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The Impact of Supply Chain Transformation in Health Systems Case Study: Mercy Health, U.S. Dr. Anne Snowdon RN, BScN, MSc, 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 A History of Mercy Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Mercy Health Supply Chain Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Resource Optimization and Innovation (ROi) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1. Engage and Collaborate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2. Contract and Source . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3. Manufacture and Package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4. Warehouse and Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5. Manage and Use Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 6. Connect and Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 The Perfect Order: Mercy Health, First in Nation to Implement End-to-End GS1 Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1. BD and Mercy/ROi’s Perfect Order Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2. ROi Achievements to Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Transformation of Healthcare Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 1. Leadership Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2. MDEpiNet Demonstration Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Execution of the Supply Chain Strategy as a Strategic Asset for Health System Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 1. Integration of Supply Chain Strategy into Clinical Programs: “You Come to My World and I’ll Come to Your World” . . . . . . . . . . . . . . . . . . . . 25 2. Achieving Clinician Engagement in Supply Chain Strategy: “Winning the Hearts and Minds” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 3. Establishing Control Over Information and Data: Information Infrastructure to Achieve Transparency of Data in Real Time . . . . . . . . . . . . . . 42 System Outcomes of Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 1. Quality of Clinical Care Outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 2. Operational Outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 3. Financial Outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Real-World Evidence: “The Promise of the Future” . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Summary and Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Contributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

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Introduction and Background This case study is one of a series titled The Evidence of Impact of Supply Chain in Global 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. Little is known, or has been documented, of how supply chain transformation has been implemented at the system level, the return on investment of these initiatives or the evidence of impacts achieved relative to health system outcomes. The following case examines the progress of a supply chain strategy implemented across Mercy Health, headquartered in St. Louis, Missouri. This case study will provide an overview of the progress of Mercy Health, their leadership strategy, and the outcomes and impacts that supply chain transformation has had in advancing their performance. The World Health Innovation Network (WIN) has been conducting research in health system supply chain and has successfully established 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 are 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 analysis of observations, public reports, online publications and key informant interviews of stakeholders across Mercy Health. All data excerpts cited in the case include combinations of direct informant responses in order to protect anonymity and confidentiality of participants.

A History of Mercy Health Mercy Health was founded by the Sisters of Mercy in 1986, building on a heritage of work dating back more than 185 years, when an Irishwoman named Catherine McAuley wanted to help the poor women and children of Dublin, Ireland. In 1827, the first House of Mercy was opened in Dublin, and a few years later, Catherine McAuley founded the Sisters of Mercy, whose Sisters were free to walk among the poor and visit them in their homes. The Sisters of Mercy were among one of the world’s first religious orders not to be cloistered (i.e., confined to prayer in a convent). Instead, they went out into the communities where they lived to feed the hungry, care for the sick and provide education. They were known among the citizens as the “Walking Sisters” because of this unique way of life dedicated to supporting community health and well-being (1). In 1843, the Sisters of Mercy came to the United States, and the first Mercy hospital in the world opened in Pittsburgh, Pennsylvania, in 1857. In 1871, the Sisters travelled to St. Louis, and from there throughout the Midwest. They began to establish healthcare organizations, each one functioning autonomously to serve the unique needs of its

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community. In the late 1800s, the Sisters of Mercy in St. Louis worked with United Railways Company to offer its employees the first pre-paid health insurance in the country. Around the same time, the Sisters of Mercy in Joplin, Missouri, did something similar by offering care to miners for as little as 25 cents a week. Many of the thriving hospitals built by the Sisters of Mercy began in unexpected places based on their foresight of how the population would shift. Mercy Hospital in St. Louis was once an apple orchard, and Mercy Hospital in Oklahoma City was originally built on a cow pasture. Sisters of Mercy Health, which was formed in 1986, was transitioned to a single health system organization in 2011, now known as Mercy, spanning four states— Missouri, Arkansas, Kansas and Oklahoma—with outreach to an additional three states (Mississippi, Texas and Louisiana). For a number of years, Mercy has been widely recognized for its achievements in health system performance, technology and excellence in supply chain strategy. In 2017, Mercy was named to the top 15 health systems in the United States for quality and performance, evaluated among 337 health systems for overall performance in inpatient outcomes, process of care, extended outcomes, efficiency and patient experience (2). Mercy Health is the fifth largest Catholic health system in the U.S., including 33 acute care and 11 specialty hospitals (specifically, heart, children’s, orthopedic and rehabilitation), with over 700 physician practice facilities, 40,000 co-workers and 2,000 physicians (1). Figure 1 illustrates the geographic reach of Mercy and the size and scope of its operations. Figure 1. Overview of Mercy services and locations An Overview of Mercy

Services & Locations

June 2017

Source: Moore, V. 2017. (3)

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Mercy is ranked 427th on the Fortune 500 companies listing with $6.2 billion in operating revenue. It offers a single, (EHR) system across all organizations in the system, and is a recognized leader in telemedicine. Mercy’s Virtual Care Center is the world’s first such facility able to monitor patients centrally from a single site, overseeing patient care remotely, 24 hours a day, seven days a week. Services include monitoring 478 critical care beds across four states; Telestroke services across 33 sites; TeleSepsis; eVisits that support patient self-care using electronic messaging with clinical teams housed at the virtual care centre; home health remote monitoring (3,800 patients); after-hours triage and clinical staff support; and Nurse On Call services, managing 285,000 calls per year. Mercy has been accepted by the Centers for Medicare & Medicaid Services (CMS) to operate two accountable care organizations (ACOs). ACOs are organizations formed by groups of doctors and other healthcare providers that collaborate in caring for patients covered by Medicare, with a focus on keeping patients healthier while eliminating unnecessary expenses. Mercy operates 3,945 staffed beds; offers an obstetric program that delivers 24,217 births annually; and in 2016, provided 171,183 surgeries, 165,315 inpatient discharges, 9,198,526 outpatient/office visits, and 664,551 ED visits (2016 annual report). Total operating revenue was $5.3 billion in 2016, with $6.4 billion in total assets; provision of community benefits and charity care totalled $394 million (3). Mercy is well known for advances in technology and supply chain operations, which have been consistently ranked among the top health systems in the U.S. Notable are just a selection of awards for their achievements to date: •

Named Most Wired healthcare system by the American Hospital Association, the 13th time they were awarded this recognition (4).

Named Gartner 2016 Healthcare Supply Chainnovators Award, saving upwards of $9 million over the year in surgery-related costs, the second such award they received in three years (5).

Named an Elite 100 finalist by InformationWeek for Mercy’s information technology (Mercy Technology Services) (6).

It is Mercy’s recognized expertise in health system supply chain that is the focus of this case.

