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The Impact of Supply Chain Transformation in Health Systems Case Study: Alberta Health Services, Canada Dr. Anne Snowdon RN, BScN, Mc, PhD, FAAN Chair, World Health Innovation Network Scientific Director & CEO, Supply Chain Advancement Network in Health Odette School of Business University of Windsor

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Table of Contents Introduction and Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Alberta Leadership Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 AHS Supply Chain Implementation Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1. Implementation of ERP Infrastructure Across the Province . . . . . . . . . . . . . . . . . 10 2. Price Harmonization and a New (Centralized) Procurement . . . . . . . . . . . . . . . . 13 3. Province-wide Item Master and Data Infrastructure . . . . . . . . . . . . . . . . . . . . . . . 15 4. Centralized Warehouse Strategy for the Province . . . . . . . . . . . . . . . . . . . . . . . . 20 Clinician Engagement Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 1. Engagement of Clinicians in Product Standardization and Sourcing Decisions . . 26 2. Clinician-Engaged Budget Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 3. Relationship Management and Physician Engagement . . . . . . . . . . . . . . . . . . . . 30 Patient Safety Adverse Event Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Integration of Supply Chain and Clinical Information Infrastructure . . . . . . . . . . . . . . . 38 Return on Investment (ROI) and Impact of the AHS Supply Chain Strategy . . . . . . . . 40 1. Cardiology Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 2. Pharmacy Program Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Summary and Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 1. Leadership Strategy: Centralized and Self-Funded . . . . . . . . . . . . . . . . . . . . . . . 50 2. Supply Chain Integration Across the Provincial System . . . . . . . . . . . . . . . . . . . . 52 3. Return on Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Contributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

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Introduction and Background This case study is one of a series titled The Evidence of Impact of Supply Chain Innovation in Global Health Systems. The purpose of these case studies is to examine real-world evidence of impact and value of supply chain transformation in health systems, designed to achieve improved health system outcomes such as safety, quality and performance. Little is known, or has been documented, of how supply chain transformation has been implemented in global health systems, the return on investment of these initiatives or the evidence of impact achieved relative to health system performance. The following case examines the supply chain strategy for Alberta Health Services (AHS), Canada’s first and largest province-wide, fully integrated health system, responsible for delivering health services to 4.286 million people living in Alberta (1), as well as some residents of Saskatchewan, British Columbia and the Northwest Territories. Alberta Health Services (AHS) has over 108,000 employees, approximately 99,900 direct AHS employees and 9,300 physicians practising in Alberta (2). This case provides an overview of the progress and impact of the Alberta Health Services supply chain strategy, the leadership approaches, and the outcomes and impacts that supply chain has had in advancing the performance of the AHS. The World Health Innovation Network (WIN) has been conducting research in health system supply chain and has been successful in establishing a global network of collaboration—SCAN Health—to disseminate and share knowledge and expertise relative to the implementation of supply chain strategy at the health system level. The five countries participating in the SCAN Health network include Canada, the United States, Australia, the United Kingdom and the Netherlands. The goal of SCAN Health is to mobilize knowledge and evidence of impact across global jurisdictions to advance progress of supply chain transformation in health systems. These case study findings have emerged from qualitative analyses of observations, public reports, online publications and key informant interviews of stakeholders across the AHS and industry. All data excerpts cited in the case include combinations of informant responses in order to protect anonymity and confidentiality of participant responses.

Alberta Leadership Strategy The Alberta health system offers a unique opportunity to examine the strategy of supply chain transformation in a Canadian health system, as the only jurisdiction with a province-wide governance model in Canada. The case study examines the implementation of a system-level supply chain strategy, which aligned closely with the consolidation of Alberta Health Services across the province, designed to advance quality, safety and sustainability of Alberta’s healthcare system. The case begins with the Alberta government’s decision to consolidate all regions of the health system into a single governance structure. In 2008, the health regions across Alberta were integrated into one publicly funded health system across the province, Alberta Health Services (AHS). A corporate entity with a board of directors and CEO, AHS is funded by Alberta Health to deliver health

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services across the province, under the direction of the Minister of Health. The goal of the consolidation is described by the Premier and the Minister of Health: This new governance model will clarify the roles and responsibilities that will help make Alberta’s publicly funded healthcare system more effective and efficient. Today’s announcement is about a governance change to move to a 21st-century healthcare system. I want to assure Albertans that quality patient care will continue to be delivered throughout the province. Our goal is to create a high-quality and innovative system that provides equitable access to health services and long-term sustainability. (Premier Ed Stelmach, 2008) The first priority in our health action plan is to improve the way health care is administered in this province. Moving to one provincial governance board will ensure a more streamlined system for patients and health professionals across the province. I want to thank all past board members for their dedicated service to Albertans. We will build on their achievements and lessons learned during their governance experience. (Ron Liepert, Minister of Health and Wellness) (3) The leadership vision of these political leaders for the consolidation of all health services under a single entity was to achieve a more effective, streamlined health system for patients and health professionals that supports innovative, high-quality care that is accessible to all Albertans across the province (4). The strategic plan for the new organization identified the following goals and objectives: • • •

strengthen quality (i.e., healthcare services are safe, effective and patientfocused); improve and ensure equitable access to appropriate healthcare services when and where they are needed; and sustainability of healthcare services to ensure that healthcare is and will be available now and in the future. (5)

In Canadian health systems, provincial governments set the priorities, policy frameworks and mandate for health systems. The provincial Ministry of Health funds the new corporate entity, Alberta Health Services (AHS), to operationalize the ministry’s mandate to deliver health services. To advance the consolidation decision, hospital boards were consolidated and regional systems were transitioned into a single, provincial board intended to improve coordination of services delivery and achieve financial savings. At the time, the CEO leading the consolidation of the Alberta health system had the goal of making Alberta a global health leader, advancing the province from being the biggest health system in Canada, to the best system in Canada (6). The CEO of AHS determined that if the system was to achieve full integration to better serve patients and Alberta families, it would require a single corporate entity. The consolidation strategy engaged a number of consultant teams to examine the

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opportunities for province-wide consolidation of the health system. One report from McKinsey & Company identified a transformational supply chain opportunity as a “quick win” for the new integrated health system structure, focused on streamlining and providing services identified as a great opportunity for financial gains. According to an AHS leader: When the consolidation was occurring, the government, through its engagement with McKinsey, identified procurement and supply chain as an area of opportunity for quick wins in achieving cost savings. Another consultant’s report mapped out an implementation pathway that demonstrated an integrated and consolidated system infrastructure, while yet another report identified the substantial savings that could be achieved as an outcome of the integration of a health regions strategy. Figure 1 illustrates the CEO’s vision (2008) of enabling one health system. Figure 1. Vision for Alberta’s integrated healthcare system

One of the tools identified to enable and support a high-performing system was the consolidation of all support services centrally, including finance, information technology, data integration and management, capital management, contracting and procurement services, all embedded in this vision of “one health service.” An additional feature of the political strategy to create one health system was the focus on quality and safety, a key priority. The HQCA was established to address quality and safety priorities that emerged in 2004, when a particularly devastating number of adverse events underscored the need for a renewed focus on the quality and safety of Alberta’s health system. Sentinel safety events (e.g., the incorrect dose of potassium in

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dialysate that resulted in patient deaths) were a catalyst for policy-makers in Alberta to establish the six dimensions of quality, which became a key driver for all stakeholders in AHS. The supply chain transformation strategy was envisioned as supporting every department, division and clinical team to enable and support the achievement of these six dimensions of quality and safety across the province, later described in empirical literature (7). Figure 2. Six dimensions of quality (Health Quality Council of Alberta)

The AHS provincial governance structure provided a unique organizational platform to make system-level changes to the healthcare supply chain system. The transition towards a patient-focused strategy required a strong vision, as well as skilled leadership in navigating political relationships to drive the strategy forward. An external stakeholder described the leadership skills needed for the AHS strategy: The other thing you have—and I think this is what you see throughout any system that has made significant progress with supply chain—is they have a leader who is at the political side internally, has the skills to maneuver through their organization and make something like this happen. The Contracting, Procurement and Supply Management (CPSM) leadership team was the team responsible for leading the “Enabling One System” dimension of the strategy. The CPSM team envisioned supply chain as a key strategy that, when integrated into the healthcare system, could enable better quality of care and safety for patients while at the same time reducing system costs. In order for the CPSM team to execute their vision, their work had to closely align with the AHS leadership strategy to create one provincial health system. The AHS leadership team mapped out the infrastructure that

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would be required to transform Alberta’s regionalized health system into an integrated provincial system by consolidating the corporate services as quickly as possible. The CPSM team is responsible for procurement, supply distribution, transportation, logistics, sourcing and contracting, as illustrated in Figure 3.

# 5 - Enabling One Health Figure 3.TIP Consolidation of corporate servicesSystem for AHS TIP 5 (Corporate Services) is the basis for other TIPS and needs to be completed as quickly as possible. SCOPE Finance HR/Payroll Legal/Policy IT Procurement Communications Common Platforms Capital Management

THE BIG THREE Finance HR/Payroll Procurement *Represents the majority of expenditure required for visibility, control, accountability

THE TRANSFORMATIONAL THREE ADDR (Data Repository) ICCR (Interactive Continuity of Care Record) OCS (Organization Communication and Collaboration System)


Given the number of consultant reports that identified supply chain as a “quick win” and as a significant opportunity to save costs in an expensive healthcare system, both government and healthcare leaders were motivated to pursue this strategy. Although cost was the initial driver, patient safety remained a consideration informed by the Health Quality Council of Alberta (HQCA), as well as ensuring a clear focus on advancing the strategy: I think the initial driver was savings, but patient safety had always been a big part of how supply chain was managed in Alberta. When I first joined … , one of the key things I did was make sure that not only did we keep the clinical resources we had, but that we were able to increase the number of clinical resources within the department, because you can’t always depend entirely on the end users to help us with understanding clinical supply chain issues. To advance the supply chain system strategy, the CPSM team identified three main goals: (1) integrate clinical resources, (2) create data integrity and analytics and (3) ensure product quality and safety, as described by one supply chain leader: When we became a single organization and were merging, consolidating and finding savings from all different areas, including the old structure, there were a few things we were not planning on eliminating. One was our clinical resources, two was our data integrity team and three was the product quality and safety group, because those three areas were viewed as foundational to the success of the transformation.

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The vision of a future supply chain system was to achieve these three strategic goals with the central focus on quality, which also reduced costs while creating better patient outcomes with greater clinical buy-in (Figure 4). Figure 4. CPSM strategic goals Clinical resources integration Data integrity and analytics Product quality and safety

Stakeholders identified the possibility of a more patient-focused supply chain strategy that embraced the six dimensions of quality. According to the Institute of Medicine (IOM), the six domains of healthcare quality include six goals for any healthcare system: safety, effectiveness, patient-centredness, timeliness, efficiency and equitability (8). The goal was not only to increase value from the supply chain system, but to leverage supply chain processes to advance each domain of healthcare quality outcomes at the system level: At a high level, what we have done over the last few years is to view Alberta Health Service supply chain from a very clinical perspective. … So what we did is reframe supply chain … from a patient and quality perspective. Our focus has been on taking the six dimensions of quality and then asking how each one of those dimensions applies to procurement. The supply chain strategy was anchored by the quality criteria of “acceptability”— meaning that the services, products, quality and safety be at an acceptable standard. By linking quality of service to supply chain infrastructure and processes, leaders began to understand how supply chain processes could support and strengthen system outcomes. This approach is described by a supply chain leader: First you can look at acceptability of the services that you’re providing; acceptability of the products that you deliver; acceptability of the quality of products that you deliver; acceptability of the product quality and safety framework that we put in place. So it basically becomes very, very dependent on the services [of the CPSM team]. Prior to that, even though people like [name] provide information back to [quality and health improvement], … there wasn’t that recognition that this was a supply chain area that was providing good service. So, once you started providing all of

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those linkages, it resulted in us actually getting that recognition that whatever we are delivering from a product standpoint, we are actually feeding it into the quality of care for the patient. The CPSM team had a clear vision for how supply chain strategies could advance the AHS leadership agenda of strengthening quality and safety of patient care. The challenge the team faced was to build recognition of the value that supply chain and procurement strategies could achieve among patient care and program teams across the provincial system. Since 2008, Alberta Health Services has continued to grow after the consolidation of all health services across the province under a single governance model. AHS has a current budget of $21.4 billion, out of the total provincial budget of $54.859 billion. Health represents 39 percent of the total provincial budget expenditure (9), and Alberta health expenditures per citizen are the highest of the 10 provinces at $7,329/person, compared to the national average of $6,604 per person. Health expenditures in Canada continue to grow at a rate that is outpacing GDP in Canada (10). In 2008, when the decision was made to create a province-wide government structure, the Alberta economy was strong, fuelled by a robust gas and oil industry. With the economic downturn of this industry, Alberta’s economy has weakened and the political mandate is focused heavily on fiscal sustainability. The health ministry consumes the largest portion of the budget. Hence, the mandate of AHS continues to prioritize cost savings and fiscal sustainability of the system. Currently, cost savings continue to remain a strong theme embedded in the AHS supply chain strategy. Figure 5 shows a brief overview of Alberta Health expenditures. Figure 5. Alberta Health expenditures (9)

Alberta Health Expenditures

0.32% 1.01%



AHS Operations


Physican Compensation and Development Drugs and Supplemental Health Benefits


Primary Health Care 63.98% Addictions and Mental Health Initatives Other Health System Priorities

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AHS Supply Chain Implementation Strategy Implementation of the supply chain strategy began with a decision in 2010 to accomplish a fully consolidated finance and procurement system infrastructure across the province. The consolidation of all of the regions into a single governance structure began with combining all the health organization governance boards (i.e., boards of directors) and creating a single corporate entity, Alberta Health Services, with a CEO reporting to a board of directors. The next major step was to create the system infrastructure required to support a province-wide governance for AHS. Hence, senior AHS leadership made the decision to implement a new enterprise resource planning (ERP) system. This province-wide infrastructure project was an opportunity for the CPSM team to leverage the implementation of the ERP across the province, advancing the goals and objectives of the CPSM team’s supply chain strategy.

