that cancer causes long-term morbidity,” says Wui-Jin Koh, an oncologist and chief medical officer at the National Comprehensive Cancer Network. The longer patients live, the more time they have to manifest morbidities potentially caused by their cancer therapies. This is partly why oncologists like Koh are particularly concerned about pediatric and young adult patients. Doctors also focus on quality of life in cancer survivors now more than they did decades ago, he says, referring to “quality-adjusted survival”: “You’re not just surviving; you’re surviving with a good quality of life.” Part of this practice involves considering patient-reported outcomes – factors that weren’t measured as much in the past, like the person’s sexual function, Koh says. But cancer doesn’t just increase the risk of chronic disease. Sometimes, cancer itself is a chronic disease, or at least very similar to one.

“Even though we would like to believe that we cure cancer patients with a minimum of side effects, we are learning that cancer causes long-term morbidity.” “It used to be that when I saw a referral, I made sure the referring surgeon got a copy of my evaluation treatment plan,” says Koh. Now, he might send that report to the primary care physician, the cardiologist, the endocrinologist and any other specialist the patient might see. There’s an increased role in cancer treatment for primary care providers, he says. “I don’t think we’ve completely defined all the roles, but I think we’re beginning to evaluate how to educate primary care doctors and how to give them the tools to manage cancer patients.” He also sees a role for primary care doctors in palliative care – which he clarifies is different from end-of-life care. “I think [palliative care] has gotten this bad connotation,” he says, when really, it’s meant for pain control and maximization of function. He notes that starting palliative care with curative cancer treatment can improve patients’ cure rates. As all these techniques evolve, says Koh, “I think there will be a lot more communication” between primary care doctors and oncologists.

David Thill is a contributing editor to JHC

The Journal of Healthcare Contracting | February 2019

41


TRENDS

A ResidentCentered Plan New reimbursement method will compensate SNFs for caring for medically complex residents Effective Oct. 1, 2019, skilled nursing facilities will receive Medicare reimbursement based on a new model of payment, called Patient Driven Payment Model, or PDPM. It’s designed to be budget-neutral and, in a global sense, it very well might be. But there will be winners and losers. The winners? Skilled nursing facilities that accurately assess the needs of the resident upon admission, and tailor their care accordingly. The losers? Facilities that cling to the old reimbursement method, which rewards SNFs that maximize the number of hours they spend providing physical therapy, occupational therapy or speech/language pathology therapy. In the new system, more therapy hours won’t add up to more reimbursement dollars. (That said, the level

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of therapy anticipated for each resident will continue to be one factor in the new reimbursement scheme.) SNFs that admit medically complex residents, that is, those who need higher levels of potentially expensive care (e.g., expensive drugs, ventilator care, care for residents with HIV/ AIDS, etc.) will receive reimbursement that more closely reflects those higher costs. “It’s good for residents,” says Robin Hillier, RLH Consulting, Westerville, Ohio, and director of reimbursement and quality metrics for Welcome Nursing Home in Oberlin, Ohio. She spoke about PDPM at the annual Convention and Expo of the American Health Care Association and National Center for Assisted Living in San Diego. “The current Prospective Payment System (PPS) used by CMS to pay for Medicare stays in skilled nursing facilities had the unintended consequence of leading to a ‘one size fits all’ approach to providing skilled care. The new Patient Driven Payment Model focuses more on the unique characteristics of each individual beneficiary, rewarding SNFs for focusing on the holistic, individualized plan of care that will help the person meet their specific post-acute goals.” “PDPM is a resident-centered model,” says Nate Ovenden, senior Medicare and managed care consultant, Good Samaritan Society, Sioux Falls, South Dakota, who also spoke at the recent AHCA/NCAL convention. “It will help us focus on the resident as an individual, instead of our current system, which relies on the amount of therapy minutes delivered.”

February 2019 | The Journal of Healthcare Contracting


Nontherapy ancillary services Under the Patient-Driven Payment Model, SNFs will be reimbursed for their Medicare residents based – in part – on the nontherapy ancillary services needed. Medicare has assigned a certain number of

“points” for 50 conditions. More points mean more reimbursement. The following 15 conditions receive the highest number of points.