Mercy Health Supply Chain Strategy In the early 2000s, supply chain leaders from Mercy believed there was a better approach to overcoming the challenges of the U.S. healthcare business model. It was a system characterized by rapidly changing funding schemes and misaligned or inefficient supply chain operations. Like many health systems, Mercy utilized a traditional supply chain model, which was fragmented and inefficient, with duplication of processes across the many Mercy organizations. Each of Mercy’s hospitals operated its own supply chain

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processes independently. Group purchasing organizations (GPO) were used primarily for contracting, and distributors such as Owns and Minor were subcontracted to manage all of the distribution of products to Mercy organizations. In this traditional model, supplier sales representatives had stronger relationships with Mercy leadership than with supply chain teams, who simply implemented contracts. Mercy leaders viewed supply chain as a potential strategic asset that could internalize and integrate critical dimensions of technology, optimize inventory and standardize processes. Their vision and mission were to transform clinical, operational and financial performance of Mercy Health through an integrated supply chain strategy. They established four strategic goals: 1. Give clinicians a voice, engaging them in making unified strategic purchasing decisions. 2. Align organizational stakeholders to empower leaders to focus on the entire organization, using broader, mutually established goals. 3. Minimize waste by overhauling and optimizing the ordering, packaging and delivery of products. 4. Enable providers to spend more time on patient care by introducing efficient, seamless supply chain processes. A key focus of the organization was to engage clinicians in supply chain purchasing decisions to ensure that only the best products for patient care were used in practice, and optimizing processes to liberate clinician time from managing supply chain issues, such as product inventory in clinical units. To operationalize their vision and mission, Mercy leaders created a spin-off corporate entity now known as ROi (Resource Optimization & Innovation) Inc., a service delivery organization, to manage all supply chain services for the entire Mercy system. The founding president of ROi, Lynn Britton, was widely viewed as a visionary leader who understood the value and opportunity of supply chain as a strategic asset for health systems. A Mercy senior leader describes him: In the truest sense of the word, Lynn is a pioneer—“one who ventures into unknown or unclaimed territory to settle.” Supply chain was Lynn’s brainchild, and today it is an enormous differentiator for Mercy because it allows us to sustain a health care ministry in very difficult times. Historically, hospitals have outsourced supply chain, but Lynn saw it as a part of our core strategy to keep our ministry afloat. In essence, we have done what [large retailer] has done, cutting out the middleman so we can better serve our communities. (7) Mercy’s strategy was to transition all outsourced supply chain and warehousing services to in-house management by its newly created ROi Inc. division. Removing all

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outsourcing to external commercial companies for contracts, transportation and distribution of products led to a reported savings of 15 to 30 percent annually. (7) Once launched, ROi managed all such services for Mercy, contracting with other health systems to further drive revenue for the organization. The health systems that have partnered with Mercy also report similar value and achievements: “We are under incredible pressure to find ways to continue to provide better health care with fewer resources,” said John Finan, Jr., president and CEO of Franciscan Missionaries of Our Lady Health System (FMOLHS) in Baton Rouge, Louisiana’s largest nonprofit health care system. “Because of Mercy’s innovative thinking with supply chain, we partnered with ROi in 2011 to replicate Mercy’s supply chain model. We are already reaping the benefits.” Bruce Holstien, president and CEO of Spartanburg Regional Healthcare System in South Carolina, and a partner of ROi, added, “Like many others, we face significant challenges in today’s health care environment. A strategic approach to supply chain management is critical to our system’s future success.” (7) ROi Inc., owned by Mercy, delivers a full range of supply chain services to Mercy and other health systems across the U.S. These are described in the following section.

Resource Optimization & Innovation (ROi) Resource Optimization & Innovation (ROi), a healthcare supply chain management company, was founded through Mercy in 2000 (8). ROi works with healthcare providers across the U.S. to provide end-to-end supply chain solutions (8). It is essentially the leadership capacity and technological infrastructure that has transformed supply chain processes across the Mercy system, creating a suite of services that combines the activities of group purchasing organizations (GPO), distribution, manufacturing and supply chain consulting (8). Gene Kirtser, the current CEO of ROi Inc., describes the organization: Not only is Mercy benefitting but, today, ROi is partnering with health care systems across the country to lower costs and re-engineer the supply chain while providing the highest levels of patient care and safety. … This is the right thing to do for health care across the nation. (7) ROi Inc. delivers all aspects of health system supply chain processes and services, from contracting and sourcing to manufacturing, distribution, storing and shipping (9). ROi describes its services as an “integrated model” with the following service delivery areas: (1) engage and collaborate; (2) contract and source; (3) manufacture and package; (4) warehouse and transport; (5) manage and use; and (6) connect and share. These are illustrated in Figure 2 and described in the sections that follow.

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Figure 2. ROi: Perfect order and beyond

Source: Dudley, C., and Black, D. 2012. (9)

1. Engage and Collaborate ROi has strategic focus on aligning clinician teams and patient care delivery processes to supply chain services and measurement of outcomes to inform and advance what they refer to as a “clinician aligned strategy.” This includes engaging with clinician teams to create a strategy that optimizes supply chain processes linked directly to patient-focused quality, safety and performance outcomes across provider organizations (10). ROi services that “engage and collaborate” include the following: •

Supply Chain Assessment and Strategy Development: A tailored supply chain strategy is created by the ROi team to align with each organization’s strategic goals. A collaborative partnership between providers and the ROi team seeks to create a higher level of transparency, focused on demonstrating value through a collaborative decision-making processes.

Physician and Clinician Alignment: Clinical integration is supported by the ROi team working directly with physicians and other clinicians to understand patient care needs and the essential requirements of care delivery so that supply chain processes can be tailored to meet the needs of clinicians to deliver patient care. This approach enables the ROi team to identify strategies that achieve optimal

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value from supply chain processes such as contracting and procurement. The ROi team partners with clinician teams to work through decisions jointly to select products and provide teams with information about new products or information technologies.

2. Contract and Source Another strategy engaged by ROi is working with clinician teams to manage the evaluation and procurement of products during both contracting and sourcing processes. Standardization of products to optimize inventory, reduce waste and maximize value of outcomes linked to product utilization is a key focus of ROi contracting and sourcing services (10). ROi essentially provides an alternative to a GPO with a portfolio of over 1,000 contracts for all aspects of products and healthcare services. ROi also offers local contracting, stakeholder engagement and pharmacy services (10), as follows: •

Custom and Local Contracting/Non-Acute Sourcing: ROi has created a spin-off organization (HPA), acquired in September 2017, to negotiate custom and local contracts and assist organization providers to expand contract coverage for all supplies and services in both acute and non-acute care markets.

Regard® Private Label Products: A private-label program, the first of its kind owned by a private health organization in the United States called Regard®, offers high-quality products at lower prices by removing the intermediaries from the supply chain. Regard® private-label products are provided at lower cost to Mercy organizations and other partnering health systems.

Service Line Management: Service line management uses a collaborative approach to aligning stakeholders in the decision-making process for products and services, including pharmacy, laboratory, orthopedics, neurology/neurosurgery, imaging, core nursing, food and nutrition, environmental services, facilities and engineering, IT, administration and ambulatory. This ROi service provides each organization and provider partner a voice in contract decision-making.

Pharmacy Solutions: A customized approach to managing pharmacy costs using solutions developed from years of experience working with providers focuses on achieving clinical, operational and financial results for pharmacy services.

3. Manufacture and Package These services offer manufacturing and packaging of select healthcare products (10), including the packaging of individual surgical packs, tailored for clinician teams to ensure the right products are available, but which are standardized to reduce inventory costs and contribute to value. Medical device reprocessing includes the cleaning and reuse of equipment to reduce costs (10). A pharmaceutical safety program provides

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standardizing pharmaceutical packaging with barcodes for bedside scanning, as well as automated medicine-dispensing cabinets for clinicians (10). Risk mitigation to avoid shortages includes procurement strategies for comparable products, relationships with suppliers to avoid shortages, and strategies to improve hospital consumption (10). •

Custom Pack Solutions: Custom pack solutions (CPS) offers customized surgical packs tailored specifically for clinical end-users to offer savings from reduced waste of surgical products.