1. Implementation of ERP Infrastructure Across the Province The senior leadership of AHS engaged the CPSM team leaders to design the implementation strategy for the new ERP system within a period of 11 months. Standard practice for ERP implementation required a three-year time frame for effective stakeholder engagement to support adoption of changes to work flow and routines. The CPSM team considered whether it was possible to achieve this very aggressive target of consolidating all finance and procurement transactional processes in such a short time frame. The decision to proceed with implementation of the ERP system was made jointly by financial and CPSM teams, with the support of the Executive Leadership team. One key issue they recognized was the lack of timeline available for the full engagement of all stakeholders and clinical teams, which would normally be important for such a large and complex infrastructure initiative. The teams recognized the challenges, but felt the alternative—continuing to work without a province-wide ERP infrastructure—would limit their progress towards a fully integrated supply chain strategy to achieve the strategic goal of “one system” for the province. The fast-track timeline for the implementation required the team to develop a plan to ensure stakeholders would have the support they needed wherever possible, along with a risk mitigation strategy for managing the issues that would likely arise for system stakeholders. A budget of $26 million and a timeline of 11 months was approved by the CEO of AHS to proceed with implementation of the new ERP system: The reason for the 11-month timeline was they were expecting other system consolidation and implementation to be approved. Also, the other piece [was that the CEO] had actually thought this through pretty well; we needed to be able to demonstrate that we were actually merging [consolidating systems], and the best way to show that we’ve merged is to implement a financial system with a single charter of accounts, and put in

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place the procurement system and accounts payable [for a single province-wide system]. To leverage the advantages of a province-wide ERP implementation, there were three primary objectives of the supply chain strategy: data integrity, clinical resource management and product quality. The CPSM teams designed their operational planning to achieve these three objectives, including an overarching technology transformation plan to optimize supply chain services. In 2011, there were changes to the executive leadership, including the departure of the CEO, which created challenges in getting support to continue with the implementation of the ERP and supply chain strategy. As health system leaders change, so too do their priorities, which makes it challenging to sustain progress of legacy strategic initiatives. Despite this change in leadership, the CPSM team completed the implementation of the ERP system across the province. As expected, the very large-scale change to implement the integrated ERP system in a very short timeline meant that many of the sites across the province, or their teams, were not afforded the opportunity to engage in or have input into the development of standardized business processes. For example, engaging staff in creating purchasing categories would have been helpful, described by one of the CPSM team members: Because of that short timeline, every textbook would tell you not to do it this way. We didn’t spend time engaging a lot of clinicians to gather feedback on whether the thousand-some categories [of products] actually made sense and that they understood it, and our mapping [of product items or stock-keeping units] to some 300,000 items was not perfect. The rapid implementation and the changes in leadership were a challenge for teams initiating the new integrated health system structure. As the CPSM team implemented the ERP strategy across the province, the inadequate communication, limited stakeholder engagement and minimal change management strategy left many stakeholders confused and pushing back against the process. Not surprisingly, front-line workers felt that the sudden changes in ordering and procuring processes were challenging. This resulted in additional workload for clinical teams: I remember on the first couple weeks of “go live,” one of the purchasing clerks said, “I used to have a list that I charge all my supplies to, based on my budget, and now you’ve changed it. None of it makes sense anymore.” The ERP system was implemented within the required 11 months, but the speed of implementation resulted in large system challenges. Product orders were not delivered on time, supplies were not filled and clinical areas such as surgical programs suffered from limited supply chain service performance. The Oracle ERP system itself was not the main cause of the problems; rather, the lack of engagement of program teams resulted in gaps in business processes and little or no ability for staff to use the new system. For example, the new Oracle system included functions such as accounts

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payable, resulting in delayed vendor payments due to system and process challenges. The vendor community supported efforts to overcome delays in payments. The ERP strategy resulted in the procurement system being implemented province-wide to standardize all purchase orders. However, the inventory and warehouse management system was implemented only in the Calgary area, as the plan was to phase in the implementation of inventory systems across the province over time. Hence, the majority of the issues were experienced in the Calgary area. Specifically, operating rooms struggled with sustaining supplies needed for surgeries, resulting in a significant level of frustration for both nursing staff and physicians. Because surgical programs have very high visibility, leaders of the surgical program, staff and physicians requested a meeting with the CEO to discuss the issues and request that the system implementation be delayed until such time as challenges could be overcome. CPSM team members attended the meeting to hear firsthand of the challenges the surgical teams were experiencing. The outcome of the meeting resulted in significant pressure from senior leadership on the CPSM teams to resolve the issues as quickly as possible in order to restore confidence in the system. The experiences of the surgical programs demonstrated the urgency of the challenges of the new ERP infrastructure. The new executive leadership of AHS directed that the problems must be fixed, and fixed quickly, in order to proceed any further. The CPSM team worked with program teams, information technology staff and other stakeholders to resolve the issues and stabilize the system. Efforts included resolving infrastructure and system capacity issues, business process challenges and internal CPSM challenges in the warehouse. The resolution of the Calgary operating room issues required a complete review of the existing service delivery model and the implementation of a new model under the leadership of an operational leader from Calgary. The supply chain challenges experienced by the many stakeholders across the system resulted in a new appreciation and recognition of the contribution of supply chain processes in the delivery of patient care. Senior leadership were now keenly aware of the risks associated with supply chain interruption, which was identified as one of the top 10 enterprise risks for AHS. Until the crisis of the Oracle implementation, clinician teams were largely unaware of the contribution of supply chain processes to program operations in patient care settings, despite many attempts to engage these teams and build awareness. People suddenly realized that if supply chain is not functioning, the OR rooms go down, products don’t get delivered, patients don’t get cared for, procedures get cancelled—so it may be a blessing in disguise that we did this. Although initial implementation of the ERP was challenging, this provincial ERP system has since become an important platform and a key asset for the province:

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The system was stabilized in three months, and then time was spent implementing improvements over a period of nine months. In retrospect, the project was difficult and challenging, but it resulted in AHS having a single consolidated procurement system, which is now yielding benefits. The CPSM team moved forward to mobilize supply chain as a strategic enabler for the province, and make it possible for clinical programs to achieve cost savings and ensure they had the products they needed when and where they were needed. The opportunity to do this was now achievable with a consolidated “back office” ERP infrastructure to support key operations such as finance, human resources and payroll as a single health system e-commerce infrastructure across the province. The next step in the strategy focused on procurement and price harmonization.

2. Price Harmonization and a New (Centralized) Procurement This second step in Alberta’s strategy for supply chain transformation was described as getting the best price possible while managing the distribution of products across the AHS system, through direct engagement with vendors, distributors and manufacturers, described by one supply chain leader: To me, their overall strategy is to get the best price possible for the products that are being delivered to the constituency, and controlling basically all of the products that are coming in and the distribution of those products. I can see that they’re eventually looking at maybe not needing distributors per se, [but] dealing directly with the manufacturers. The CPSM team focused on managing the contracting and competitive bidding process, managing products entering the system and working with clinical teams directly to standardize products by reducing the wide variation in product selection, in order to generate savings and reduce expenditures. This standardization across the system was described by one external industry leader: To me, for example, with Alberta—knowing the individuals there and working with them over the years, their controlling the RFP process, the products that are going to be [used], the standard of care that’s going to be [utilized] in managing the clinical groups so that they can standardize … what they’re [doing], managing the funds of the province and what’s being spent on healthcare and maybe getting consistency from all levels from acute care down to home care—I’m 100% behind [that]. I think that is the right way to go. The price harmonization phase of the strategy was designed to ensure that all organizations across the province were paying the same price for the same product. When AHS was established as a corporate entity, they inherited all contracts from the former legal entities. In many cases, different contracts had different price points for the same item. The goal of the price harmonization strategy was to create a single contract with each supplier in order to ensure that AHS was paying the same price for each

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product. This harmonization process assisted with standardizing a single item master for the province and to list products only once. It also achieved savings by consolidating all contracts to achieve the lowest price point for that product. To harmonize pricing, all vendor contracts were reviewed. A data warehouse was also created to profile contracts and pricing for all former organizations across the province. As contracts were examined by the team, the lowest price among all contracts became the established contract price for the province. The CPSM team realized that AHS now had great purchasing power as a single procurement entity for the province. Vendors were informed that all contracts would be consolidated and the lowest pricing would be the provincial pricing moving forward: What we did was we pulled all the data, and that data was confusing. We wanted to demonstrate the ability to actually have informed dialogue with the physicians, but beyond that what it did was show the variation in pricing was across the province. And so our first $80 million in cost reductions came directly from this price harmonization ‌ . So the strategy at that time was more around how can we show savings, how can we show our relevance from a fiscal standpoint, and at the same time how can we carry our clinical partners with it. This pricing harmonization strategy was viewed by a supply chain leader as an important step in establishing the relevance of the CPSM team in supporting the provincial priority of reducing health system costs. The harmonization brought profile and awareness to AHS leadership for the opportunity that supply chain optimization could achieve for the province. In addition to price harmonization, a product category analysis was initiated to determine whether harmonization or a competitive bidding process would provide the greatest value. These category reviews developed and tested new methodologies for determining current product utilization patterns, reducing product variation in clinical programs, and creating a model for engagement with stakeholders from different parts of the organization. The five product categories included in the analysis were (1) pacemakers, (2) interventional cardiology, (3) pharmaceuticals, (4) food distribution and (5) diagnostic Imaging equipment, including service contracts. These product category reviews enabled the CPSM team to strengthen clinician engagement by working closely with clinician teams throughout the review of product categories. The experience of engaging clinical program teams with the CPSM team proved valuable later, as it created the foundation for engaging these same clinicians in the implementation of future projects. The clinician engagement strategy was based on providing choice for clinicians, engaging them to reduce variation in the products procured, and assessing the quality of products relevant to care needs and optimal cost to the system. Each of the five project areas mobilized the engagement of a group of clinical leaders, who guided their respective clinician colleagues in each service delivery area. This engagement strategy focused on assembling the clinicians and leaders to participate in the five teams, determining how best to work with each other as a collaborative team to resolve opposing views and come to a consensus, given that

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many of the leaders had their own ideas and views on how to improve the system. The CPSM team provided the clinician leadership group with data and information on product utilization, product demand levels, product waste and cost for each specific clinical program area. Dialogue with clinician teams focused on the range (i.e., number of distinct products by category type) and utilization of products in each program area. The goal was to reduce variation in the products procured for each program, while at the same time engaging clinician teams to support clinician choice in deciding which products offered the best value in meeting patient needs, finding cost savings and supporting clinician preference. The overall results of these initiatives demonstrated that the engagement strategy was successful. Clinicians, though hesitant at first, fully participated and made decisions that resulted in meeting all of the objectives: reducing variation, reducing costs and achieving lower pricing on product categories reviewed.