Nontherapy ancillary service

Points

HIV/AIDS

8

Parenteral IV feeding: level high

7

Special treatments/programs: Intravenous medication post-admit code

5

Special treatments/programs: Ventilator or respirator post-admit code

4

Parenteral IV feeding: level low

3

Lung transplant status

3

Special treatments/programs: transfusion post-admit code

2

Major organ transplant status, except lung

2

Active diagnoses: multiple sclerosis code

2

Opportunistic infections

2

Active diagnoses: asthma, COPD, chronic lung disease code

2

Bone/joint/muscle infections/necrosis - except aseptic necrosis of bone

2

Chronic myeloid leukemia

2

Wound infection code

2

Active diagnoses: diabetes mellitus (DM) code

2

Source: American Association of Nurse Assessment Coordination

Existing method to fade out Until October 2019, Medicare will continue to pay SNFs a prospectively determined rate for each day of care. That daily rate has three components: nursing, therapy, and room and board. The nursing and therapy portions of the payment for each patient are adjusted for differences in case-mix using a classification system called resource utilization groups, or RUGs. The current iteration – RUG-IV –

The Journal of Healthcare Contracting | February 2019

classifies patients into one of 66 possible resource utilization groups, depending on the resident’s nursing care needs; amount of therapy provided; other services furnished, such as respiratory therapy and specialized feeding; the patient’s ability to perform activities of daily living; and certain medical conditions, such as pneumonia and depression. The current RUG-IV system includes payment for staff time spent on nontherapy ancillary (NTA) services, but not the cost, which can be high for SNF residents who require expensive drugs, a ventilator, tracheostomy care, wound care, IV medication, etc. (“Nontherapy ancillary services” refers to any ancillaries a provider uses other than therapy services, such as drugs, supplies and equipment.)

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TRENDS

The patient-driven approach

Simplicity

Under PDPM, residents will be classified into one group for each of the five case-mix-adjusted components: • Physical therapy • Occupational therapy • Speech/language pathology • Nontherapy ancillary services • Nursing

CMS hopes that PDPM will simplify the payment system, says Ovenden. “We currently spend so much time meeting regulations and doing assessments that our nurses don’t have as much time to see residents face to face. With PDPM, we will get to know our residents on a more personal basis, and our MDS [Minimum Data Set] assessments will be more accurate. We will have the resources to focus on our clinical competency skills, and make sure we’re providing great care for our residents with comorbidities.” In addition, by recognizing 50 nontherapy ancillary services for which SNFs can be reimbursed, the PDPM model will more accurately reflect the time, effort and cost of caring for clinically complex residents, rather than emphasizing therapy minutes, says Ovenden. That said, it would be a mistake to believe that PDPM will lead to a flood of new clinically complex residents in SNFs, he says. Those residents are already being cared for. But PDPM will reduce the incentive for some SNFs to pick and choose residents who may require many therapy minutes, but who do not present clinical complexities.

And, whereas under RUG-IV, therapy minutes delivered is the primary determinant for reimbursement, under PDPM, therapy minutes will have no impact on reimbursement. SNF administrators and staff will enjoy another benefit from PDPM – less time spent completing assessments of their residents. RUG-IV calls for SNFs to perform five scheduled assessments of the resident, at Day 5 of the stay, Day 14, Day 30, Day 60 and Day 90. In addition, SNFs are expected to perform unscheduled assessments

“Accurate and complete coding on the initial assessment will be critical to a facility’s success.” – Robin Hillier

Making adjustments throughout the stay, depending on the needs of the resident. Under PDPM, however, SNFs need only perform one scheduled assessment – at Day 5 – and unscheduled assessments as needed. While PDPM will save SNFs time spent on assessments, it also will demand a higher degree of accuracy at that Day 5 assessment. “For many – if not most – Part A beneficiaries, reimbursement will be based solely on the information captured on the initial (5-day) assessment,” says Hillier. “Under certain circumstances, facilities will have the ability to complete an ‘Interim Payment Assessment’ to adjust the reimbursement rate if new conditions arise during the stay that would increase the payment rate. But accurate and complete coding on the initial assessment will be critical to a facility’s success. “In order to achieve complete and accurate initial assessments, facilities will need to evaluate their admissions processes to ensure they are considering all relevant clinical information.”

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“Under PPS, providers are paid based on the amount of therapy they provide,” says Hillier. “If two beneficiaries receive the same level of therapy, the rate is the same – regardless of their overall medical complexity. Under PDPM, providers who treat people with greater clinical complexity will finally be compensated for that care.” All facilities have the ability to be successful under PDPM if they take the appropriate steps to prepare for it, says Hillier. Some will develop clinical programs that attract more medically complex patients, since reimbursement will be available to properly care for them, she says.