Medical Device Reprocessing: Cleaning and reusing non-critical medical devices reduces costs. Reprocessing also reduces the cost of medical waste in landfills. ROi’s reprocessing methods are consistent with guidelines from the Centers for Disease Control and Prevention (CDC) and the Association for Professionals in Infection Control and Epidemiology (APIC). ROi reports that one million devices are collected annually and reprocessed, resulting in $565,000 in yearly cost savings and avoiding 85 tons of landfill waste.

Pharmaceutical Repackaging: The pharmaceutical repackaging program uses medication-dispensing machines, bedside scanning and verification equipment to track medication all the way to patient consumption.

Print Solutions: A full-service commercial print shop offers offset and digital printing, copying, binding, word processing, typesetting and graphic design services.

4. Warehouse and Transport Warehouse and transportation services managed by ROi offer complete control and autonomy over the distribution of health products across the entire Mercy system. ROi optimizes central supply operations and manages complex distribution and transportation operations across the system. •

Consolidated Services Center Design and Operations: The complex distribution and transportation operations are managed by a consolidated services centre (CSC), which employs 350 full-time equivalents (FTEs) to support and service the entire Mercy Health. A self-distribution model and the CSC act as a platform for eliminating costly services provided by third parties, while at the same time creating tailored services to meet organizational needs. An integrated supply chain approach optimizes supply distribution through sophisticated inventory management and consolidated transportation solutions, while leveraging technology to streamline the flow of information and provide real-time data and dashboards to inform decision-making.

Transportation Management: A sophisticated transportation and logistics function includes one of the largest privately owned transportation fleets in the United States, with more than 125 vehicles servicing nearly 2,000 locations. The

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logistics network uses global positioning software to dynamically track and route vehicles; real-time package tracking software identifies an order at any given time, optimizing the management of supplies to hospitals (11). One of the services provided is real-time package identification so that hospitals can identify, and thus “see,” where their orders are at any time (10). This state-of-the-art, 100,000-square-foot CSC in Springfield, Missouri serves as a consolidated and centralized “ship-to” location for all vendors, while guaranteeing next-day delivery and industry-leading service levels on stocked items to each Mercy organization. Self-distribution and warehousing give Mercy control over their supply chain system supported by service flexibility, improved end-to-end process alignment and visibility, and better overall quality and efficiency of transportation and distribution services. The CSC is also used for central record storage, bulk-buy storage, pandemic supply storage and commercial print services.

5. Manage and Use Services ROi offers a number of management solutions to execute Mercy’s fully integrated supply chain system. Services include contingent workforce solutions; physician preference items (PPI) optimization for medical device implants; supply chain consulting; and supply chain management, utilization and standardization programs (10). Contingent workforce solutions assist with managing staffing challenges such as staff shortages, the use of contingency (temporary) staff, hiring and training staff (10). This includes working with temporary contractors, independent contractors or consultants to help scale and manage gaps in workforce resources while also minimizing overhead, cost and lost productivity. ROi documents up to 30 percent savings in the costs related to managing contingent work force challenges for the Mercy system. Medical device implant solutions focus on optimizing PPI in the perioperative program to reduce the waste of medical devices and streamline implant utilization in surgical procedures. Partnerships with equipment manufacturers offer cost reduction by eliminating the distributers and sales force costs associated with product pricing. Inhouse supply chain consulting and supply chain operations management teams provide medical devices support for the entire Mercy system, focusing on standardization and product visibility, to improve inventory operations (10). Extensive physician leadership and engagement have supported the design and implementation of ROi’s medical device implant solutions, which distributes and services spinal implants directly to Mercy hospitals and provider partners at a reduced cost. The cost of PPI, including spinal implants, increases between 6 to 12 percent annually, placing significant pressure on hospital budgets. ROi estimates that 42 percent of the cost associated with these products comes from sales and marketing expenses. Sales representatives are incentivized and commissioned to sell more implants to hospitals than what is needed, and higher supplier revenue drives higher costs for healthcare systems. Cost savings of medical devices have been substantial for Mercy hospitals.

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Consulting services leverage ROi’s clinical and operational expertise with industry and clinical program experience to provide pragmatic supply chain solutions for Mercy organizations and partners. Examples of the consulting services offered include the following: •

Value Analysis: evaluates product options through collaborative decision-making to improve quality and safety while reducing costs.

Formulary Development: ensures an enterprise-wide supply drug formulary.

Utilization Management: develops and implements tools to control spending in key areas.

Metric Development: develops key supply chain metrics to measure clinical, operational and financial performance impact of supply chain outcomes.

Operations/Logistics Services: apply process improvement tools such as Lean principles and Six Sigma™ methodologies for supply chain assessment to identify opportunities for ownership and control over supply chain processes. Improved flexibility, end-to-end process alignment and visibility leverages the CSC and transportation network.

Supply Chain Management Operations: include central sterile instrument reprocessing, supply/linen distribution, mailroom, receiving, recalls, crash carts and inventory management, with consulting on supply chain processes in the OR, cath lab, ED, environmental services and general nursing areas as well as centralized shared services such as purchased services and item master and data content services.

Utilization and Standardization Programs: provide visibility of product utilization and on-hand inventory at or near the point of care. This program identifies opportunities for additional value by standardizing and consolidating products/services, optimizing contracts, utilizing products and services that are aligned with industry standards, and optimizing on-hand inventory and replenishment quantities and cycles.

6. Connect and Share ROi serves as an expert resource for partners sharing lessons learned, leveraging their experience and successes to create opportunities for collaboration with other healthcare partners well beyond supply chain services. Services in this category include working with EHR systems such as Epic, telemedicine and revenue management services. Mercy, a pioneer in telehealth, operates the largest single-hub telemedicine centre in the country. Mercy Virtual’s mission is to connect patients with leading care providers whenever and wherever they need help in order to support and enable care delivery for patients across the Mercy system. Telehealth technology provides any community with

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care that is accessible, affordable and effective. Mercy Technology Services (MTS) has nearly a decade of first-hand Epic EHR experience and supports 40,000 Epic users across the seven states. MTS brings their provider-based information technology experience, solutions and services to healthcare organizations that partner with ROi.