3. Province-wide Item Master and Data Infrastructure A master item list provides a comprehensive index of product information, including vendor information and contract pricing. As AHS was established, the item master product list was consolidated with item-level data from all of the programs in the province. At the outset, the consolidated list of products contained over 300,000 items, with duplications and repeated product numbers and catalogue numbers for the same product. The consolidation of over 30 item inventories required cleaning and removal of duplicate items with varied product or catalogue numbers from the legacy systems. In order to meet the short timelines for ERP implementation, all of the item masters from all of the legacy systems were amalgamated into a single item master, which resulted in the same product (or item) being listed multiple times. The team anticipated duplication, and had developed a plan to standardize the item master once the ERP implementation was completed. In addition, many of these duplicate items remained on a valid contract left over from one or more of the former legacy organizations. The CPSM strategy was to first complete the price harmonization process, which would then make standardizing the item master more manageable. Each item in the item master was assigned a unique item number, generated from the ERP system, with plans in the future to adopt GS1 standards to identify products using the global trade identification number (GTIN) and other product attributes, obtained from manufacturers through the Global Data Synchronization Network (GDSN). This initial, non-standardized item master with all of its duplicate items was a necessary, but challenging requirement, to support the “fast track� implementation of the Oracle system. The very high prevalence of duplicate item identification for the same products underscored the value of unique device identification (UDI) to accurately and uniquely identify every item used in the system. At the time (2011), the adoption of GS1 standards in healthcare was not well developed. The process of cleansing the item master to ensure accuracy and uniqueness in product identification for each item was undertaken using a manual review process. The review process required line-by-line

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review of items to compare the manufacturer/supplier number and item descriptions, in order to identify and remove duplicates. The initial item master of 300,000 items was consolidated into 100,000 uniquely identified products, which were then grouped and organized into functional purchasing categories. The decision was made to adopt the United Nations Standard Products and Services Code (UNSPSC) defined categories, which were modified to meet the needs of the AHS system. Categorization of the items into functional groupings (e.g., pharmacy) was designed to make product ordering and reporting on product inventories much more structured. Work on the item master and categorization of functional categories was further strengthened by undertaking a comprehensive review of the nomenclature and category definitions in partnership with the program areas and clinical teams. The primary goal of this review was to ensure accuracy of item identification in the item master, to make using it very easy for stakeholder teams across the system. Throughout the implementation of the ERP infrastructure, there was a clear understanding of the value of accurate product item information to achieve a number of goals, such as enabling traceability of products in the event of a recall, and accurately quantifying costs and savings across the province. Towards this end, GS1 standards were adopted as best practice for AHS to support the foundation for the data standardization strategy. Global standards enable accurate product identification and product information (e.g., attributes such a latex content, sterile) that must be very accurate to support patient safety. Adoption of global standards is known to be a lengthy process; it would require a significant time commitment to work with industry partners, and for a certified data pool provider to obtain accurate product data. Unlike other jurisdictions such as the United States and the European Union, Canada has no policy frameworks or legislation that require suppliers or manufacturers to adopt global standards for product identification. Hence, suppliers must partner with health system teams to create the processes and define the type of product data that is provided to the health system. In order to secure agreement from industry, health systems must demonstrate the capacity for using global standards for all transactions with suppliers, from purchase, to payment, to distribution to clinical programs. Thus, the next step required for the supply chain strategy was to build capacity across Alberta for efficiently and effectively utilizing GTINs (i.e., the product item based on global standards) for all transactions with suppliers. In order for suppliers to flow product data and information to AHS, a certified data pool provider was needed to enable the flow of data from suppliers to the AHS supply chain infrastructure. Data pool providers offer a “portal” type of infrastructure that essentially uploads product data from suppliers, and transmits the data to health systems in a secure process that ensures all manufacturers and suppliers own and maintain the accuracy of the product data. The CPSM team reviewed all data pool providers and selected GHX, partially influenced by Alberta’s existing investments in GHX’s products and technology, including EDI processing of purchase orders and invoice payments. The absence of a regulatory framework in Canada requiring vendors to publish product data using global standards meant that industry partners would have to be willing to partner with the AHS team to create a strategy for sharing data. Six industry partners

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and an industry association agreed to join with the AHS to initiate the data standards project. There was a three-way relationship with Alberta Health, GHX and then all these manufacturers. There was a whole separate group that were having regular calls, planning and talking about how this was going to be communicated to the market, what the requirements were, how each company needed to do certain things the same way. So there was a lot of work on the part of each company internally to deliver the objectives. The initial objective was to take a certain number of products, [assign] the appropriate UDIs on them and be able to run it all the way through the operative system and have all the appropriate information communicated between the manufacturer and the data pool provider, GHX. To begin, the partners needed to reach an agreement with the CPSM teams on the specific product attributes that AHS required and that vendors could, or were able to, provide. Once the product attributes were identified, vendors agreed to publish product data through GHX, which would then flow product information into the AHS supply chain data system. At the time of this case study, the project work with industry partners was continuing and was making progress. The data standards work will be a key asset for the AHS to introduce point of care scanning of products used during care delivery. The next major step in the strategy is the integration of supply chain data infrastructure with the clinical information system (CIS) to link product information to clinical teams. This will enable tracking of products, patients and care processes to support patient safety. In 2019, AHS plans to implement its CIS across the province, presenting an important opportunity for the CPSM team to integrate or link supply chain processes (e.g., tracking and traceability of products identified with global standards) with the CIS to identify products used during care procedures. Once supply chain data and infrastructure are integrated into clinical information systems, then tracking and traceability of products, patients and processes of care, linked to patient outcomes, are enabled across the province: Because we’d chosen a technology standard and that’s the GDSN, and they have a series of rules. [Suppliers have] got to provide us with an item number, a unit of measure; we must have mandatory information. But we, in partnership with these other vendors, have said, “Here’s some other things that we want.” We ask for some clinical fields, [such as] the latex content. … And drug interactions is one of the big things. … And if we start looking at … feeding that information from our item master into these clinical information systems, where we look at allergens like latex content, that can … feed that closed loop of patient safety based on the [product] information that comes out of the supply chain system.

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The CPSM team made a key decision to work with its partner vendors to upload their entire product catalogue with the appropriate data attributes required for the system. The alternative approach was to build in data standards requirements into every RFP and procurement contract. However, the view of the team was that this was a painstaking process to acquire product attribute information, one product type at a time, when contracts were due to be procured. The engagement of vendors to acquire entire product catalogues offered a much more efficient strategy for adopting data standards in Alberta. Data integrity is a key requirement if a supply chain strategy is to be effective. Accurate product data must include the correct attributes (e.g., serial numbers, lot numbers, expiry dates) and product attribute information. Having the correct product attributes is integral to patient safety, by identifying product characteristics that could endanger patients. The CPSM is spending significant time prioritizing data accuracy and ensuring that it is accurate before uploading it into the system. In Canada, the absence of a regulatory framework that requires vendors to use global standard barcodes for product identification and traceability has meant there is a high degree of variability in product identification and barcode labeling of products used in health systems. Hence, health systems are unable to identify specific products used in care processes, and no ability to automate recall of products to support patient safety. The Alberta CPSM team is working with vendors to correct product identification data and upload the product data into their master item inventory. Working with vendors to get the accurate UDI data on every product will eventually enable Alberta to track and trace products from manufacturer to individual patients at the point of care. Once these products have been accurately uploaded into the system for this first group of suppliers, the CPSM team plans to engage the next 20 to 25 vendors or suppliers to upload product catalogues into the Provincial Item Registry, so that adoption of global product identification standards for all or most products used in Alberta can support a fully integrated and strategic supply chain infrastructure in Alberta, as described by a supply chain leader: I think the critical mass, probably 20, 25 vendors, is what we’re finding right now, but we’re also at the same time phasing the project. So we now have agreement from the group that sometime in September, we’re going to have an in-person meeting, and during the in-person meeting we’re going to look at our success so far, and we’ll invite the next batch of vendors. The provincial item master has many functions and applications beyond traceability of products to patient outcomes. It is used for inventory management, warehousing and clinical procurement teams. This item master is the provincial item catalogue that is utilized by all stakeholders or teams to order supplies. Having a large, accurate data infrastructure is critical for clinical programs to know what products have been procured, when, and for what clinical programs, to evaluate product utilization and enable clinicians to examine which products achieve the best outcomes for patients. The fully integrated supply chain strategy will eventually link the product item master data to the

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patient record (EHR) to enable the complete tracking and traceability of products from manufacturer to the patient. Ultimately, tracking and traceability enable identification of patient outcomes related to products and care processes, as well as automated inventory replenishment to guard against stock-outs, and automated recall of products to notify individual patients of potential risk due to recall. A fully integrated item master, with accurate product data, linked to care processes and patient outcomes, also serves to inform value-based procurement decisions for future contracts and RFPs. This is discussed by a supply chain leader: The other thing that they are building is they are also saying, “Okay, once you get here, then there’s a whole massive repository because you also want to be able to collect all this data to do retrospective studies.” So this way, I could actually then go back and do value-based procurement and say, “[Company name], I used 100 of your pacemakers; you told me you were going to allow 80.” Alberta may be the first jurisdiction in Canada who will have a complete UDI-enabled product item master—a key enabler for a fully integrated supply chain infrastructure for health systems. Despite the significant time and resources required to work with vendors to ensure product data is accurate and barcodes scan consistently, accurate product information using UDI barcodes is a key enabler to achieve a strategic supply chain strategy for health systems. Currently, the team continues to work with industry partners from the medical devices sector to establish data standards and accuracy of product data flowing from the data pool into the ERP supply chain information system. In future, the plan is to adopt the GS1 standards for all pharmaceutical and food products. Eventually, when this work is completed, the product Item registry will be the single “source of truth” for identifying all product items and product attributes across the province. The single item master will also serve as a repository of product information that flows into the ERP and CIS systems to build the critical link between supply chain and clinical information that documents and supports patient care. As the demand for unique (UDI) product data grows over time across global health systems, manufacturers are working towards meeting the data standards and product attribute data being requested by health systems. The work with vendors will continue to ensure that every product ordered has a global standard barcode so that it can be uniquely identified at the point of care with the simple scan of the barcode. To date, not all vendors have fully adopted global standards in Canada. The CPSM team is working with vendors to ensure that accurate product data is uploaded into a product registry which will then be used to create the product catalogue item master in Oracle. Equipment is not currently tracked using barcoding standards such as GLNs. Currently, the clinical engineering groups have databases that are tracking equipment using serial numbers. The database only tracks equipment that is supported by the clinical engineering system, leaving out areas where third-party contracts are used for maintenance. The CPSM team is creating an equipment committee to develop a

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strategy for managing equipment inventory across the province, including all medical device equipment, to support the management of upgrades and replenishment by the CPSM team.

4. Centralized Warehouse Strategy for the Province A fourth strategy in consolidating the Alberta supply chain strategy was a warehouse and distribution strategy to offer AHS control over the movement of products and goods across the province. Alberta leaders identified warehousing as one of the key strategies to advance their supply chain, creating a province-wide system to stock and distribute supplies to all sites across the province. The centralized warehouse and distribution strategy offers the advantage of greater visibility of products, reduced duplication and reduced surplus that contributes to waste. The objective of health systems managing their own warehouse and distribution strategies is described by one industry leader: The theory [of inventory management] and the reality in many cases [involves] putting [everything] in a central inventory location [so that] you can pull duplicate inventory out of all of your forward sites. Think about … six hospitals, all having half a million dollars of a particular product on their shelves because they need it and they want to be able to access it quickly. You can pull that $3 million of inventory back into a central location and you only need to carry $1 million worth there because of the way the inventory [gets replenished] and your ability to manage it. So inventory management would be a big [consideration]. Also, [it improves] the ability to better plan your shipment movement and transportation of products. A lot of these hospitals are very challenged with receiving docks, how much time they have to get products in and how much they store on site. So just the ability to make that whole process more efficient can be very significant. I would say that’s certainly [true] for Mercy and St. Louis [hospitals], one of their primary objectives. You also then have the ability to have more expertise in a warehouse versus all of these individual hospitals [sites]. So you’ve got somebody running a warehouse who has higher-level skills as well as product management, safety, quality, transportation—all of those things in a supply chain. It also gives [the supply chain lead] an opportunity to negotiate pricing differently with distributors. So [company name], for example, now would be, in theory, delivering to a single site, a single warehouse, versus [delivering products] to three hospitals. It doesn’t always work out that way because you end up delivering to the hospitals as well as to the distribution center. The underlying advantage of a health system warehouse strategy is the consolidation of expertise in warehouse and distribution in a smaller number of sites than all hospital receiving departments. Another is the opportunity to carry less inventory, which can reduce health system costs. Alberta uses a zone leadership warehouse management strategy for distribution of inventory. Executive directors working in each zone (region) are responsible for delivering services within their zone and working with supply

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management, equipment and sourcing teams to ensure that services and products are delivered efficiently and effectively to programs: [With zone operations] I have embedded staff and management under zone leadership, and … the executives and executive directors across the zone are responsible for delivering services or working with our centre of excellence (COE), like the equipment and the sourcing teams, the provincial teams, to either deliver services or work with them to ensure that their services are delivered and are the enabler for all of the provincial teams. … Right now we’re up to about 426 sites [across the province] that we support. So we’ve serviced, including provisions of supplies to site management, to warehouse, local engagement, transportation, business continuity and a whole bunch of them. Zone leadership allows for centralization of warehouse and distribution processes while engaging local teams, who have the necessary knowledge of the organization’s local needs. The provincial warehouse strategy is described as making products more “visible,” so that supply chain managers and end users at any given time of day can quickly identify which products are available and where they are located in the warehouse system. The other advantage of the strategy is the standardized master product data list, which will eventually enable all employees to use the same terms and product descriptions, to ensure that procurement and product inventory are managed with greater accuracy across the province. The CPSM team continues to work towards standardization of all product descriptions for all inventories. However, to date progress has focused on the centralized item master. The team has not yet engaged every individual organization in each zone to standardize all item descriptions of products in each setting. Hence, each zone, or former organization, continues to have different descriptions of products on their supply carts, and some organizations and teams continue to use manual and paper-based tracking of products and inventory. The CPSM team continues to work towards full integration of the item master into each clinical program and organization across the province. Currently, the inventory and warehouse strategy has not yet been fully integrated into key clinical programs, such as surgical programs (i.e., operating rooms) and other specialized patient care settings (e.g., cardiac catheterization, diagnostic imaging). To date, the Alberta strategy has not yet progressed to full implementation, achieving savings from either inventory or labour costs at the level of clinical programs or services. For example, three different automated inventory systems (Oracle, Vax and Meditech) are currently being used by different regions in Alberta. Although each software system is different, all use the same item master data for inventory processes. As the CPSM team continues to progress towards fully automated inventory management, the three software systems will transition towards Oracle across the province, as described by one CPSM leader: We’ve been able to reduce inventory drastically, turn it a lot more and actually reduce a lot of the expired products or wastage because we don’t buy cases of 50 when we put [inventory] into the main warehouse; we see