February 2019 | The Journal of Healthcare Contracting


The first step for SNFs is to evaluate the need in their specific market for such programs, she says. They could start by identifying patients whom hospitals are having difficulty placing, given their medical complexity. Then they should focus on what they need to do to accommodate such residents. In some cases, that may mean making physical changes to the facility, or acquiring

additional capital equipment, she says. Just as important, it may call for upgrading the clinical skills of the nursing staff. “You have to make your clinical team comfortable and confident that they have the ability to provide that type of care. “Providers and their suppliers should educate themselves about the new payment system and understand the new incentives contained within. I encourage strategic planning to identify opportunities to provide skilled care in a way that is more patient-centered and will achieve better outcomes with higher customer satisfaction.”

Therapy hours don’t add up

Study shows SNF patients near death receive more hours of therapy Nursing home residents are increasingly spending time in rehabilitation treatment during the last days of their lives, a University of Rochester study shows, according to an Oct. 9 Bloomberg report. The proportion of nursing home residents who received “ultrahigh intensity” rehabilitation increased by 65 percent between October 2012 and April 2016, according to research published in October. Medicare defines “very high” therapy as almost nine hours per week, and “ultrahigh” therapy as more than 12 hours per week. Some residents were found to be treated with the highest concentration of rehabilitation during their last week of life. The study analyzed data from 647 New York-based nursing home facilities and 55,691 long-stay decedent residents, with a specific focus on those who received very high to ultrahigh rehabilitation services – including physical, occupational and speech therapy –during the last 30 days of their life.

“There’s a possibility that nursing homes know a patient is approaching end of life, but the financial pressures are so high that they use these treatments so they can maximize revenue,” Helena Temkin-Greener, the lead author of the study and a professor at the University of Rochester Medical Center Department of Public Health Sciences, was quoted as saying. Alternatively, “if it’s being driven by a failure to recognize that a resident is approaching end-of-life, then it calls for improving the skills of nursing home teams.” Medicare’s existing reimbursement method rewards SNFs that maximize the number of hours they spend providing physical therapy, occupational therapy or speech/ language pathology therapy. A new payment system, called the Patient-Driven Payment Model, to become effective Oct. 1, 2019, more therapy hours won’t add up to more reimbursement dollars.

Some residents were found to be treated with the highest concentration of rehabilitation during their last week of life.

The Journal of Healthcare Contracting | February 2019

45


By Elizabeth Hilla, HIDA

HIDA PRIME VENDOR:

Getting the Most from Your Most Important Supplier

Ask Your Distributor for Help Meeting Your Savings Targets Predictions for 2019 are all over the news, and it’s no surprise that healthcare providers are expected to be under continued pressure to reduce costs. As you look for ways to reduce your total supply chain spend, one of the questions you may hear is, “Why don’t we just buy direct from manufacturers and save on distribution fees?” You probably already know the answer to that: distribution services represent real value in your supply chain, and duplicating their services internally would increase other costs for things like staffing, inventory, and space.

 our prime vendor has data Y on your spending history and may be able to mine that information for ideas and opportunities. So instead, include your distributor in the conversation about how to cut your total costs. Here are a few ideas that you might want to talk over with your prime vendor: • Low-unit-of-measure/just-in-time (LUM/JIT): Most distributors have programs that allow you to order in smaller quantities, often with products delivered in totes ready for delivery directly to patient care areas, rather than in cases or pallets. Talk with your distributor about whether such a program could allow you to reduce or eliminate storage areas and convert storage areas into revenue-producing space. LUM also reduces your inventory levels and therefore your carrying costs, and can reduce the risk of expired or overstock inventory. • Emergency preparedness: If you’re holding a lot of inventory in case of epidemics or other emergencies, talk with your vendor about ways to reduce this investment. For instance, having an agreement with your distributor to sequester certain items for you may allow you to have the safety stock you need without committing the storage space.

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• Standardization opportunities: Your prime vendor has data on your spending history and may be able to mine that information for ideas and opportunities. Ask for insights on what product lines could be standardized further, and what the savings opportunities might be. • Non-acute spend: Ask about ways to work together to drive contract compliance and standardization in your non-acute locations. Your vendor can also offer ideas for improving operational efficiencies, keeping in mind that most physician offices and clinics are short on both time and space. • Construction or expansion projects: If you’re planning to open new facilities or expand existing ones, bring your vendor into the conversation early. Some distributors have particular expertise in planning for projects like these and can ensure that the equipment and supplies you need are ready to install the moment the paint is dry. • Patient satisfaction: While cutting costs is probably the first, second, and third item on your to-do list, keeping those HCAHPS scores up is also critical. Talk with your prime vendor about products and services that can help. For example, your distributor might recommend lab tests that deliver fast results and eliminate waiting time, products that increase patient comfort, or items that create a more pleasing patient care environment.