The Perfect Order: Mercy Health, First in Nation to Implement End-to-End GS1 Standards In 2011, ROi’s strategy to transform the supply chain division of Mercy Health had gained a significant milestone, recognized nationally for achieving the “perfect order.” This industry standard in supply chain management had not yet been achieved in a U.S. healthcare system. The end-to-end integration of global standards to achieve an automated perfect order between Mercy and their industry partner, Bectin Dickson (BD), was the first known documented case of both a manufacturer and a health system provider using global location numbers (GLN) and global trade item numbers (GTIN) on every BD product supplied to Mercy. Global GS1 standards enable complete traceability of every barcoded product across all supply chain processes, from manufacturer through to patient use during clinical care. A standard prevalent in many industries, the perfect order, as defined by Strategic Marketplace Initiative (SMI), is “a purchase order processed electronically (from order to payment) without human intervention, delivered to the correct location, on time, undamaged, at the right price, with the desired quantity, on the first attempt” (12). Karen Conway, an industry leader in supply chain best practice, describes the challenge of achieving perfect order in health systems: The ability to process a purchase order (PO) electronically (from order to payment) without human intervention and without errors on the first attempt remains elusive because of unclean data, inefficient or manual processes and un-integrated systems inherent to the healthcare supply chain. To achieve the “Perfect Order” in healthcare, as defined by Strategic Marketplace Initiative (, requires data synchronization, process refinement and adequate infrastructure. (13) ROi had successfully automated the supply chain processes to achieve an end-to-end system, from purchase order to point of consumption—integration of GS1 standards with its system-wide IT capacity to support supply chain processes to synchronize data, achieving the perfect order. The use of GTIN and GLN enables global traceability of product manufacturers in any country, tracked to the patient receiving a product during care (14). ROi and Mercy implemented the perfect order in two phases. Phase 1 established the technology infrastructure for electronic transactional processing, eliminating all manual processes (14). Phase 2 implemented GS1 standards to make the process efficient, incorporating patient-level barcode scanning at the point of care (14). As an industry standard in health systems worldwide, the perfect order remains

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elusive. Curtis Dudley, formerly Vice President of Integrated Business Solutions at ROi and now Vice President of Performance Solutions at Mercy, explains: We have successfully overcome two major obstacles—software and standard—to work toward true perfect order. Mercy’s IT infrastructure now incorporates both GS1’s Global Trade Item Numbers, GTINs, and Global Location Numbers, GLNs, to enable a fully automated synchronization of data with our suppliers. (15) A critical feature of the perfect order is the use of global GS1 standards—the global language required to identify products accurately, to enable traceability of the product globally from the manufacturer to the end user. Dudley describes the importance of GS1: Without standards, such as GS1, and adequate software to support those standards, manual intervention is prevalent throughout the healthcare industry as part of pursuing perfect order. You must have both in place to be able to fully automate the process from the manufacturer to the patient bedside. (16) This particular achievement of the perfect order was possible through a collaboration with BD, a large global medical technology company that supplies many health systems worldwide. The ROi team worked with BD to adopt GS1 standards to enable “perfect order” transactions through their trading contract. They also developed a perfect order scorecard to measure transactional performance and evaluate the outcomes of perfect order. When global standards are implemented, specifically the GTIN and point of care scanning linked to patient care records, it makes it possible to measure patient outcomes associated with products used during care processes. The goal of the perfect order initiative was to determine which products offer the best outcome for patients at the lowest cost. The critical feature of the perfect order that enables outcomes measurement is the scanning of GTINs at the point of care so that product information is uploaded into the patient’s record. Currently, progress is being made in a number of health systems to fully automate supply chain processes to achieve the perfect order. However, no health system to date has achieved this across its entire organization for every product. Progress towards a perfect order will rely on vendor adoption of global (GS1) standards for all products, as well as health system capacity to synchronize inventory systems with supplier data systems. This will allow product data to be updated on a regular basis, ensuring accuracy and enabling the perfect order for the majority of orders. Companies are making progress, although on a limited scale. One company executive explains: A lack of industry-wide product identification standards has hampered the healthcare industry's ability to improve supply chain efficiency and accuracy. … By delivering solutions that foster GS1 adoption, industry

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continues to advocate for the adoption of these standards to help healthcare organizations battle escalating supply costs. (15) ROi worked collaboratively with a number of partners on the perfect order initiative, including solution providers, manufacturers and software providers, to achieve end-toend integration of GS1 standards in its operational system. In a 12-month period, more than 500,000 perfect order transactions with customers were completed. One of the rate-limiting challenges to progress towards full system integration is the capacity of suppliers to adopt GS1 standards and clean data (identifying attributes of products) for all product categories. Progress continues among suppliers, particularly global national suppliers such as BD, to fully adopt GS1 standards across all product categories. As one supply chain software VP describes: We have made an investment to support the use of GTINs in healthcare distribution. ‌ The next step is achieving perfect order 100 percent through full automation and standards, and enhancing supply chain technology to support initiatives like this is key to achieving it. (15) As ROi works to fully automate perfect order enabled by GS1 standards, Mercy continues to seek out manufacturers equipped with the capacity to transact business processes using global standards to achieve perfect order across all product categories. The progress Mercy and the ROi team have made in demonstrating the perfect order has created the necessary foundation for supply chain innovation across Mercy Health, which is described in detail in the following sections.

1. BD and Mercy/ROi’s Perfect Order Process A high-level overview of the processes inherent in the perfect order, demonstrated by the Mercy/ROi/BD partnership, is illustrated in Figure 3.

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Figure 3. Overview of the perfect order process Manufacturer Every product is barcoded to represent the GTIN along with production data (e.g., lot no., expiry date) on every package, and product data (such as unit of measure and attributes) is accurate and updated frequently.

Perfect Order Products are replenished automatically through Period Automatic Replenishment (PAR) levels based on demand forecasting.

Clinical Units Clinicians scan the barcoded patient ID band and barcoded product used during care procedures. The scan triggers replenishment of the product in inventory and triggers patient billing charges and device identification in the patient's EHR. A data warehouse synchronizes data from the EHR and from Enterprise Resource Planning (ERP) to identify the products used for individual patients, accurately costing procedures.

Distribution Centres Product barcodes are scanned to verify receipt, track inventory, pick products and create shipments to health organizations.

Hospital Receiving Products are scanned at the loading dock to confirm delivery and track products across hospital units.

Health Organization Distribution Centre or GPO Receives delivery of products; barcodes on products are scanned to validate receipt and scanned to pick products for shipment to Mercy hospitals.

As part of the Perfect Order initiative, ROi and BD examined their past transactional history using an objective set of metrics to calculate errors retrospectively. An extensive root cause analysis was completed to gain insight into how to reduce transactional errors in future. After extensive collaboration and a significant number of process changes, the two organizations are now achieving many of the desired outcomes consistent with the SMI Perfect Order definition: •

A 73 percent reduction in discrepancies, including a complete elimination of vendor part number and unit of measure (UOM) discrepancies, by replacing part number and UOMs with GTINs on purchase orders.

A 30 percent reduction in days payable outstanding, generating further value from early pay discounts from faster payments that required less manual intervention.

Greater process efficiency.

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Fewer stock-outs due to the simplicity of scanning barcodes at the bedside by nurses and the automated replenishment of product based on utilization in patient care.

Fewer calls to customer service.

Better charge capture, resulting in more accurate case costing. (12)

2. ROi Achievements to Date The supply chain capacity and expertise developed by the ROi team since its inception has resulted in a number of system-level outcomes and achievements for Mercy, all of which have supported Mercy in its strategy to transform supply chain systems to optimize financial, operational and clinical performance: •

Development of the nation’s 7th largest nongovernment healthcare group purchasing organization, internally managing more than $1 billion in contracts.

Self-distribution model that includes a 100,000-square-foot Consolidated Services Center (CSC), where more than 5,000 codes of medical supplies and pharmaceuticals are managed and distributed to Mercy’s network of hospitals and clinics across four states.

Largest regional healthcare system transportation fleet in the U.S., managing more than 70 vehicles servicing 1,200 delivery locations.

First provider-owned, FDA-regulated custom procedure tray manufacturing facility in the U.S., producing nearly 300,000 surgical packs annually.

First provider-owned private-label product brand in the U.S.