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who else within the zone uses [the product] and we make some strategic decisions. This has helped the operational best practice too, so the cost per patient-day is reduced when we do that as well. Once we all get on Oracle, that’ll be even easier yet. But right now we have Oracle, Vax and Meditech—three operating systems. … But we’ve got the database, [so if] it’s 2:00 in the morning and someone needs something, I fire up my computer and I can go in with my exact quantity on hand—I think it’s uploaded twice a day. So I know where stock is, I know where I can move and [whether] I have to reallocate across the province. … We have full visibility of where a product is sitting all across Alberta … because we can see it and we know where it is. The strategy in progress has already offered Alberta a new model of collaboration with vendors and manufacturers to achieve access to innovative products on the market and position Alberta as an important customer for vendors. The province has leveraged its size and the influence of its large buying capacity to encourage vendors to offer greater value, well beyond simply purchasing products at the lowest negotiated price for each RFP: One company came to [AHS], and we have about 80 [operating suites using this company's products). They came to us with a very aggressive offer to upgrade 80 OR suites at once. So for pennies on the dollar, we upgraded 80 [OR] rooms in the province, which was a year-long project. … If you looked at it through a normal [equipment replacement strategy based on] age of use, there’s no chance that would ever get done. The vendors are cognizant of how big we are and how important some of our key sites are for them to have their brand in our buildings. So they’re going to give us deals that they won’t give many other jurisdictions because [company name] knows that 89 sites—that’s major; not many organizations in Canada have 80 ORs and one vendor. We have a couple hundred OR suites, but if they [company] lost 50 percent of that, that’s a major problem. Vendors clearly see the benefit of a single, system-wide procurement opportunity to leverage system-wide adoption of their products, to demonstrate the value of their product offerings for an entire health system. The integrated data infrastructure across the province will further inform provincial procurement decisions when system-level data on utilization, quality and outcomes of products, such as joint implants, are available. A strategic advantage of a provincial warehousing and distribution strategy is the competitive contract negotiation opportunities it can offer Alberta procurement teams. A warehouse system reduces “touchpoints” for vendors that influence contract pricing through reduced shipping costs that can achieve savings and efficiency. Centralized warehouse locations have reduced distribution costs, permitting bulk buying of products

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to generate further savings. An industry leader describes the value of the Alberta strategy: [Centralized warehousing] also would give Alberta an opportunity to go do bulk buys. So they could go directly to [company name], for example, and negotiate buying six months’ worth of a particular product, get a better price, and then we have the warehouse store it, versus paying a higher price through the normal buying cycle. So that gives [Alberta] an advantage. And on that same point, there are a number of manufacturers that won’t ship through distribution, [such as] [company name], a lot of your high-end medical device companies. They ship directly to the hospitals. So by consolidating the shipment of those manufacturers’ products directly into a warehouse, the hospital would be able to negotiate lower pricing. … I’m not sure how far [Alberta] had gotten trying to negotiate a central inventory on some of the medical device products, because that is where the real money is. If they are] able to pull out of the individual [hospital] significant inventory in cath labs and in the ORs, the money that could be saved is so much bigger than saving money on gloves and gauze and needles. So I think when you look at a fully evolved supply chain—which … is where the [Alberta] goal is focused—that central warehouse … is of value. I think that touches upon all of the places where they could save money. The warehousing strategy is a key asset for the province of Alberta, which holds tremendous potential to achieve significant savings as the CPSM team continues to work towards standardization of products and processes in all sites across the province.

Clinician Engagement Strategy The current AHS supply chain strategy is to progress towards full integration of the supply chain team in clinical programs to achieve a patient- and clinician-focused healthcare supply chain. As described by one provincial supply chain leader: Right now, we have an operational plan that speaks to … the work we need to accomplish for the next three years. This is an operational plan we developed about two years ago. After we did all this—the ERP, sourcing and stabilization, EDI [electronic data interchange]—we recognized that a lot of our focus was on the technology. We needed to shift our focus to people, not so much from a people perspective both internal to CPSM, but people in terms of the fact that we have 108,000 staff out there [across AHS]. How do we engage with them in a meaningful way so that they can become part and parcel of helping us move forward? Because without engagement, we found that there were lots of issues with people saying, “Oh, you’re doing this on your own,” so we did engage in a framework of how [to] work better with our [group purchasing organization].

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The first key step identified by the CPSM team was to build relationships between their team and the clinician teams leading health services delivery. The CPSM team strategy was to engage with clinicians and program teams to support them in finding savings to meet their budget targets. In return, the engagement opportunity would build relationships with clinician teams that the CPSM team could mobilize to help move forward with their supply chain strategy. The CPSM original installation of Oracle in 2011 resulted in challenging relationships between the supply chain team and program teams owing to the lack of time afforded for appropriate stakeholder engagement. CPSM team members reflected on their progress over time, from a transactional supply chain approach that focuses heavily on resolving challenges, towards a more proactive approach focused on planning, engaging stakeholder teams to progress: There’s been a big change, specifically in the last year and a half, and why we have [become] more operational is we’re getting away from “What’s the latest fire and let’s move it forward” to “We have to work towards a strategy.” We’re never going to be 100 percent strategic; that’s impossible in healthcare. There’s always going to be emergencies, but [for us] it’s getting ahead and looking forward as to what’s coming around that corner, and we’re going to jump the corner. Clinician engagement was recognized by the CPSM team as an integral part of a successful supply chain strategy. Clinicians have the necessary expertise to determine which products work best, for which patients and under what circumstances, as discussed by this supply chain leader: [What is important is] extensive clinical and stakeholder engagement through the entire process, because ultimately, in terms of product outcomes, we are not the experts; the physicians and the clinicians are. So they have to be involved in the process up to the point that we select a product and implement the contract, to then doing every quarter meeting with them, to make sure that the product is achieving what they set out to do, that they’re meeting the volume thresholds. They’re getting all the value, they’re getting everything that they need to get. And so the problems are resolved that way. … And the real value of this is that working with the OR group, and capturing their [expertise, enables] the discussion and the rationale as to why they think [the process] should be changed. To engage clinician and program teams more meaningfully, Supply Chain Engagement teams were created to include clinicians from different program areas to bring a wide range of experience and innovation to zone committees that would review the guiding principles and service expectations including new products, innovations and any other related service items. Figure 6 illustrates the clinical engagement framework hierarchy.

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Figure 6. Clinical engagement framework

The strategy ensures that clinicians have input and decision-making accountability for general program supplies (commodity engagement), specialized products (e.g., standing category committees) to inform decisions on new products and evaluation of existing products to inform procurement decisions. There are two committees per zone: medical/surgical committees for commodity items and perioperative (surgical) committees for clinical preference items required by surgeons. The zone-based committees engage the local community or region, and provincial program committees engage teams in identifying savings and efficiencies, manage equipment and supplies, and provide reporting and input on contracts and non-catalogue purchases. The value of committees is described by a CPSM team member: The committee [has] 10 to 12 [members], and they meet on a quarterly basis to review what we call the guiding principles to say, “Okay, has the business changed, has [the] work that’s coming from the standards or GS1 [changed]?” So they would review those and help make decisions, and then help champion those to their counterparts. The Supply Chain Engagement teams have been successful in supporting system-wide engagement to build awareness and profile of supply chain processes and their relevance for both clinical and nonclinical programs. This level of system-wide engagement becomes the “system DNA” linking supply chain processes (i.e., contracting, procurement, supply management) and the clinical program stakeholders to participate in decisions about inventory management across the province. The Supply Chain Engagement teams also reach across clinical areas to include other departments such as linen, food and pharmacy:

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We actually started three years ago with other nonclinical areas. So for example, linen/laundry; we’ve had a committee of linen/laundry for about three years now, and food service, pharmacy. And the reason … I chose those areas: we’ve already established the user committees, because they are structurally within AHS. They were set up as a provincial program, so there was one person we could go to, to say, “Hey, we’re doing something that impacts your business, can we talk to you?” And because it was a provincial program with one leadership in the organization, it was easier. The clinical integration strategy leverages clinician liaison staff in CPSM, who work directly with program teams to ensure that the correct expertise informs procurement processes. The clinical liaison staff on the CPSM team help to facilitate conversations between clinicians and supply chain stakeholders in each program, to ensure that clinicians are engaged in all decisions on product procurement and RFP contracts: I have four clinical liaisons. And essentially, they focus on all of the tactical issues and some of the engagement activities we do during contract work. Partnership with our sourcing leads and reaching out across the organization make sure that decisions are [informed] with the local subject matter expertise of clinicians before we look at the leadership level, and then we bring in the contracts. The idea of the engagement methodology is that we are helping to facilitate. We don’t provide subject matter expertise; we help facilitate those conversations to bring the right people to the table based on the appointments from the clinical areas, and then to consolidate some of that information to bring back, so those decisions can be endorsed by their leadership team. The CPSM team supports dialogue between the program teams and the CPSM teams to achieve value and advance the supply chain strategy using a collaborative approach. This strategy ensures that clinicians and stakeholder perspectives not only better understand the relevance of supply chain processes to support and strengthen program outcomes, but also leverage supply chain processes to achieve program outcomes related to budget.

1. Engagement of Clinicians in Product Standardization and Sourcing Decisions While the term “standardization” was not used by supply chain leaders directly, reducing the high variation of products, while maintaining clinician choice, was described as a strategy to reduce health system costs. AHS issued a sourcing plan for product procurement. The plan includes review of spending on original contracts; market research for new technology and innovations; identification of challenges and issues with the current contract; and clinician input into needs and priorities before going to market. This strategy allows new technologies to be reviewed, comparing costs and engaging clinicians to determine value before awarding contracts. It promotes local

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engagement in procurement processes, including input into how products are procured using the RFP process, as discussed by one supply chain leader: The process … is that we have a sourcing plan, which is really our procurement plan. We call it sourcing because sourcing encompasses a number of different activities. The sourcing plan is a rolling plan for three years, so we add one year every year that goes by, and the sourcing plan basically lets out all the contracts that we have to work on in any given year. So if you take stents, for example, or pacemakers, … our first task is … to review where we are and do a complete spending analysis that gives us an idea of what we are spending on our existing contract, how much of the existing contracts have been proliferated with new technology, so people are now buying new products and innovations. We work with the physicians and the different stakeholders from all of the different sites in the province that would be using those products. We discuss any issues or challenges that they had in the existing contract and in the existing product mix. We review the spending against the budget in terms of how it was tracking, how it was trending, was the cost trending high [or] low … . Then we create what would be called a sourcing strategy document that outlines all of this background information as the first step. Then we do market research … to look at the market and figure out what are some of the new and emerging technologies that are coming out, and we get a lot of help from the physicians on this as well. Once we’ve been able to determine what the market looks like, we sit down with our physicians and we strategize on how to go to the marketplace. Supply chain leaders believe this approach leads to a better understanding of budget targets and creates the link between cost and clinician product choice: It’s an engaged supply chain [and] integrated as well [because] it’s not a bunch of supply chain efforts, making the calls, making the decisions. There’s high engagement with the zones, with the front line, the nurses, the doctors, … so we have a number of committees at the zonal level that have the front-line staff involved in supply chain decisions. So they’re not an afterthought or just a rubber stamp at the end of the process. They’re the ones at the table making the decisions with us. Clinicians are engaged to examine product choices and link these to program budget targets. Traditionally, clinicians would identify their product preferences, and attempts to standardize products across programs failed through lack of consensus. When clinicians were directly engaged, it became evident that multiple versions of the same product were an opportunity to consolidate inventory and achieve cost savings for programs. The engagement of both supply chain and clinician expertise supported a collaborative approach to identifying new innovations and technologies that would bring value to programs. Savings from product and supply standardization resulted in positive impact on program budgets, which informed clinician teams to better understand how

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supply chain processes can directly affect patient care and patient outcomes in a positive way. The CPSM team’s strategy to engage clinician teams in sourcing and standardization efforts focused initially on perioperative and surgical programs, which account for among the highest costs for products compared to other programs. The strategy started with one surgical program and focused on how clinicians viewed supply chain and improvement of practices. These practices informed the strategy for engaging other departments, and the strategy has slowly expanded across the province: They [operating room (OR) teams] have great influence. So the approach that I took [in reviewing] the [United Nations Standard Products and Services Codes] in our process—we call them purchasing categories— [was] to make some improvements. Number one was to get the clinical feedback. Let’s improve the categories that we developed and make them better; we’re not aiming for perfect and 100 percent. What we will do is identify clearly that this is the first step in making improvements. So even if it’s only 50 percent correct, it is 100 percent better than what we did a few years ago. The cross-provincial collaboration has not only enabled cost reduction across the province, but has opened opportunities for improved innovation. Alberta is a large-scale customer, so when vendors need expert evaluation of innovative products and pilot testing, AHS has cultivated a provincial ecosystem that can be of value to vendors. By engaging clinicians, Alberta’s supply chain team has increased value-based decisions, technology and innovation, as discussed by one supply chain leader: Historically, [clinicians] had strong preferences and history. They agreed, once we showed [them] the math and the value-adds, what we could get in terms of innovation. The more we’re going to commit to a vendor, the bigger we are in their global scheme, and the more important we become to them. So when they start needing to do research studies and gather end-user input into future innovation decisions, AHS would have a bigger seat at that table. So when you look at something like …[company name], we were the largest customer of [that company] in the world. So … whenever we needed something, we had the research guys from the head office [of the company] in to meet with our team.