February 2019 | The Journal of Healthcare Contracting


Send all upcoming events to Graham Garrison, managing editor, at ggarrison@sharemovingmedia.com

CALENDAR AHRMM AHRMM Conference & Exhibition July 28-31, 2019 San Diego, Calif.

HealthTrust HealthTrust University Conference August 12-14, 2019 Nashville, Tenn.

Federation of American Hospitals 2019 Public Policy Conference & Business Exposition March 3-5, 2019 Marriott Wardman Park Hotel Washington, D.C.

IDN Summit Spring IDN Summit & Reverse Expo April 8-10, 2019 Omni Orlando Resort at ChampionsGate Orlando, Fla.

2020 Public Policy Conference & Business Exposition March 1-3, 2020 Marriott Wardman Park Hotel Washington, D.C.

Fall IDN Summit & Reverse Expo September 9-11, 2019 JW Marriott Desert Ridge Resort and Spa Phoenix, Ariz.

GHX Supply Chain Summit April 29 – May 1, 2019 JW Marriott San Antonio Hill Country Resort & Spa

Intalere Elevate 2019 May 13-16, 2019 Gaylord Rockies Denver, Colo.

Health Connect Partners Spring ’19 Hospital Supply Chain Conference April 29 - May 1, 2019 Miami, Fla.

Premier Breakthroughs Conference & Exhibition June 18-21, 2019 Nashville, Tenn.

Fall ’19 Hospital Supply Chain Conference September 23-25, 2019 Kansas City, Mo.

Health Industry Distributors Associations Health Systems Channel Strategies Conference January 29-30, 2019 Biltmore Coral Gables, Fla.

The Journal of Healthcare Contracting | February 2019

Share Moving Media IDN Insights East May 16-17, 2019 Nashville, Tenn. National Accounts Summit November 14-15, 2019 Atlanta, Ga.

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NEWS

Got someone in mind?

We’ll bet that in the past 24 hours, you have interacted with a supply chain professional in a hospital, health system or non-acute site who is outstanding in what they do. While you’re thinking of that person, send us their name and a few words about why the Journal of Healthcare Contracting should recognize them in one of these 2019 features: • Ten People to Watch in Healthcare Contracting (for supply chain execs with accomplishments to share). • Future Leaders in Supply Chain (for up-and-comers). • Women Leaders in Supply Chain. Email JHC Editor Mark Thill at mthill@sharemovingmedia.com, with subject line “Someone worth recognizing.” We’ll be back in touch later in the year with a request for a more formal nomination.

Capstone Health Alliance announces launch of new subsidiary: Capstone Solutions Inc Capstone Health Alliance (Asheville, NC) announced the launch of its subsidiary company, Capstone Solutions Inc (CSI). CSI will provide business and industry customers with new and creative savings opportunities through partnerships with industry-leading suppliers. CSI’s focus to “Do More. Learn More. Save More.” will empower businesses of all industries through e-Learning Solutions, Health Plan savings opportunities and training programs with world class leaders, the company said. Visit www.capstonesi.com for more information. Cooperative Services of Florida and Vizient form a Strategic Partnership Vizient (Irving, TX) and Cooperative Services of Florida (CSF) have signed a strategic membership agreement. Vizient will serve as the preferred national GPO and strategic cost management partner for CSF and its member health systems. The agreement also includes an aggregation group development strategy and all analytics modules within the Vizient Savings Actualyzer platform. Cooperative Services of Florida represents four health systems in Florida including Lee Health, the largest and only

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community-owned healthcare system in SW Florida; Sarasota Memorial, an 819 bed hospital; Central Florida Health, which Leesburg Regional Medical Center, the Villages Regional Hospital, and Leesburg Rehabilitation Hospital; and Jupiter Medical Center.

Intalere hires new SVP of sales Intalere (St. Louis, MO) hired Julia McAllister as SVP of sales. In her new role, McAllister will provide executive leadership, strategic direction and administration to the sales teams and business partners of Intalere with a focus on strategic business development and growth. She previously was VP, payment management solutions for Change Healthcare. ONC advisory group cancels January meeting amid government shutdown The federal Health IT Advisory Committee has canceled its January meeting due to the government shutdown. The 25-member committee was created under the 21st Century Cures Act, which former President Barack Obama signed into law December 2016. The committee of experts is appointed by Congressional leaders, the HHS secretary, and the comptroller general

February 2019 | The Journal of Healthcare Contracting


of the Government Accountability Office and works to provide policy recommendations to the ONC related to interoperable health IT infrastructure. The cancelation may create challenges for the committee's task forces, such as its interoperability standards and annual report groups, which are scheduled to finish work around this time.

