Executive Summary
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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Executive Summary Introduction This case study is one of a series titled The Impact of Supply Chain Transformation in Health Systems. The purpose of these case studies is to examine real-world evidence of impact and progress of supply chain transformation in health systems, designed to achieve improved health system outcomes such as safety, quality and 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.
AHS Canada Supply Chain Strategy In 2008, the government of Alberta made the decision to amalgamate all health regions in the province into a single, publicly funded health system, now known as Alberta Health Services, to achieve a more efficient and streamlined health system for both patients and professionals. 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, and contracting and procurement services, all embedded in this vision of “one health service.” The supply chain strategy was identified as a “quick win” by senior leaders and consultants’ reports. The vision was to achieve a “clinically relevant” supply chain strategy across the province, leveraging the province-wide infrastructure supporting the “one system” mandate.
AHS Supply Chain Implementation Strategy Implementation of the supply chain strategy began with a decision in 2010 to implement enterprise resource planning (ERP) to support province-wide governance. This project was an opportunity for the contracting, procurement and supply management (CPSM) team to leverage the implementation of the ERP infrastructure across the province in order to advance the goals and objectives of the supply chain strategy for Alberta. Additional components of the supply chain strategy included price harmonization, provincial item master and data infrastructure, as well as a centralized warehouse and distribution infrastructure. Implementation of ERP Across the Province: The ERP was required to be implemented within an 11-month period. Stakeholders experienced many challenges during this process, resulting in a new recognition and appreciation of the contribution of supply chain in the delivery of patient care. Senior leadership and program teams became aware of the risks associated with supply chain challenges and the interruptions to clinical care in priority programs, such as surgery. The provincial ERP system was a challenge to implement, but has now become an important platform and a key asset.
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Price Harmonization and a New (Centralized) Procurement: The price harmonization phase of the strategy was designed to ensure consistency in pricing and supplier contracts across the province. The harmonization process included creating a standardized item master of products that will be used for all procurement and contracting when fully implemented. Price harmonization and product category analysis were two initiatives undertaken that resulted in substantial savings for specialty programs. Province-wide Item Master and Data Infrastructure: As the ERP implementation was completed, a master item list, containing a comprehensive index of products identified using global standards, was consolidated with item-level data. Each item in the item master was assigned a unique number, generated from the ERP system, with plans in the future to adopt GS1 standards to support the global trade identification number (GTIN), obtained through the Global Data Synchronization Network (GDSN). The AHS team has partnered with industry to support product identification using global standards, and worked with vendors to agree on product attributes and accurate product information, which are key enablers of an integrated supply chain strategy for health systems. Centralized Warehouse Strategy for the Province: Alberta leaders identified warehousing as one of the key strategies to advance their supply chain infrastructure, creating a system to stock and distribute supplies to all the sites across the province. The centralized warehouse and distribution strategy offers the advantage of greater visibility of product inventory, reduced duplication of products and reduced surplus that contributes to waste. The warehousing strategy 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: Clinician engagement was identified by the CPSM team as an integral part of a successful supply chain strategy. The vision for the Alberta strategy was to create a clinically relevant supply chain infrastructure across the province. The clinician engagement strategy focused on clinician input and decision-making accountability on new products, and evaluation of existing products, to inform procurement. This strategy ensures that clinicians and stakeholder perspectives are deeply embedded in supply chain processes as a key feature of AHS strategy. Engagement of supply chain and clinician expertise supported a collaborative approach to identifying new innovations and technologies that would bring value to programs. Integration of Supply Chain Processes with Adverse Event Reporting: Safety and quality were identified as key priorities for the Alberta supply chain strategy, informed by the six dimensions of quality of the Health Quality Council of Alberta. A comprehensive digital adverse event reporting system offers a dashboard able to track and report adverse events to enable patient safety and medical device teams to follow up on all actionable events across the province. The patient safety team analyzes data and outcomes to identify trends across organizations to achieve a truly system-wide adverse event reporting system that enables and informs risk mitigation strategies. A performance summary (e.g., analysis of actions and orders) is reported to executive leadership and to zone leadership to inform strategic decisions that will improve and strengthen safety across the Alberta health system.
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Findings Return on Investment (ROI) and Impact of the AHS Supply Chain Strategy: The opportunity for supply chain transformation to contribute to the reduction in health system costs across the province continues as a key strategy by AHS leaders. Key programs were engaged by the supply chain team to find program savings and standardize inventory costs. Contract Harmonization Cost Savings: The harmonization of contracts for all the cardiology programs across the province achieved cost savings of $18.56 million, approximately 25 percent greater than was estimated by the CPSM team. A cost analysis for the 15 most commonly purchased drugs in one region revealed savings of more than $676,000. From 2010 to 2014, the CPSM team demonstrated a 7:1 return on investment, capturing $261,000,000 in total savings as of 2013. The supply chain strategy investment included $26,000,000 for the ERP implementation and $3,000,000 annually in operational costs to support the supply chain team, for a total investment of $36,000,000. To date, the supply chain strategy is essentially unfunded, as the CPSM team supports all supply chain initiatives within its current operational funding. This significant return on investment is impressive, given that the savings do not account for inventory optimization in patient care programs, and that integration of point of care scanning into clinical programs has not yet been completed.
Conclusion The most significant savings and return on investment for AHS are yet to be achieved, as the supply chain infrastructure in clinical settings continues to be implemented in programs across the province. Alberta is well positioned to continue to achieve substantial savings as the fully integrated inventory management strategy progresses with the upcoming implementation of the clinical information system, commencing in 2019. The Alberta supply chain infrastructure and strategy have had impressive impacts and outcomes to date, despite being limited by the requirement to self-fund yet at the same time demonstrate annual cost savings and cost reduction targets. The return on investment is substantial—a remarkable fact, given that AHS has not yet realized savings in the highest-cost programs across the province. The digital online adverse event reporting system is among the most comprehensive among global health systems, and is a significant asset as Alberta continues their supply chain integration strategy, with the upcoming clinical information system implementation scheduled for 2019. As the province continues to face significant financial pressures, the consolidated health system strategy, coupled with the province-wide, integrated supply chain strategy, positions Alberta to make significant progress towards a high-performing, sustainable and safe health system.
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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: winhealth@uwindsor.ca Windsor, Ontario