2. Clinician-Engaged Budget Management Alberta’s budgeting approach considers both operational and capital budget resource allocation to seek better value on equipment procurement as well as interdepartmental program budgets. The CPSM team takes a strategic approach to link working with clinical programs on product purchasing to program budgets in order to create savings and help meet budgetary targets, as described by this supply chain leader:

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[In] most jurisdictions in Canada, capital is one division, operational budget is separate, so we’ll replace and repair something for $10,000, when for an extra $2,000 we could have bought something brand new, and saved significant dollars in return. We have a number of examples in our business cases where you spend $600,000 and save $2 million as an organization. We spend a lot of our provincial capacity on those types of projects. This year we have five projects [where] we’re purchasing scopes, we’re purchasing gas machines [and] power stretchers for our ambulances. If we can save a dollar, if we’re running operational debt, it goes towards the greater budget targets or deficit. Sometimes we have to write up a business case, but a lot of the savings that we [focus on] are to help the operational deficits. Again, we don’t have the budgets for the program areas, so when they’re running deficits, we’re actually helping them meet their [budgetary] target. It’s not our target, and that’s where [clinician] engagement is so important. The capital equipment budget is grouped into distinct clusters organized by zones and provincial programs. Each cluster is given a certain percentage of the budget based on asset base and clinical program needs, and the remaining budget is allocated to provincial priorities that are approved by a provincial committee. The committee is influenced by what is needed in each community or region of the province, and co-led by clinical and operational leaders to ensure that both clinical and operational perspectives are accounted for in all decisions. The committee makes its decisions based on provincial priorities, life-cycle buy, technology evolution and the marketplace (recall of products). This is described by an expert in supply chain: Every year we’ve been spending anywhere from as low as $89 to as much as $200 million, it depends on budget. … We separate our budget into 20something distinct groupings. So [program name] gets a certain percentage of the budget every year. They have their own strategy on how they want to replace their equipment. The other thing we do is allocate a certain percentage of our budget to provincial strategic priorities and actually call it that, for example, endoscopy. Individually, if … one scope dies you can go buy a new one. That’s fine, but as an organization, we have hundreds … of scopes in place. … All those 20 groups get a certain percentage. Because, you know, they all have beds that need to be replaced, so we’re spending significant amounts on beds … . For the remaining budget, there’s a group of us that come up with general strategies as to the bulk orders that we know, through conversations with other zonal [regional] people, [where] there seem to be challenges with gas machines in a whole bunch of jurisdictions. They maybe don’t talk to each other because we’re so big we can’t talk to everybody, but [with] a few of us getting that sort of [regional] input, we can put a puzzle together. We’ll present the eight or 1 models to our clinical leadership as well as our operational leadership; we sit down

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and review it, and as a group the organization decides … these are going to be the five projects for this year. The supply chain strategy in Alberta was centrally focused on being “clinically engaged”: it enabled clinicians to not only understand the importance of supply chain, but to be central decision-makers in determining program needs and participating in procurement strategies that achieve value for each program. The added feature of the strategy was to position Alberta as a valued and important customer for vendors, whereby the potential for investment in research and product evaluation could bring additional resources to the provincial health system. Alberta’s integrated supply chain strategy has extended beyond the “low-hanging fruit” of bulk-buying and unit-level pricing: We’re now looking at efficiencies, and that’s where it comes to data standards, and we start talking about barcoding. We’re beyond the easy stuff, which is just doing unit-level pricing. … We’re now looking at how we can become more efficient, because that’s where those fine dollars are going to be found. It’s “How can [we] do more for the same [cost]?” The CPSM team is positioned as the enabler to program teams across the system, to support advancing quality, safety and affordability of care. As the system advances, tracking and tracing products and medical devices to individual patients is a long-term goal for Alberta, as it works towards greater efficiencies and quality of patient care. The CPSM team works alongside clinical programs to enable a shift towards forecast planning and predicting risk to inform risk mitigation strategies, scaling solutions across the province. This approach reduces inventory costs and helps meet budgetary targets for each program. The program teams are gradually becoming very reliant on supply chain staff expertise to engage clinical teams in identifying savings and efficiencies, and manage equipment and supplies across the system. Gradually, such expertise has become highly sought after, because program teams are increasingly realizing the opportunity to achieve their budget targets by working closely with the CPSM team to manage inventory, standardize products and reduce costs. CPSM has also developed strategies to actively engage with clinical teams for contracting activity through integration of staff working with a number of program areas such as IT, as well as other support services departments such as construction, food, linen and environmental services, laboratory, diagnostic imaging and pharmaceuticals.

3. Relationship Management and Physician Engagement Formal working groups have been established in each zone. The committees include Medical/Surgical, Perioperative, and Zone CPSM Leadership Councils. CPSM staff meet with these committees at regular intervals to discuss all matters related to supply chain and contracts. They also actively solicit feedback on all CPSM strategies, including making decisions on which items should be added to the warehouses, identifying new products entering the system and any other issues that affect delivery of services. The engagement of clinicians and program teams in working with the CPSM

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team has built relationships, set clear expectations and established trust among clinicians and program teams because they now have input and a voice at the table in determining the best strategies to support service delivery. Relationship-building with clinician teams has also given the CPSM team an intimate knowledge of how the clinical team works, its needs, and when and how those needs can be met by leveraging supply chain strategies to achieve value. A provincial supply chain leader explains: They’re living with those teams, and they understand what they need to do and when they need to do it. That’s an easy example, but on our clinical side, I have three people, all they do is [program name] contracts. They meet with the [doctors] on a regular basis, they’re a part of the team; they need them as [a member of the team], not as a corporate person making the decision. So they’ve built a relationship, really, is what it comes down to—relationship management. The integration of CPSM team members in clinical programs and the establishment of clinical zone and program-based engagement committees offer the additional advantage of enabling clinicians to focus their time on patient care, rather than on supply chain operations, such as ordering and managing supplies, or looking for equipment. This approach also provides a point of contact for discussing issues or challenges. The impact on clinical staff time (i.e., FTEs) has not been measured to date in Alberta. But the continued collaboration of supply chain staff and program teams is creating capacity within program teams to improve performance (efficiency, productivity, excellence in care delivery) and gain value by leveraging supply chain strategies. The early phases of the strategy resulted in significant challenges in relationship management for the CPSM team. They are now working to overcome these challenges with a clinician-engaged and clinician-informed approach. The CPSM team has positioned much of its supply chain strategy to enable program and clinician teams to improve program quality and cost savings. They are also building awareness of how supply chain can advance and strengthen program teams, as well as the relationships between supply chain and clinicians, and increase system capacity for change. The strategy fully engages clinician teams in relationship management, clinician preference and administrative leadership. This clinician engagement strategy has resulted in reduced complaints and issues among clinician teams.

Patient Safety Adverse Event Reporting When the original Alberta health system was regionalized, adverse event reporting was paper-based, unique to each of the 99 health organizations, with no system-level oversight or measures of adverse events. Little communication or learning between healthcare organizations meant that medical device failure and adverse events were not documented, and there was limited analysis of adverse events that could inform how best to reduce the risk of harm for patients. The catalyst for change in Alberta was three significant patient error incidents that mobilized AHS to design a centralized system of adverse event reporting to enable clinicians to report equipment failure and product

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challenges, using a reporting learning system (RLS) to inform strategies for reducing patient risk. The RLS strategy was a key opportunity to create a dashboard able to track and report adverse events digitally so that specialty patient safety and medical device teams can follow up on all actionable events across the province. This integrated strategy for adverse event reporting is described by a leader in patient safety: It started in the Calgary health region before AHS [existed]. … We think it was triggered from three deaths and patient error [contributing to] these three deaths. … The decision practices were very fractured. People were handling recalls [on an ad hoc basis]. Complaints didn’t really get resolved, and we didn’t know how the devices events got recorded. Health Council of Alberta got involved and said Calgary should do this and we should have a centralized area of people dedicated to patient safety, plus supply chain, plus clinical engineering handling the complaints aspects of this, including recalls. … Before AHS was invented, they said the goal should be to make it province-wide. … Then when AHS existed we had a means of implementing it across the province. They developed a centralized system for input from clinicians about medical device problems related to patient events, reporting adverse events related to devices, and a centralized system for handling recalls and safety information attempted externally. So there was this core group of people that were specifically dedicated to medical devices … , and they actually had a funded position and a half from patient safety. So patient safety and the supply chain were kind of married at the time of the AHS merger … . The Medical Device Safety team was established to oversee all adverse events related to medical devices. This team has established a measurement framework, guided by some of the Pascal Metrics for patient safety analytics in reporting medical errors (11). Pascal Metrics includes proactive harm detection, quick response time and real-time reporting. The Alberta Medical Device Safety team use Pascal Metrics to standardize adverse event reporting to establish a system-wide strategy enabling transparency across the Alberta health system. Reporting tools support teams to implement evidence-informed strategies with the aim of reducing the prevalence and severity of patient harm events across the province. The Patient and Quality Safety team monitors the system for recurring events that may indicate a product failure. This team also monitors each adverse event individually, and dispatches a team rapidly to investigate the event and design an action plan when needed: [With] proactive harm detection, the sooner that you know about something, … the sooner you can react to it. So if you know about … an adverse event, you’re going to respond right away. But if there is something else you can do, or if it’s a hazard versus harm, and you catch all the hazards, you are preventing harm, and again, as you say, “How do you know you’ve done that? You can’t prove a negative.” But we’ve adopted two of [Pascal’s] metrics. We’ve had real-time reporting, so we

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strive to have our events reported to us in one business day and then we try to risk-assess it, and then develop our first steps within one business day of the event. So that’s something we do try to get as close to real-time response as possible. To date, the RLS is a national system that has collected over 14 million adverse event reports (since 2010) at 1.8 million reports a year. Of these reports, 0.6 percent (108,000 events) have resulted in severe harm (i.e., severe injury or death), and 100,000 have resulted in moderate harm. The adverse event reporting system enables investigation of past incidents and also examines the potential for future trends. The Patient Safety team looks for patterns in the adverse events to identify and proactively intervene to prevent adverse events due to medical devices and workplace practices. The Product Quality and Safety Division examines all product issues, either reported by clinicians or through product recalls. The team works with both clinicians and vendors to investigate the cause of the incidents and determine future action. This approach leads to a wide range of actions, including removing products from the clinical setting, or providing learning opportunities for clinician teams to prevent future adverse events. The RLS’s goal is to improve patient care and reduce the number of adverse events in Alberta: That’s the value: we have a Product Quality and Safety Division that deals with any product issues, which are recalls or where physicians complain about a product. There’s a process where they fill out the paperwork, provide all the details [and] submit it. Our team [investigates]—they will determine root cause, work with the vendors and the clinicians, and then provide a report to Health Canada to say, “Here are the product concerns that we were notified of, here’s how we dealt with it, and here’s what we are providing you because we believe that this is a significant issue and you need to deal with it.” The provincial system red-flags any potential issues before they become a problem while collecting data from investigations that are disseminated across all healthcare organizations in the province to ensure patient risk is minimized for all Albertans. The Patient Safety team analyzes data and outcomes across the province to identify trends and achieve a truly system-wide adverse event reporting system that enables and informs risk mitigation strategies to reduce prevalence of future events: [The job of] our incident tracking system [is] to go in and say, “We had a patient incident, we believe it was because of this pacemaker.” Because it’s a supply-related issue, they will check our supplies, and then that will trigger a Product Quality and Safety Report (PQSR) group to say there was a supply-related issue that was reported in the system. The RLS is a voluntary learning system that provides clinicians with the opportunity to report hazardous events or issues that could become future problems. Phone and