CDC: The flu has sickened over 6 million this season The flu has sickened 6-7 million people in the U.S. during the 2018-19 season. And according to the most recent report from the CDC, 69,000 to 84,000 people have been hospitalized because of the flu. The CDC estimated there have been about 2.9 million to 3.5 million flu-related medical visits this season. These preliminary figures do not include estimates of flu-related deaths, which officials will provide when there is enough data to support a more precise estimate. For the first time during a flu season, CDC officials are providing estimates of how many people have gotten sick, sought care, or been hospitalized to highlight the risks of flu complications and encourage people to get vaccinated. Previously, the CDC provided these estimates at the end of flu season. CVS to acquire Ritzman Pharmacy CVS plans to acquire 20-store pharmacy chain Ritzman Pharmacy (Medina, OH), and will close all but three stores. Ritzman stores in Akron and Berlin will continue operations but under the CVS name. The chain will also end its participation in a pharmacy at Northeast Ohio Medical University. Financial details regarding the deal were not disclosed. VA appoints permanent CIO after 2-year vacancy The Senate confirmed James Gfrerer as CIO and assistant secretary of IT at the U.S. Department of Veterans Affairs January 3. Gfrerer is the first permanent CIO at the VA since the start of the Trump administration, ending a nearly two-year-long vacancy. In this role, Gfrerer will oversee the agency's EHR modernization project to ensure its system is interoperable with the Department of Defense. Since 2015, Gfrerer has been an executive

The Journal of Healthcare Contracting | February 2019

director at Ernst & Young. Politico notes that Gfrerer has no prior experience in healthcare.

CHI to sell health plan to Centene Catholic Health Initiatives (CHI) (Englewood, CO) agreed to sell its health plan to Centene Corp. CHI said in June 2016 that it planned to exit the health insurance business and spin off its insurance subsidiary QualChoice Health. The companies have entered into a definitive agreement on the sale but will remain independent until Arkansas Insurance Commissioner Allen Kerr finalizes and approves the deal. QualChoice is Arkansas’ third-largest health plan. Financial terms of the deal were not disclosed. Indian River Medical Center, Martin Health System join Cleveland Clinic Cleveland Clinic, Indian River Medical Center, and Martin Health System officials announced that Indian River Medical Center (IRMC) and Martin Health System are now part of the Cleveland Clinic health system, effective January 1, 2019. Moving forward, IRMC and Martin Health will continue all current operations, services and programs and patients will continue to see their same physicians and providers. All procedures and outpatient appointments will proceed as scheduled. NYC launches first city-led nurse residency program in the US New York City launched the Citywide Nurse Residency program, the first of its kind in the country. There will be 24 hospitals participating in the year-long program, which aims to improve the transition to the workplace for newly graduated nurses. It is being offered by NYC in collaboration with the Greater New York Hospital Association, NYU Langone Health, and New York-Presbyterian Hospital. The organizations will help the participating hospitals implement the program. Via the program, 500 nurses will gain specialized, on-the-job training focused on ethics, decision making, clinical leadership as well as incorporating research-based evidence into practice. The curriculum will be developed by Vizient/American Association of Colleges of Nursing.

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OBSERVATION DECK

The Talent Pipeline

As healthcare systems incorporate more acute-care and non-acute facilities – maybe a consolidated service center, too – supply chain departments spread out. Call it sprawl.

Mark Thill

Question: How do you keep your people motivated if they work in a facility that’s 15, 50 or 100 miles away from the corporate office? How do you know which of them have the talent and desire to grow professionally? How do you nurture their professional development? It’s a point that Dennis Mullins of IU Health, whom we feature in this month’s magazine, brings up. A talent gap exists between facility operations and corporate operations, says Mullins. “I’m passionate about my career, and I love helping those around me who have the ambition to grow their careers. I feel strongly that if they are not able to gain experience on both sides, we run the risk of having future leaders making strategic business decisions without the perspective to maximize patient care.” The other risk is losing good people who, had they been – Dennis Mullins, IU Health nurtured properly, could offer you a pool of loyal, talented and experienced prospects for future management positions. In sports, they talk about farm systems or feeder systems. What they’re talking about is an organized way of spotting talent and developing it. Have you developed a farm system at your health system?

“I’m passionate about my career, and I love helping those around me who have the ambition to grow their careers.”

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February 2019 | The Journal of Healthcare Contracting


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