Innovation that is changing the way spinal implants are marketed, distributed and serviced in healthcare.

Mercy Meds has become one of the most significant patient safety initiatives in the industry, born out of ROi’s approach to link supply chain processes to improved patient safety.

Since ROi’s inception in early 2000, annual reports identify health system cost savings for Mercy of over $1 billion as a direct outcome of optimizing and transforming supply chain processes across the Mercy system (8). The work of ROi and Mercy has positioned Mercy Health as a leader in supply chain transformation nationally in the U.S.

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Transformation of Healthcare Supply Chain The progress and achievements of ROi created the infrastructure and capacity for the Mercy senior leadership to advance their supply chain strategy as a strategic asset for the entire Mercy system. The next section details the Mercy leadership strategy. It is followed by a discussion of the first clinician-led implementation of point of care scanning of product unique device identifiers (UDI) to enable traceability of products in clinical care and determine value and outcomes for patients.

1. Leadership Strategy Foundational to the leadership strategy for supply chain transformation is the mission and vision of Mercy Health: Mission: We are the people of Mercy Health Ministry. Together, we are pioneering a new model of care. We will relentlessly pursue our goal to get health care right. Everywhere and every way that Mercy serves, we will deliver a transformative health experience. (17) The operational strategy to execute this mission focused directly on leveraging efficiencies in supply chain in order to transform healthcare services across the Mercy system. ROi created the necessary system infrastructure to support implementation of strategic supply chain processes, and established key partnerships with industry with the aim of achieving the perfect order. The focus on supply chain transformation was led by the highly experienced senior leadership team at Mercy, in particular, the founding CEO of ROi, Mr. Lynn Britton, who became CEO of Mercy Health in 2009. Widely viewed as a visionary, and recognized by numerous awards for his work, in 2013 Mr. Britton joined some of the world’s top leaders, including President Barack Obama, at the annual Wall Street Journal CEO Council in Washington, D.C. (18) The current Mercy senior leadership have been recruited from leadership positions at ROi, to bring deep knowledge, experience and expertise in health system supply chain to the Mercy team. Mr. Vance Moore, President of Business Integration, was one of the ROi leaders who now heads the integration of supply chain best practices within Mercy to reduce unproductive variation and accelerate growth of revenue, driving the achievement of key outcomes of better quality, service and cost reduction. He leads integration across all commercial service lines (i.e., supply chain, IT, virtual care, revenue management, research) to deliver a more comprehensive and unified solution to Mercy customers (3). The culture of Mercy Health was one of autonomy and independence for each Mercy hospital, very proudly supported and reflective of the unique needs of each community across the seven states. For the Mercy leadership to achieve the vision of an integrated supply chain strategy, the engagement of all Mercy organizations and hospitals would need to be connected in a highly integrated system for the strategy to succeed. Supply chain integration was envisioned by the CEO and his team as the opportunity to build

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collaboration across the system, providing services to hospitals in a way that would be viewed as supportive rather than controlling or reducing their independence or autonomy: Each individual hospital operated very independently, and I think that integrating of the supply chain together as a unified unit was a way in which we could serve the purpose of almost a “sneak-up” on the hospital’s perspective of “Hey, we don’t do anything together, maybe the supply chain area is an area that we can do this.” That was one of the key elements—to find a way to connect supply chain to the overall mission or commission of the leadership. (Supply chain leader) The initial strategy was built on four pillars: (1) connecting supply chain to strategy, (2) getting control of information and data, (3) gaining control of operations and movement of goods and (4) being in control of relationships. True to the organizational mission, vision and values of Mercy, the first priority of this strategy was doing what was best for the patient while involving all stakeholders: clinicians, supply chain workers, operations and finance, and information technology. Mercy leaders believed that if all stakeholders were involved, then the strategy would be successful: The pieces of a supply chain organization … always focused on doing what was right and having the inclusion of the clinicians and operators and the finance people … . All those things kind of came together, and we always try to view through those filters. If we deferred to, … let’s say, money and [said], “Let’s not worry about the clinical side,” we’d fail. [And if we said,] “Let’s just go to the clinical side and not take into account the operational side,” … we’d fail. … From the very beginning we said, “One: we’ve got to connect supply chain to strategy. Two is we have to get control of our information and data. Three is we have to get control of our operations and movement of goods. And number four, we’ve got to get control of the relationships. So those were the four key pillars of the origination of ROi in our supply chain way back when. (Mercy senior leader) The key driver in each of the four pillars described by the leadership was to “get control”—control over information and data, over operations and movement of goods, and over relationships to engage and advance the strategic goals of the Mercy system. The notion of control was essentially a strategy to execute a system-wide transformation, centrally “controlled” or enabled, to achieve the intended goals of quality, safety, financial viability and delivery of the best care for patients. The supply chain strategy started with point of care scanning on the nursing units to track consumption of products and supplies in order to support automated charge capture (for patient billing) and automated replenishment to ensure the right product was available when needed for patient care. This early (2003) point of care scanning initiative created opportunities for learning across Mercy, laying the groundwork for the introduction of

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point of care scanning later in specialty programs such as the cardiac catheterization suites. The next phase of supply chain initiatives at Mercy was the highly specialized cardiology program, which introduced point of care scanning of products during procedures such as cardiac catheterization. Dr. Joseph Drozda Jr. joined Mercy as a leading cardiologist in 2009, just about the time when the U.S. economy had fallen into a deep recession, and the federal government had created economic stimulus funding for corporations to create infrastructure projects in an effort to stimulate the economy. Mr. Vance Moore encouraged Dr. Drozda to create such an infrastructure project proposal. Dr. Drozda was new to Mercy, having joined the cardiology program just four weeks prior to leading this initiative. He worked with leaders in cardiology to design the infrastructure for implementing supply chain tracking and traceability of stents at the point of care during cardiac catheterization procedures. This infrastructure proposal was not funded. However, Dr. Drozda’s proposal had created enough momentum among national leaders in cardiology to continue the dialogue and map out a way forward for implementing this project. A series of subsequent conversations with the U.S. Food and Drug Administration (FDA) about the project and vision for supply chain traceability in healthcare generated great interest among members of the FDA team to consider a strategy for regulatory frameworks linked to medical device tracking and patient outcomes. A key opportunity of this project was to create a system that could generate evidence of product performance, both for health systems and for manufacturers. Dr. Drozda’s vision inspired the FDA, which then funded the infrastructure project, now named MDEpiNet (Medical Device Epidemiology Network). The MDEpiNet project was the first to introduce point of care scanning and integrating supply chain processes into a clinical program to advance quality and safety for patients at Mercy. A major goal of the project was to create a research database that could identify product UDI for stents linked to patient outcomes to support comparative effectiveness research, while at the same time creating transparency in case costing. Dr. Drozda’s work on MDEpiNet established and further built on the achievements of ROi, making the critical link between supply chain optimization and integration and effectiveness of clinical care for patients in the cardiology program.