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online forms allow clinicians to report all adverse events or “close calls” that have led, or may lead, to harm for patients: There are a couple different ways staff and physicians can access this system. There’s an online form that’s available to anyone while they are on an AHS computer, and there’s also a phone line that people can call in if they can’t access the online form. They call in on the phone, [and] staff will enter it into the form for them. … There’s a general reporting form and some event-specific forms for some of the more common events. … Staff just type up [on the general form] what happened and on the eventspecific form, there are some targeted questions. The reporting system is flexible and enables patient adverse event reporting and product feedback reports, allowing clinicians to leave out product codes and unique identifiers if needed, for ease of reporting. The Product Quality and Safety team examine each report to ensure that all device information is accurately captured and forms are completed. Each report is examined by a manager, providing details and recommendations from the Patient and Quality Safety Division on how to improve patient safety, as discussed by this leader: In 2016/17, we received and actioned 2,300 product concerns. That’s the non-maintained product feedback. … We triaged and reviewed 4,000 RLS reports. … We received 540 safety notices from vendors. We reviewed 3,000 safety notices from Health Canada or others. And then out of all of those sources of input, we actioned 4,426 in some way. … We had only 18 high-priority harm events out of all of those. That was before we realized we were missing some of the RLS reports that actually had very serious device-related harm. As the adverse reporting system advances, challenges have been identified by the medical device adverse event team, including coding errors in reports, difficulty in confidence and frequency of the reported information, and vendor transparency. Each report in the RLS is manually coded by Health Information Management and organized into different categories. If it is not coded accurately, the adverse event will not be seen by the team or reported to the area manager. In 2016, the team discovered that many of the adverse event reports were not coded properly, as coding knowledge of the employees varied widely. To correct coding errors, Alberta’s Patient and Safety Team screens all adverse reports, an increase from 1,000 reports annually to 9,000, as discussed by a leader in supply chain patient safety: We realized we were missing … many high-priority device events [because] they just weren’t flagged correctly … . Last year we could only see the ones that somebody had coded as medical device failure or suspected medical device. … And so, this year, we’re screening them all, and that’s 9,000 a quarter, and it’s too many. So we’re going to have to

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figure out how to do it in a way that doesn’t have us reviewing 9,000 reports a quarter when we used to just do 1,000. It is difficult for a clinician to know the root cause of an adverse event, making it difficult to report. According to one leader in medical device patient safety: … The most important trend that we have that is specific to AHS is the fact that although we have [clinicians reporting new events] every day, I can’t exactly expect … that everybody reports all the information. … I think we’re getting a much more accurate picture over time. Of harm events, I would say the majority [are] device-related events [where the risk is] typically a known cause, it’s a known risk. When you do a cardiac implant, there is a risk of inadvertently doing it [wrong]. … Somebody has made a mistake, an abnormal use which is doing something wrong or different, or unknown device failure, and the largest ones that we see when we take an aggregate step back, the trend is [that] user error and user technique are usually number one. The current system in Alberta has seen significant increases in reporting as the online system has been implemented. Although adverse event reporting is generally voluntary, Alberta is experiencing impressive numbers of reports on a regular basis. The reporting of medical device error is currently required by clinicians through provincial legislation. However, the definitions around devices and what needs to be reported are unclear, leading to some staff viewing adverse event reporting as “optional.” The Patient Safety team is working with front-line staff to develop an easier reporting system: We’re working on developing a method for the front lines to [diminish] the burden on them … . If we had a magic wand, we would perhaps integrate with RLS, but I’m leery of that because it’s voluntary, and our area, because it’s device-related, is no longer voluntary. … Change in the legislation happened November 2014. … It’s in the legislation, but Health Canada has not determined the definitions around it, so it’s not enforced. As clinicians are becoming more familiar with the reporting system, and the burden of reporting is minimized with the convenience of online reporting, the frequency of reporting is increasing, building a more accurate account of adverse events in Alberta, as described by a leader in patient safety medical devices: We probably don’t have a gap in information. When you have 600,000 RLS reports, we likely have enough to tell us what our problems are and what our issues are. So … even though we only get what I would say is a small sample of what’s going on in the organization, we have more than enough. We have the nature of the problems, we have everything on the spectrum, we have staff reports on how to improve it. When you have 600,000 reports, some of the work we are now doing is really related to diving into the data. You have a big full pool and someone has to dive. … There are some aspects that we are monitoring all the time.

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For our purposes, we use this data almost non-stop. … So when we have a significant event, the first thing they do is ask, “Where else is this happening? Is it confined to the location of the event? Is it confined to the location of the site? Or is it province-wide? And are we solving it here first, or going big first?” When the Product Quality and Safety Division finds a trend, or issue, with medical devices, they work with vendors to report and correct the issue. Working with vendors to fix and overcome problems has been a challenge for the team. Vendors work slowly to assist in fixing medical device problems, and there is a perceived “lack of transparency.” The global national location of many vendors increases the difficulty in getting product failure addressed: One of the biggest trends we have right now is a vendor that is really slow and non-transparent and has so many device problems [that] we’re trying to shake the tree and get them to fix things. … So that’s one kind of vendor-related complexity to our work that hasn’t always been there. As these companies are merging, it’s more complex for us, because [one company purchased another company that supplies products for dialysis] and it takes over a year at the least to … talk to somebody in Europe. … As these companies are merging, it’s becoming very confusing for us. Maybe there will be more clarity in the future, but it’s become … harder to actually report, and in some ways, it seems like it’s harder to find the people that are accountable. So we really upped our simultaneous reporting to Health Canada at the same time that we report things to vendors. The CPSM team is prioritizing relationship management to improve communication between the procurement teams, safety teams, clinicians, vendors and manufacturers. When AHS was established, there was limited communication between the Purchasing and Procurement team and the Patient Safety team. Engagement of program teams, the CPSM team and the Patient Safety team now offers a platform for AHS to ensure that only the safest products are procured for AHS organizations. Adverse event reports are assessed by the Patient Safety team, who then engage all other teams, including procurement and the CPSM team, clinician teams, the vendor and manufacturer to ensure that safety challenges are addressed quickly and effectively to reduce risk of future safety events or eradicate them altogether: Before AHS, in the old Calgary Health Region patient safety was embedded as part of the team, and they would have metrics reported. They went to their patient safety meetings and also worked with the supply chain staff. Now when AHS was established, and the team became exclusive, those FTEs came in exclusively as members of the supply chain division, and there was a significant loss. … The patient safety people kind of moved on and there was no [institutional] memory. And so, when I started, there was a real distinct division. … We did our stuff, patient safety did their thing, and you kind of reached out to each other,

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but it wasn’t really close. Now, I worked very, very hard to keep us up to date on what’s going on in the patient safety world at large, [and] the patient safety world at AHS; we go to the Patient Safety meetings and we make sure they review any of our formal documents and the policy. We make sure our policy is aligned with theirs. [There are] human factors, and we see things like shortage, or the wrong product was on the wrong cart and it was a near miss, or it was an actual RLS because somebody without looking grabbed the wrong thing. We actually do the actions if it’s a defect failure, mis-packaged. We’re the link between the clinical people, the supply chain, the vendor and the manufacturer who needs to know and needs to fix something. And then we’re also the link to the internal supply chain, so the team didn’t realize there was a difference between irrigation and inhalation or whatever, that kind of thing. The Patient Safety team has a comprehensive approach to investigating all safety reports, and then sends the investigation to the vendor with a follow-up report. Any information filed in the RLS from clinicians is tracked and followed up, as discussed by a supply chain leader: When we talked about our inputs, we try to send as many products away for investigation as appropriate, and so we arrange between a handful to a couple hundred every quarter that go to the vendor and come back with some kind of report. But we also are tracking … reports … from the front lines, to trigger some kind of product improvement, manufacturing improvement, design improvement. More recently, the CPSM team has been working towards increased transparency of safety reporting for the public. A quarterly review, as well as a performance summary (analysis of actions and orders), is reported to executive leadership and to zone leadership to inform strategic decisions to improve and strengthen the Alberta health system: There’s a whole section on medical devices management, so quarterly we share our numbers, but typically there’s … a medical device story in there. … So that’s one mechanism and it goes to the executive leadership. … It can be shared far and wide; I share it with my team. I’m not sure if it’s on our internal network or not, but then there’s another report, … the CPSM performance summary, or performance report, and very similar numbers go there. ... It’s kind of weird though, because it’s like we’re the odd man out in that report. That number is about volumes filled and orders placed; it’s very much supply chain, and then we talk about our inputs and our outcomes and how many we’ve reported to legal, which was, you know, 54 a year, and how many recalls we had, which was 200, and then some safety stuff, and how fast we handle our safety reports. Actually, our whole team right now is reviewing our metrics, our numbers.

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The Alberta health system continues to strengthen its reporting of supply chain and patient safety outcomes, in particular to link patient outcomes and product procurement. New areas of reporting that the team is considering include medical device outcomes, such as explants in orthopedic services. But the reports that trigger a product improvement—and I would say [they’re] something we can count but we haven’t reported—are the number of recalls … that our internal clinical [teams] are reporting to us. That has in turn not just caused an improvement of the product, but we check our international recalls because we have so many reports. So that’s another metric; that means something that’s unsafe has been corrected. … But that’s something else I would love to be able to do, because we just had an orthopedic guy come to us; we haven’t actually been involved in submitting and reporting explanted devices, but now we’ve got some real keen interest from the one zone and probably more [interest in] using our process to start sending in more explanted knees and hips and that kind of thing. I would love to do that. A fully integrated supply chain system is underway in Alberta, with the next major phase of implementation being point of care scanning to enable tracking and traceability of products, patient identification, care processes and provider teams, all linked to patient outcomes. The implementation of a new clinical information system will be leveraged to complete this key next phase of the supply chain in Alberta: I’m on the eSafety/eQuality group for the province, so our clinical information system has been chosen. They’re going to try to embed as much as they can in the system to try to prevent any kind of systemrelated problems when they do the transition over the next several years. … Every time I … talk to somebody they say, “And I presume that includes tracking by a unique device identifier, through the supply chain and to the patient and to the outcome?” But I don’t yet know if that is included in the scope of this clinical information system. The supply chain strategy has fully integrated with patient safety infrastructure to support comprehensive online tracking of adverse event reporting across the province. This online, digital system is unique among other Canadian health systems, with a robust, online digital patient safety reporting strategy linked directly to supply chain information systems to ensure safe care and outcomes for patients.

Integration of Supply Chain Information Infrastructure



The AHS supply chain infrastructure has not yet reached the goal of a fully integrated supply chain strategy capable of tracking and tracing patients, products and care processes linked to patient outcomes. Although this is the vision of AHS leaders, many former regions in the province continue to track products manually, using manufacturer

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serial numbers to identify products and manage inventory. Settings are available to track implantable devices, using global trade item numbers (GTIN) to manage all inventory processes, including traceability, of these high-cost products. The new clinical information system (CIS) is the next major infrastructure project that will be leveraged to advance the supply chain strategy. It will complete the integration of supply chain information infrastructure, enabling system-wide tracking and traceability of products and processes linked to patient outcomes. Connecting the supply chain infrastructure to patient information infrastructure will link product information to patient care processes and outcomes, enabling traceability to individual patients. In order to link specific products to individual patient outcomes, global standard product identifiers (UDI) are required to accurately identify products and link them to care processes and outcomes, in order to monitor patient safety and risk of adverse events. The lack of government legislation or policy (either federal or provincial) mandating the use of global standards to support tracking and traceability means that health systems are challenged in requesting manufacturers to adopt global standards for all products, as discussed by an industry leader: The health authorities need to push more because the manufacturer is saying it’s a great idea, everybody loves it, it just needs to be legislated in Canada. We do it [with] our food, but we don’t do it [with] our health products. I’ve never understood that. A province-wide patient information system is the final step to enable tracking and traceability of products to the point of care for patients in Alberta. Ultimately, when the clinical information system is fully implemented, the traceability of products, care processes and patient outcomes will be identifiable across the entire patient journey: When a product is purchased, the product identifiers then get linked into the CIS modules. So that item plus the product identifier [data] will go into the CIS module, where the physician will scan the [product] barcode and the patient [ID], and it goes into the patient’s profile. When the CIS is implemented across the province, supply chain data will be integrated into the system to automate tracking and traceability of products from manufacturer through to patient use at the point of care. Implementation of the CIS is expected to start by November 2019. This system-level architecture investment gives the CPSM team the opportunity to complete the integration of the supply chain strategy: One of the programs on the go right now is the [clinical information system], and what we are … doing is saying that if we’re moving towards a provincial healthcare solution, that has to include the supply chain. So if we’re going to be building components that are critical in the supply chain part of Alberta Health Services to provide information—and this is where you’ll hear things about the data standards, information, interfaces, etc., about the supply, the medical devices, things that we buy—then we don’t want to connect them to eight different systems. So if you want a truly

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provincial vision of that, we need to convert our supply chain operations ahead of your implementation of the CIS, whether they’re doing it hospital by hospital, or region by region. So, when that was announced, we had our roadmap built to convert these systems, the initial plan, as far as I know. In order to achieve supply chain integration, the CPSM team identified two key paths forward. The first was to link the existing supply chain systems by converting to the same ERP software, Oracle. The supply chain team continues to work region by region to link to all organizations to prepare data and information for conversion to Oracle, which will then be interfaced to the Epic CIS. The implementation of the CIS will allow for a centralized access point to make the critical link between the “back office” infrastructure of finance, procurement, inventory, warehouse distribution and clinical care delivery captured in the Epic patient care record systems.

Return on Investment (ROI) and Impact of the AHS Supply Chain Strategy The AHS vision is to provide excellence in all aspects of its service delivery through focus on people, process, technology, standards, sustainability, innovation and partnerships, while ensuring that AHS values are at the forefront of all initiatives and day‐to‐day operations. The ultimate goal is to ensure that the products and services required for patient care are always available at the point of use when needed. The CPSM team leads the supply chain strategy for AHS. Table 1 describes the scope and breadth of CPSM team operations in order to capture ROI for the supply chain strategy.

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Table 1. Scope and breadth of CPSM team responsibilities Area of Responsibility

Contract Management

Scope and Breadth of Responsibilities Develop, negotiate and execute all contracts for supplies (clinical and nonclinical), pharmaceuticals, food, general services, clinical services (including both acute and continuing care services), information technology and equipment with the exception of capital management, research, employment and medical affairs contracts. The total number of contracts is approximately 3,900, with an estimated annual value of $3.1 billion.


Accountable for all competitive bidding and noncompetitive processes in compliance with relevant trade agreements and AHS policies.

Procurement of Equipment and Supplies

Acquire these and any other items needing a purchase order (with the exception of pharmaceuticals).

Distribution Logistics

Manage warehouses for the storage and distribution of medical/surgical supplies, along with the majority of AHS transportation, including commercial and noncommercial vehicles (except EMS) and surplus equipment.

Integrated Support Services at Program Level

Provide support services in zones, including distribution of supplies to patient care areas; receive all items and manage the flow of materials within facilities.

Risk Management

Manage risk through regular compliance review and monitoring of contracts, and manage automated business systems used in the delivery of supply chain services.

Supply Management

Manage disposal of surplus assets; manage fleet and support AHS business continuity planning through management of supply and equipment stockpiles.

Supply Chain Integration

Maintain the end�to�end integrity of the supply chain. Work with end users in supply spending management; support operational best practices. 

Business Systems Support

Supporting the business systems and technology transformation through deployment of Oracle to replace legacy inventory systems while improving business processes.

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The CPSM operating budget for 2016–2017 is $75.6 million, with a staff complement of approximately 881.5 FTEs located across the entire province and in the majority of facilities. The organizational structure of the team is depicted in Figure 7, which includes the scope of activities in the accompanying table. Figure 7. CPSM organizational structure


2015–2016 (Actual)

2016–2017 (Actual)

Purchase Order Value



Purchase Orders



Direct Buy Requisition to Purchase Order Cycle

1.1 Days

0.5 Days

Direct Buy Purchase Order to Receiving Cycle

16 Days

12.5 Days

Automated Purchase Orders (no touch end-to-end)



Online Requisitioning



Number of Contracts Completed



Value of Contracts Completed



Inventory Requisition Lines *New



Surplus Disposal- Landfill Avoidance



Product Quality and Safety Notices

1027 (51%)

1088 (48%)

The goal of the supply chain strategy is to create a highly integrated, system-level approach that leverages coordinated and centralized contracting, procurement and supply management to control the $8 billion supply chain portion of the AHS budget of $21.4 billion annually (12).

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The ultimate goal of the CPSM is to optimize supply chain processes to achieve value and cost savings for AHS. However, often in health systems cost savings are achieved, but the money “saved” gets spent on other items. Thus, reductions in health system costs are not achieved, contributing to the provincial deficit. The CPSM team works closely with program teams to find savings that can then be applied to achieve savings targets for each program: Most of it is, if we can save a dollar, if we’re running operational debt, it goes to the greater targets or deficit. So sometimes we have to write up a business case, but a lot of the savings that we achieve [go toward] operational deficits. Again, like CPSM, we don’t have the budgets for our ORs, so when they’re running deficits, we’re actually helping them meet their target. It’s not our target. But that’s where that engagement is so important. The CPSM team quickly identified the challenge of achieving significant cost savings. This required clarity in distinguishing cost savings versus cost reduction in their work with program teams. Many departments found savings but reinvested them back into the purchase of new or additional products, or used the savings to cover other program costs. Hence, reducing costs through supply chain optimization was not generating a monetary surplus: Cost reduction is, from a per-widget standpoint, I’m going to reduce your cost for that widget, but you may be buying more of it or buying new products that may not be on contract. Or you may have started buying newer stuff we are not aware of, so while I did reduce cost, and I have evidence of it, programs end up spending the $2 million on a whole bunch of other things. So if you bought more of the same item because you’re paying less, you were able to achieve savings.” In 2010, the very first year of the CPSM strategy, the projected savings were substantial for each of the programs. Table 2 profiles the scope and breadth of the categories of savings.

The Impact of Supply Chain Transformation |44 in Alberta Health Services, Canada .

Table 2. Projected spending and savings for AHS, 2010–2011 Product Categories

AHS Projected Spending
($ Mil)

2010–11 Projected Savings 
($ Mil)







IV Supplies



Lab Supplies



Medical/Surgical Supplies



Nonmedical/Surgical Supplies



Nutrition and Food



Other Spending, Including EMS









Wound and Skin Care



Office Supplies



CPSM Sourcing Savings



Rebates Total CPSM Sourcing Savings with Rebates and CPI Adjustment

5.3 2,103


The actual savings for year 1 of the CPSM strategy were validated and reported to the senior leadership as $50.27 million. These were net savings, aggregated from all CPSM contracts excluding Clinical and Community Services, Continuing Care, Managed Services and Consulting Contracts. The savings target set for CPSM for 2011–2012 was $70 million, and shifted the parameters that determined savings. Value-added (i.e., restricted) funding from vendors has not been included in these reported savings.

The Impact of Supply Chain Transformation |45 in Alberta Health Services, Canada .

In order to validate that savings were achieved, the Executive Leadership team requested an internal audit, conducted by an external audit firm, to review all data and provide feedback on the accuracy of the savings achieved across AHS. This audit comprised a detailed review of all purchase orders, receipts, supplier invoices and contract information that were accessed from multiple information systems in organizations across the province. At the time, the CPSM team had not yet developed a robust system for tracking these processes to accurately identify where savings had been achieved in each program. The savings shown in Figure 8 were reported to AHS leadership. Figure 8. Actual savings achieved across AHS as a result of CPSM integration

Source: CPSM General Strategic Plan, 2013–2016. The savings captured in Figure 8 were described as a partial representation of savings based on availability of data across the AHS system. The internal audit was conducted by an external firm to ensure the accuracy and validity of actual savings for Alberta Health Services. As of 2013, the CPSM team had completed 1,530 contracts with suppliers. The savings declared are based on reduced contract pricing and rebates received validated in the auditor’s report. The product category review, which the CPSM team undertook with clinicians, completed a detailed analysis for cardiology products, orthopedics and pharmacy. The analysis was based on actual product volumes and prices, using purchasing data obtained from legacy information systems as well as the Oracle ERP system. The following sections illustrate the return on investment for each of the programs that engaged in program review to optimize product savings.

1. Cardiology Analysis The main objective was to determine the savings achieved for the products procured and used in the cardiology program between September 2009 and January 2011, which provided a full year of data following implementation of the strategy. Cardiology programs are a high priority for inventory management, as the products are of high cost, and the program carries a degree of risk compared to other programs. The harmonization of contracts for all of the cardiology programs across the province was anticipated to be $14.8 million for this two-year period. When the cardiology data was analyzed and validated by auditors, price savings were identified at $18.56 million,

The Impact of Supply Chain Transformation |46 in Alberta Health Services, Canada .

approximately 25 percent greater than was estimated by the CPSM team. The analysis is further detailed in Table 3.

CPSM – Cardiology Analysis Table 3. AHS savings by product category and zone, September 2009 through January 2011 Savings by Product Category Stent - Bare Metal Stent - Drug Eluting Catheter - Balloon ICD Pacemaker Lead Totals

Volume Volume Expected Purchased (in 000) 8.80 6.20 18.00 1.20 3.64 11.20 49.04

Total $ Value


(in 000) (in mil) (in mil) 9.11 3.19 1.11 8.22 10.43 7.65 18.32 2.49 1.13 1.48 22.79 5.34 4.21 11.70 2.14 5.98 4.85 1.19 47.32 55.45 18.56

• Calgary and Edmonton Zones were the biggest spenders amongst all of the zones. • They also have 97% of all savings for cardiac products. • Spend in other zones is negligible due to concentration of cardiac program within these two cities.

• Drug eluting stents & ICDs contributed to the largest amount of savings even though actual volumes were higher than expected. • Leads were the only product category with lower than expected volumes.

Total Savings By Zone Calgary Zone Central Zone Edmonton Zone North Zone South Zone Total

2. Pharmacy Program Analysis

Total Spend (in mil) 21.65 1.20 31.97 0.00 0.63 55.45

Savings (in mil) 7.88 0.23 10.30 0.03 0.12 18.56


36% 19% 32% 750% 19%


When the CPSM program projected the initial savings for pharmacy in 2009, total savings for the pharmacy program for all zones across the province were estimated at approximately $17.7 million for 2010–2011, based on initial calculations in 2009. However, when the analysis of actual savings was initiated as part of the internal audit, a complete analysis of all pharmacy data was not possible due to different data definitions and classifications used by legacy pharmacy information systems in the various regions across the province. As an alternative, the decision was made to analyze the savings for the 15 most commonly purchased drugs in the Edmonton region for the 18-month period from September 2009 to February 2011. For each drug included in the analysis, the average purchase price for the earliest month in 2009 was used as the baseline price for comparison. The results of the internal audit and analysis reported savings of more than $676,000 for the top 15 pharmacy products in Edmonton (over the 18-month period). This figure includes a price reduction of more than $782,000 for one drug and an increase of $109,867.73 for three others. The pharmacy data analyzed is shown in Figure 11.

The Impact of Supply Chain Transformation |47 in Alberta Health Services, Canada .

Table 4. CPSM pharmacy analysis results The $676,915 price savings amount over the 18-month period is broken out across the 15 most common pharmaceutical product categories: Drug Number

Amount Spent




$ –



$ –






$ –



$ –



$ –



$ –






$ –



$ –






$ –









$ –




As benchmarks are created, the supply chain teams identify the efficiencies across jurisdictions, as well as staffing needs and labour costs. The key performance indicators (KPIs) measure progress and determine target goals and objectives. The primary goal of the strategy is to create an efficient supply chain with demonstrated fiscal savings,

The Impact of Supply Chain Transformation |48 in Alberta Health Services, Canada .

having the ability to properly measure and benchmark as a priority for supply chain. This is described by a leader in operations: We have KPIs for the operations that we keep, and KPIs that we look at regularly to see where the spikes are, and how we manage our business. … For our warehouses, the pick line [the process of how products are “picked” from the warehouse and sent to hospitals or clinical programs] per hour for the carts—it’s how many locators we have. We did a benchmarking across the province on how much it costs to manage one item on one cart. We’ve got about 37,000 [stock-keeping units] across the province. I was trying to do a staffing comparison to see where the efficiencies were, and all the different models, and we broke it down to the cost per locator, and were able to see [where we are]. The CPSM is required to achieve specific performance targets annually. The resources to fund the team are determined on the basis of their success in meeting the priority targets each year. In 2016–2017, the operating budget to support the CPSM team was $78 million, an amount that supported 881.5 FTEs, at 354 sites across the province. The portion of this budget allocated to the supply chain transformation described in this case is $3 million annually. The team working on the supply chain processes focus on data management and reporting initiatives, and system and process transformation specialists and project managers. The investment made to advance supply chain transformation in Alberta is described in Table 5. The one infrastructure investment in the strategy accounted for the cost to implement the Oracle ERP system across the province for $26,000,000. It is notable that Oracle implementation was limited whereby the inventory and warehouse management system was only implemented in one southern region (Calgary). The plan is to phase in the remaining ERP implementation of inventory systems across the province when the EPIC Clinical Information system implementation begins, anticipated in 2019.

The Impact of Supply Chain Transformation |49 in Alberta Health Services, Canada .

Table 5. Summary of investments and savings from supply chain transformation in Alberta Fiscal Year

CPSM Investments




$ 29,200,000

(Oracle ERP—acc’ts payable, costing, supply chain)

$80,000,000 (pricing standardization)

$3,000,000 (Labour) 2010–11

$3,000,000 (Labour)

$ 79,500,000


$3,000,000 (Labour)

$ 50,000,000


$3,000,000 (Labour)

$ 22,800,000


$3,000,000 (Labour)



$3,000,000 (Labour)



$3,000,000 (Labour)



$3,000,000 (Labour)





Despite the incomplete implementation of the ERP system across the province, the CPSM team has progressed over this four-year period in advancing the provincial warehouse and distribution strategy; completed pricing harmonization across the province; and is currently creating the infrastructure to support supply chain optimization, tracking and traceability from product manufacturer through to patient care utilization. The savings captured in Table 5 demonstrated a 7:1 return on investment (ROI) for the Alberta strategy to date. This significant ROI is impressive given that the savings do not account for inventory optimization in patient care programs such as surgery, cardiology or other high-cost settings. The most significant savings are yet to be achieved by the Alberta system as the supply chain infrastructure in clinical settings has not yet been introduced, nor has it been linked to cost savings from reduction of adverse events. In other global health systems, the most significant savings have emerged from inventory savings due to reduced product waste in patient care settings. The CPSM team anticipates implementation of the ERP system and inventory management systems across the province aligned with the implementation of the Epic clinical information system, commencing in 2019. The savings and return on investment will

The Impact of Supply Chain Transformation |50 in Alberta Health Services, Canada .

likely exceed the current savings when the fully integrated inventory management strategy is implemented to support tracking and traceability for every patient, care process and product used in care to eliminate waste and support safety and value in patient care outcomes.