2. MDEpiNet Demonstration Project The FDA-sponsored project funded Mercy to demonstrate the process of scanning a prototype unique device identifier (UDI) on coronary stents being implanted into patients during cardiac catheterization procedures. The process included the product UDI being scanned and then automatically uploaded into the patient’s medical record. The project required the cardiac program to create the information technology infrastructure necessary to upload the information captured in the product barcode (UDI) during scanning. Today, very few, if any, health systems in the world have implemented point of care scanning of all product UDI information, uploaded into the patient’s record, across the entire health system or across a single organization, for all products. At the

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time of the MDEpiNet project, therefore, Mercy was breaking new ground in demonstrating the key infrastructure requirements of tracking and traceability pathways to link products to patient outcomes. To accomplish this, a multidisciplinary team of clinicians and supply chain experts worked together to implement a point of use barcode scanning inventory management system in five Mercy cardiac care settings. Cardiac catheterization products are expensive and, when product failure or recall occurs, high risk. Many health systems globally that have since implemented point of care scanning of product UDI have similarly focused on high-cost, high-risk programs such as surgery (perioperative), interventional radiology and diagnostic imaging, and interventional cardiology. The value of optimizing inventory management and tracking of products and supplies in high-cost programs is viewed as a compelling prescribed-use case for initiating system deployment of supply chain technologies in many health systems. Mercy leadership viewed the cath lab as an important setting to demonstrate the strategy for managing products that are renewable or reprocessed, manage recall of implant products such as stents, and evaluate the impact of point of care scanning of supplies and products on value in terms of procedural delays, costs and increasing potential revenue. Mercy also recognized that the MDEpiNet project could potentially create the model for scaling this strategy in other programs where implanted devices or products are used, such as joint implants in orthopedics. In 2012, the FDA published its strategy for post-market surveillance of medical devices (19). The FDA strategy included four directives: (1) establish a unique device identification number (UDI); (2) promote device registries; (3) modernize adverse event reporting; and (4) develop new ways to generate and analyze evidence and data (19). To begin, Mercy contracted with the MDEpiNet Methodology Center to perform the demonstration project, which is located in the Department of Healthcare Policy at Harvard Medical School. This centre brought expertise to the project, leading the effort to develop the methodologies for analyzing device data and patient outcomes data emanating from a variety of sources (10). The vision was to create a link between the product attributes and patient care to enable assessment and evaluation of product performance and value in achieving outcomes for patients. Traceability of products to individual patient outcomes enables clinician teams to examine objective and empirical evidence to determine which products (in this case, stents) offer the best outcomes for patients. Although implanted devices offer patients treatments for illness such as cardiovascular disease and osteoarthritis, these implants are challenged when they fail (20). The FDA, in its regulatory mandate to protect the public from harm, viewed the MDEpiNet project as a strategy for tracking and evaluating product performance and outcomes informed by objective patient data linked to accurate product data from UDI barcode scanning. The MDEpiNet demonstration project was carried out over 18 months in 2012 to 2013, at four of the largest of Mercy’s cardiac catheterization labs (19). It required the cooperation of all critical stakeholders, from clinicians in the cardiology program to

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operations staff from supply chain teams, finance, information technology (IT) and researchers. The project had the support of a senior vice president, who championed it at the most senior levels of leadership at Mercy. Its success is attributed to breaking down traditional barriers between departments and the active involvement of top-down leadership, including Dr. Drozda, the senior clinician (19). The project faced two significant challenges: the need for an automated strategy to manage product inventory and overcome manual entry of product UDIs, which would not be feasible for clinician teams during cardiac catheterization procedures. Product UDI capture with point of care scanning of barcodes would enable automating UDI capture for clinician teams (19), but the data captured in the barcode scanning would have to automatically upload to the patient record. To tackle these challenges, Mercy created a prototype coronary UDI using GS1 and global trade item numbers (GTIN) linked to device attributes from the FDA’s Global UDI Database and clinical attributes from Mercy’s Supplemental UDI database (19). The project team was able to link data identifying the products in inventory by using data from inventory management software (OptiFlex CL inventory management system), as well as data from the cath lab’s hemodynamic software, which documents patient care biometrics during a procedure (e.g., cardiac function, coronary artery blood flow). All data was linked and uploaded into the patient’s EHR. This approach created the integrated database necessary for the project team to begin examining which stents were used for which patients, and during which specific procedures. Thus, specific patient outcomes could be linked to a procedure and a particular stent, both during and following surgery (19). At the time, the FDA was requiring manufacturers to identify product UDI for all implanted devices. Mercy leaders also anticipated that accreditation bodies would soon require documentation of UDI used during patient care, and the manual entry of such data would be challenging and burdensome for clinician time and costs. Thus, the use of barcode scanning of products during care procedures would enable Mercy to accurately compare product performance tracked to the individual patient. This data would enable assessment of performance for patient outcomes relative to cost of the product, and inform procurement decisions. Point of care scanning also enabled automated product recall and removal of products not delivering quality outcomes for patients. The data linkages among inventory, clinical care and patient outcomes created a number of key results for Mercy, both for the operations team and the clinicians in the cardiac program. First, automating the scanning of product UDI during cath lab procedures enabled the supply chain team to improve inventory management of stents. Prior to this project, cath lab staff would walk through the department and inspect the supply of products on the inventory shelves, ordering more product when supplies seemed low. There was no link between product utilization patterns, patient volumes and product replenishment. To

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track expiry dates, staff would attach colour-coded stickers on the products that were nearing their expiry date and thus should be used as soon as possible to avoid waste. There had previously been no manual record of product UDI (e.g., product lot and batch numbers to identify a unique product in the event of product failure). The product UDI scanning at point of care documented the time of care, automated the charge capture, linked it to the inventory management software, and enabled automated replenishment of products based on utilization patterns for patient care, rather than staff prediction. Second, automated scanning of product UDI resulted in dramatic savings in reduction of excess inventory. Prior to implementation of the MDEpiNet demonstration project, inventory levels of product value in the cardiac program were estimated at $800,000. Yet, when inventory of the cardiac programs was scanned to validate inventory, it was found to be over $1.9 million. During the first six months of the demonstration project, inventory value was reduced to $1.56 million. Third, the automated scanning enabled clinicians to capture exactly which stent was used in each cardiac catheterization to create a research database for examining patient outcomes relative to product performance. When a product is scanned it can be linked to the details of the patient’s health record, diagnosis and patient care procedures, and enable measurement of outcomes to inform the clinical record, departmental reports and case costing for more accurate billing. Additional outcomes of the demonstration project were fewer procedure delays, reducing costs and improving revenue through more accurate case costing (19). Despite these benefits, a number of challenges required solutions in order to execute the project successfully. The challenges were related to integrating the technology (i.e., the interface between the supply chain and clinical software), clinician engagement and training, and inventory issues with product barcodes, product expiry and inventory software. Details of each challenge and the solutions required to overcome these challenges are illustrated in Figure 4.