Summary and Key Findings Health systems in Canada are governed by a federated model whereby each province and territory are autonomous in their accountability for the delivery of health services for their respective jurisdictions. The role of the federal government includes accountability for military and veterans’ healthcare, public health and First Nations healthcare, with limited influence on provincial jurisdiction decisions. The amalgamation of the AHS into a single, province-wide governance structure was a political decision by the Alberta government in 2008. The basis for the decision, as described by the Premier and the Minister of Health, was to strengthen efficiency and effectiveness of health services across the province. Analysis of the rationale behind this decision has been described as “hazy” in empirical publications (13), as performance of the Alberta regions ranked very similarly to other jurisdictions across Canada. The decisions of political leaders to restructure health systems is commonplace in Canada; it has resulted in many structural changes in health systems across the country as political leaders and their respective administrations are elected and implement priority platforms. Thus, in each Canadian jurisdiction there is a high degree of variability in how health systems are structured, how they are operated and the outcomes they achieve.

1. Leadership Strategy: Centralized and Self-Funded The decision by the Alberta government to consolidate all regions and health organizations under a single provincial governance model was a key opportunity presented to the leadership of the newly created AHS, despite the somewhat unclear goals and objectives underpinning the decision. The single governance structure offers a centralization of power and decision making across the province, with particular focus on resource allocation to drive performance. The consolidation decision was implemented when Alberta was considered a “resource-rich” province in Canada with a robust economic gas and oil industry as the primary economic base. However, in 2014, the price of oil declined substantially, dropping from a high of $108.93 per barrel in June 2014 to the current price of $46.00 (June 2017). Hence in 2008, when the initial decision was made to consolidate the health regions, there were ample provincial resources to support the investments in health system transformation, such as the new ERP system, and creation of a provincial warehousing and inventory system. Currently, the province is facing a budget deficit which has prioritized health system cost savings as a key priority. The province is now experiencing the considerable challenge of a $10 billion provincial deficit, placing very significant pressures on the AHS budget, which accounts for 39 percent of the total provincial budget expenditures. Under these circumstances, the efforts of the supply chain teams have focused very directly on cost savings and reduction of program costs.

The Impact of Supply Chain Transformation |51 in Alberta Health Services, Canada .

The vision and foresight of AHS leaders to pursue a province wide supply chain strategy was informed by consultant reports which identified the opportunity of a "quick win" of supply chain optimization when the consolidation strategy was being implemented. AHS leaders embraced these recommendations and have been the key driver that has informed and enabled the supply chain transformation strategy for the Alberta health system. The supply chain strategy has been centrally focused on achieving economic value in the form of contract savings, and cost reductions across the many programs of AHS. The key leadership driver behind this case is the goal of achieving cost reduction and program savings, while working towards a fully integrated supply chain model across the province. This case profiles the very significant influence of politicians on the structure and governance of health care systems in Canada. A key feature of the Alberta supply chain strategy is that it is self-funded, meaning that the AHS funding allocated to support CPSM team operations is the only funding available for its implementation. The CPSM team has leveraged two infrastructure initiatives to advance their province-wide supply chain strategy—the implementation of the provincial ERP system to create “one health system,” and the upcoming implementation of the Epic clinical information system infrastructure—to link supply chain information systems to clinical patient information systems. The nuance of political pressure and centralized leadership power on health system performance in Alberta was evident when the ERP system was implemented over such a short timeline that performance outcomes were negatively affected in high-profile programs in one region in the province. This outcome is consistent with what is common in Canadian health systems: the risk aversion among Canadian health system leadership given the strong link between leaders who want to operationalize health system strategic priorities, and political leaders who want to direct priorities and hold health system leaders accountable for performance outcomes. The leadership approach driving the AHS supply chain strategy has been one of collaboration focused on partnering with program and clinician teams to support and enable them to leverage supply chain approaches, optimize their program processes and achieve annual budget targets. The CPSM team assumes the role of expert consultant to program teams for the purpose of building relationships and awareness. A pervasive theme in this case study is the consistent focus on the drive to achieve cost savings and cost reduction across programs or teams across the province. The collaborative strategy used by the supply chain team builds relationships with teams across the province, helping to build profile for the CPSM team as the “go to” support to assist all teams in achieving their program targets and outcomes. Relationship-building has created awareness of how supply chain processes and approaches can serve as a key enabler of program success. The CPSM team views this as an important strategy to foster these relationships among programs and teams so that when the supply chain strategy advances to point of care implementation, they will be able to rely on well-established relationships to initiate point of care scanning.

The Impact of Supply Chain Transformation |52 in Alberta Health Services, Canada .

2. Supply Chain Integration Across the Provincial System The AHS supply chain strategy has achieved a centralized supply chain infrastructure to date, including three key dimensions: (1) a centralized warehouse and distribution strategy, (2) a provincial data infrastructure to support “one health system” and (3) collaboration with program teams to achieve cost savings. Integration of supply chain with clinical infrastructure is the next step in the strategy, and planning is underway as the Epic clinical information system is due to be implemented in 2019. •

Data Infrastructure. This is one of the key supply chain achievements to date for the Alberta supply chain strategy. The CPSM team has created a provincial item master that, once it is advanced to include all programs in the province, will comprehensively consolidate and streamline all supply chain processes using validated and accurate product identification data. The item master is also a key enabler for a fully integrated supply chain to support tracking and traceability of products from manufacturer through to patient outcomes, once the clinical information system is implemented and integrated with supply chain infrastructure. This achievement is significant given the lack of policy or legislation in Canada requiring suppliers to label all products with global standard identification, accompanied by product attribute data, to support patient safety. Alberta is widely viewed as the first, perhaps the only, health system with a provincial item master that is a key enabler of a highly integrated supply chain infrastructure for health systems. The second key achievement relative to data infrastructure in Alberta is the online adverse event reporting system, which is unique among Canadian health systems. One of the key priorities for Alberta’s supply chain strategy was quality and safety, following a series of adverse events that resulted in patient harm. The online adverse event reporting system offers a provincial dashboard that creates visibility of safety and adverse events across the province. This digital system will be a key asset for Alberta’s supply chain strategy once the team has completed province-wide implementation to include point of care scanning. This achievement will represent full integration of supply chain and clinical infrastructure analysis of safety outcomes and trends, linking supply chain information on products, patients and outcomes to safety indicators. Information on adverse events will include data on the impact of these events on patients, strategies to resolve them, and prevention of the use of unsafe products, processes or equipment across the system. This very robust reporting system is a significant achievement that will position Alberta as a global leader in supply chain infrastructure.

Central Warehouse and Distribution Optimization. The Alberta supply chain strategy leveraged the provincial ERP infrastructure to advance their warehouse and distribution strategy. The motivation was to offer control and visibility over all product procurement, contracting and sourcing, and product distribution across the province. The vast geography of Alberta and the number of remote communities make product distribution challenging and expensive. The vision of

The Impact of Supply Chain Transformation |53 in Alberta Health Services, Canada .

the Alberta team is not only to bring control over inventory management provincially, but also to find cost savings by centralizing warehouses for suppliers to deliver to only one location, rather than multiple locations across great distances. Consolidated inventory of products can also offer cost savings by optimizing inventory levels across the province to carry less inventory by reducing duplication across sites. Control over inventory provincially offers AHS the capacity to consolidate and reduce inventory costs because the distribution strategy can move product to locations across the province when and where needed. Internal management of warehousing and distribution has been implemented in other health systems, including the National Health Service in England and Mercy Health in Missouri. •

Clinician Engagement. The Alberta strategy had a strong focus and prioritization on building relationships and collaborative initiatives with clinicians and clinician teams across the province. The CPSM team created a number of initiatives to engage clinicians in reviewing programs to strengthen supply chain processes and meet budget targets. This strategy was successful in highlighting the value that the supply chain team could offer programs and clinician teams. Product review opportunities for specialized programs such as pharmacy and cardiology were structured to engage clinicians and ensure that clinicians made the decisions on product standardization, informed by data and evidence provided by the supply chain team. This engagement strategy focused first and foremost on relationship management, ensuring that clinicians were well informed. The data necessary to make informed decisions created the opportunity for collaboration with these specialty teams. The focus on building relationships was an important strategy for the AHS team, given the somewhat negative engagement they experienced while implementing the ERP strategy, which resulted in supply chain failures for some surgical programs. The relationship management strategy was important to build credibility between the CPSM team and clinician teams to overcome previous concerns and to build the capacity to work collaboratively, advance efficiency and optimize cost savings in program teams. Clinician engagement will be an important asset in future, as the CPSM team proceeds to work closely with programs and clinician teams to implement point of care scanning in patient care settings. This achievement will complete the full integration of supply chain and clinical care infrastructure across the province.

3. Return on Investment The Alberta supply chain strategy has demonstrated impressive returns on their investment, demonstrated by a seven-fold savings of over $261,000,000 since commencing the strategy in 2010. The financial savings, audited by an external agency, demonstrate a significant return on investment for the Alberta health system. The level of savings is an outcome of price harmonization, inventory optimization in key programs and program-level savings achieved through collaboration with selected program teams. While the savings are substantial, what is much more impressive is the potential savings the AHS team is now well positioned to achieve, given that supply chain optimization has not yet been implemented in high-cost programs such as surgery,

The Impact of Supply Chain Transformation |54 in Alberta Health Services, Canada .

cardiology and interventional radiology, to name a few. In addition, Alberta is poised to become the first health system to link patient safety outcomes to tracking and traceability of products, patient care processes and patient outcomes. Although the ROI is very impressive to date, it will very likely continue at even greater levels when point of care scanning is implemented across the province to optimize inventory in surgical and specialty programs. These costs account for the most significant portion of inventory costs for health systems. The Alberta supply chain infrastructure and strategy have demonstrated impressive impact and outcomes to date, despite being limited by the requirement to self-fund the strategy while at the same time demonstrating cost savings and cost reduction targets annually. The return on investment is substantial, which is remarkable given they have not yet realised savings across the province in the highest-cost programs. The digital online adverse event reporting system is among the most comprehensive among health systems, and a significant asset as Alberta continues their supply chain integration strategy with the upcoming implementation of the clinical information system, scheduled for 2019. As Alberta continues to face significant financial pressures, the consolidated provincial health system strategy, coupled with the province-wide, integrated supply chain strategy, positions AHS to make significant progress towards a high-performing, sustainable and safe health system.

The Impact of Supply Chain Transformation |55 in Alberta Health Services, Canada .

References 1.

Statistics Canada. 2017. Population by year, by province and territory (Number).


Alberta Health Services. 2018. About AHS.


Alberta. 2008 (May 15). One Provincial Board to Govern Alberta’s Health System.


Alberta Health Services (AHS). 2010. Our History. 2010. "


Alberta Health Services. 2012. Strategic Direction 2009–2012.


Alberta Health Services. 2010 (November). Becoming the Best: Alberta’s 5-Year Health Action Plan, 2010–2015.


Canadian Medical Association Journal. 2004 (May 25, vol. 170, no. 11). Responding to Tragic Error: Lessons from Foothills Medical Centre. .pdf.


Agency for Healthcare Research and Quality. 2016. The Six Domains of Health Care Quality.


Alberta Health. 2017 (December 1). Health Funding Forecast: 2017 Q2 Update.

10. Canadian Institute for Health Information. 2018. 11. Pascal Metrics. 12. Giang, D. 2016. The Drive to Reducing Supply Chain Cost: And Picking Up a GHX Award Along the Way. Alberta Health Services. 13. Donaldson, C. (2010, August). Fire, aim… Ready? Alberta’s big bang approach to healthcare disintegration. Healthcare Policy, 6(1): 22–31.

The Impact of Supply Chain Transformation |56 in Alberta Health Services, Canada .

Contributors The World Health Innovation Network would like to acknowledge: Dr. Verna Yiu, AHS Mr. Jitendra Prasad, AHS Contracting, Procurement and Supply Management Team AHS GS1 Canada

Produced by: Dr. Anne Snowdon, Academic Chair, World Health Innovation Network, and Scientific Director & CEO, Supply Chain Advancement Network in Health, Odette School of Business, University of Windsor Original release date: February 2018 World Health Innovation Network T: 519.253.3000 x6336 E: Windsor, Ontario

Profile for WIN | SCAN Health

Final for release ahs case feb 14 926am  

Final for release ahs case feb 14 926am  


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