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Figure 4. Mercy unique identifier demonstration project: Challenges and opportunities Mercy Unique Identifier Demonstration Project: Challenges and Opportunities



Challenge Technology Integration

Capturing Information


Clinical staff "double scan" products Ongoing communication with software vendors Wait vendor solutions

Software limitations for capturing device data Two barcode standards

Capture data in UDI Research Database Link inventory management software with vendor item numbers

Implementation Effort

Greater than anticipated need for assistance by Cath Lab personnel

Training Methods

Point of use training required

Overall Complexity

Lack of familiarity of Cath Lab staff with point of use information systems Cumbersome ordering and inventory practices, prior to automated inventory system

Perspectives of Mercy Directors

Resulted in last-minute replenishment


Inventory Management Application/ Data Limitations Charging/ Billing Product Barcodes


No functional interface between inventory management software and clinical software

One staff member dedicated for implementation In-person training E-learning modules to supplement classroom series E-learning refreshment courses Training of Cath Lab staff by operational consultants Automated reorder system Actionable operational and ad hoc reports created by point of use system

Software requirements for serial numbers but serial numbers not use by manufacturers on Creation of "dummy barcodes and serial coronary stent Conflicting facility numbering systems (FDA numbers" DUNS number vs. GS1) Staff confusion over meaning of item (catalogue number vs. function) Incorrect charge codes No barcodes for some items Multiple barcodes for some items

USI and point of use system implemented Barcodes generated internally

Inventory Value

Underestimation of inventory before automated inventory system

Point of care scanning implemented

Expired Inventory

Difficulty identifying expired items prior to system

Automated expiration date tracking by point of use system Communication to multiple vendors or other facilities

Source: Drozda, J., et al. 2016. (21) The MDEpiNet demonstration project successfully implemented point of use scanning of cardiac stent products captured in the UDI surveillance and research database for comparative analyses that are currently underway. Inventory management outcomes were significant in terms of savings and successful collaboration between supply chain and clinician teams in each of the four cardiac programs involved in the project. The FDA’s support of the Mercy demonstration project was closely aligned with the FDA strategy to strengthen the nation’s system of medical device post-market surveillance. This project was a new dimension of Mercy’s point of care strategy, which had begun with medication tracking (Mercy Meds) for all patient care units. As each phase of point of care scanning was introduced across Mercy, the roadmap for scalability of point of use scanning for additional products was designed for the cardiac programs to introduce tracking and scanning cardioverter defibrillators and transcatheter valves (21). The Mercy Meds project, followed by the MDEpiNet demonstration project, served to create the roadmap for Mercy as each program or organization implemented point of care scanning. Dr. Drozda is now working towards overcoming the challenges of case reporting, whereby standardized case data such as patient comorbidities, history and diagnostic investigations are easily accessed in the Epic EMR. The linkages between

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the product UDI data and the cardiologist reporting during the case are accurately collected in digital format in real time. This work will advance comprehensive tracking and traceability of cardiac care, including the outcomes achieved for patients and the value achieved for Mercy Health.

Execution of the Supply Chain Strategy as a Strategic Asset for Health System Performance The vision of Mercy’s senior leadership was to integrate supply chain into operations across the entire system as a strategic driver to strengthen clinical, financial and operational performance. The foundation of the strategy was to integrate supply chain processes into clinical programs at the point of care. To reiterate the four pillars of the strategy: (1) connect supply chain to the operational strategy, (2) get control of information and data, (3) get control of operations and movement of products and (4) engage relationships to drive the strategy. The first and most significant factor in the case of Mercy was their efforts and initiatives to fully integrate supply chain strategy into clinical programs.

1. Integration of Supply Chain Strategy into Clinical Programs: “You Come to My World and I’ll Come to Your World” The integration of supply chain processes and approaches was acknowledged by senior leaders to require a highly specialized team with the capacity to incorporate supply chain thinking and approaches into clinical programs. The biggest challenges Mercy faced were getting the right people on the team with the ability to execute the vision, and giving them the right tools and information to be successful: If the product costs more and that’s the right thing to do, we’re going to buy a more expensive product. And it’s just the way it’s going to be, and we backed that up and documented it well, so that was a piece. We had to win the hearts, but we also had to win the mind. … We spent a lot of time and effort up front making sure that we hired people that had that mentality and were willing to support that, and that we also spent a lot of time and effort on … recruiting the right people and then arming them with the right information and tools so that they could actually be successful in their positions. (Senior leader) In 2002, Mercy established a team called Performance Solutions that had the expertise to engage all stakeholders, such as clinicians, finance, supply chain, IT and Lean 6 Sigma: The vision: … for all intents and purposes, we are the marriage between technology and clinical and business operations. My team is like a field team would be to the military. We have people with expertise in all the areas of focus, and we engage with the clinical operations to identify what

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an issue is, but not an issue solely from the perspective of one area. … My team represents people from clinical. Our finance, supply chain, IT, Lean 6 Sigma bring all those things to bear. … People were begging, people are begging for this Performance Solutions concept. (Senior leader, Mercy Health) The Performance Solutions team brings together all key stakeholders in the system to create a design strategy to overcome challenges and engage the necessary expertise from clinical and operational teams for implementing change: I’ll give you a great example. The notion [of] standardizing and charge codes seems relatively simple from a clinical space to an operation space. But to change the charge code, finance has a say in that, and the overall operations of IT have a say in it. … The bottom line is we [bring all of the key stakeholders together and] come out with a more harmonious solution [where everyone involved has been part of the solution and implementation]. (Supply chain leader) One of the key drivers underpinning the work of the Performance Solutions team was the changing funding models in the U.S., which were moving towards bundled payments whereby a hospital would be reimbursed by a funder for a total cost of a patient care episode. Mercy initiated a strategy, referred to as destination medicine, whereby Mercy would contract with large employers to deliver care for large employee groups, driving down the cost per case for employers and increasing patient volumes and revenues for Mercy. For example, Mercy was contracted by a large retail company to provide all joint replacement surgical care for its employees. The company negotiated with Mercy and contracted to deliver joint replacement surgeries for a fixed bundled payment per case. For this contract to be successful in driving revenue for Mercy, surgical teams had to meet or exceed an established case cost target for each surgical case, and the cost of each case had to be accurately measured to achieve this target goal. The traditional approach to case costing had been based on traditional cost accounting methods, which supply chain leaders knew was an inefficient and expensive way to do business. Supply chain processes that tracked and traced every product to every surgical case enabled an accurate accounting of the exact cost (supplies, products and labour) of each surgical case to create the transparency in the costs and revenues for clinical care: That became a [financial] driver in year 2 of this project, the bundle payments, … and destination medicine was a piece of that too. … A lot of health organizations will do bundled payment of bundled charges of bundled costs, and they really don’t ever know what the total cost is for procedures they do. So we have the opportunity to look at a procedure and say, “You know what, increasing value on a procedure that you’re losing $500 on is literally like trying to open the wounds you have; you can’t get more blood out.” You’re going to be successful, but eventually you’re going to bleed yourself dry. (Senior leader)

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Senior leaders began by analyzing clinical program costs across the Mercy system as the basis for their strategy to integrate supply chain thinking and analysis into clinical program operations. Mr. Vance Moore, President of Business Integration, profiled the financial analysis of costs across the system, illustrated in Figure 5. Figure 5. Reality: Mercy expense breakout (top 15)

REALITY: Mercy Expense Breakout (Top 15) $1.2 BILLION spend in top 5 categories Representing 34.6% of Expense



Source: Moore, V. 2017. (3) Essentially, the analysis of high-cost clinical program areas revealed the sources of greatest cost to the Mercy system. These became the priorities for the Performance Solutions team to address: The initiative was about reducing supply expenses. ‌ When we walked into Mercy, the five leading expenses were nursing labor number 1, perioperative supplies number 2, number 3 was pharmacy, number 4 was perioperative labor and number 5 was the ancillary services, like food and all kinds of other stuff. (Supply chain leader)

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Specifically, one-third of all expenses and costs to the Mercy system are accounted for by high-cost programs such as the perioperative/surgical program, the second highest cost to the Mercy system. Overall, ROi identifies that 40 percent of health system costs are attributed to supply chain processes, including the cost of products and supplies and the labour required to support supply chain management. It was also envisioned that automating supply chain processes, fully integrated into clinical programs such as perioperative, could also reduce labour costs by removing the tasks and time required for clinicians to document, manage supplies, reduce product inventory costs (based on the experience of the BUILD project) and accurately capture the costs for each surgical case to better identify opportunities for savings. A further analysis of the perioperative services program revealed that although this program was currently generating revenue for the Mercy system, changes in bundled care reimbursement models were being projected to lead to the program’s becoming a cost centre rather than a source of revenue. Bundled payment models, capped at specific reimbursement levels per case, as well as growing costs of surgical products and devices, were projected to become a challenge for revenue growth for this program. Based on this financial analysis, the projected revenues for the perioperative program were declining while the number of OR cases was increasing. Thus, the revenues per case were declining, placing the financial viability of the program at risk. The perioperative program therefore became a central focal point of the integration strategy that could have a positive impact on its operational, financial and performance outcomes. The Performance Solutions team engaged with leadership of the perioperative program to implement the UDI point of care strategy, previously demonstrated in the cardiac program under the leadership of Dr. Joseph Drozda. Point of care scanning of products in the perioperative program would be implemented, co-led by the lead for the Performance Solutions team and the Vice President of Perioperative Programs. Mercy had already established a system to document products and processes in the perioperative program to support accurate case costing. However, the system was manual, whereby clinicians would enter the product UDI number manually into the patient’s health record—a process that was time consuming and prone to error. The Performance Solutions team validated these estimated savings: Generally, [revenue from surgical programs] is anywhere from 30 to 45 percent, if you look across the nation. [At Mercy in the] last year, 40 percent of the revenue comes out of this service line. (Senior leader, Mercy hospital) The Mercy team began their perioperative strategy by first touring other hospitals to find what worked and what didn’t, before creating their solution. When touring other organizations, Performance Solution staff saw firsthand the many issues hospitals and patient care programs were experiencing. The supply chain team believed that many clinicians faced challenges due to a poor inventory management system:

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Basic inventory practice is bring the old product forward and new product backwards. You end up having a lot more products that do not expire, or pilferage or damage, because that happens. So, we went through that process and we spent time measuring it, [determining] the things we need to resolve. We essentially spent our first year figuring out what we needed to fix. We looked at system, we did tours of major hospital systems … and looked at what they do and how they do it, and what wasn’t working. (Supply chain leader) The team began to identify the key challenges they would focus on, informed by lessons learned from their visits to other hospital systems. One challenge identified was the movement of products into and out of clinical settings: The supply chain is sometimes owned by the clinical side and sometimes it’s not, but the bottom line is there’s somewhat of a supply chain. [The supply management team] gets this information off the pick list, and then they bring the stuff that does not get used on the pick list back, considered a return. And there’s between a 24-and 72-hour float in inventory that comes back because of stuff that’s returned. So if we think about basic inventory management, and your strategy is not to get yelled at, you’re going to walk the shelves and look for things that are now on the shelves. You’re not going to know that that same product may be floating back, or [when] it’s going to get returned. (Supply chain leader) The second key finding was the observation that clinicians were “in survival mode,” simply “making do” and trying to manage products or equipment in surgical settings as best they could, often going to great lengths to make it work: We’re in this OR [when visiting another health system in another state] and we’re watching this tool they’re using. First of all, you can tell it’s very burdensome on the patients. [During] this procedure, … these two guys grab the table they’re yanking it around, and I’m like, “Is this normal?” … Survival mode. What we learned is the clinicians were in survival mode. Because of the solution [the supply chain team] had put in front of the surgical team, which was really burdensome, and they hated it, and they did everything they could not to do it. (Supply chain leader) Mercy’s strategy focused first and foremost on establishing basic principles, engaging clinicians to collaborate on the design of the software and implementation strategy to inform “what needs to happen”:

There were basic principles … that supply chain must [apply] to govern what they use. And there just has to be the realization that the people using it is where the most important part is. It’s not scanning to something

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else. … Where it touches the patient, right? So we started bringing clinical folks together and said, “What needs to happen if we want to do these things?” And we begin developing what it would look like. (Supply chain leader) Preference cards for surgeons was one of the first areas of focus for the Mercy team, which began by building relationships with clinicians: We formed a relationship, and we took the first step saying, “Why don’t you come to my world; I want to show you what supply looks like, and why don’t you take me to your world so I understand your side?” And we began weaving. (Supply chain leader) Each surgeon had their personal preference card with items they required for each type of surgical case. Preference cards are dynamic, often changing every week as physicians request specific products during surgery. Every time a surgeon makes a request, perioperative staff would manually enter the request onto the preference card to ensure that supply management staff would place the product. Product costs are expensive, and the more surgeons request new items, the greater the cost of each case in the program: The first place I look [for ways to reduce costs] is preference cards. … By procedure, by physician, pull all these items, use them on a case, so it’s nice and neat and tidy. But the problem is, preference cards are not clean. They change weekly. … They’re dynamic and it’s a manual process, you have to take a look at them. And so we’re going to form committees, and we’re going to work on preference cards, and we’re going to clean them up. (Clinician leader) The cards are individualized as surgeons request the products they require for each type of surgical case. Surgeons have little awareness of product costs and determine product selection based on needs, not considering, or aware of, cost. If a product is not on the preference card, and a physician needs it during a surgical procedure, clinical staff need to go get the product, taking up precious surgical time. Traditionally, there had been very limited communication between supply management staff and surgical teams regarding what products were needed, which ones were often not used and either returned or wasted. The Performance Solutions team and the perioperative program lead saw the opportunity to manage preference cards more effectively through documenting by exception, scanning products as they were used in each surgical case and tracking products not used. In this way, items on surgical trays could be tracked to enable more accurate trays, improving efficiency during each procedure. Recording actual product use during a procedure made it possible for analytics to examine historical trends of product use. Changes could then be made to the preference card that more accurately reflect quantities and products actually used in each surgical case. More accurate preference cards reduce the amount of products being pulled but not used. Currently, all surgical tray barcodes are scanned to track the use of instrument

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sets during a procedure, and products that are flagged in the inventory system (lot number, serial number, tracked items) are required to be scanned at the time of use, minimizing wasted products and reducing time spent looking for missing products. Improved communication between clinicians and supply chain staff supported a strong working relationship: It was something that they might see on one of our preference cards or our surgeons preference lists, and so on that side if they see it and the surgeon had requested it, the clinical team are hanging on to it. But they too didn’t have the communication with the surgeons that maybe we already had… . So we were able to reduce a lot of inventory. We were also able to talk. There was an item the other day on the shelf that we had a par level of 10 for, and it was something that we only had on hand for emergency situations; it was a backup product. So we knew the products were going to be expiring, we knew we might only use one before they expire, so it was something that the clinical [team] brought to us, and we were able to drop our par level on. (Supply chain leader) Building relationships between supply chain staff and clinical teams resulted in clinicians working towards common goals with the Performance Solutions team to reduce waste and more effectively manage inventory by highlighting opportunities for reducing costs. Point of care scanning, integrated into surgical settings, enabled clinicians to think more about the products they were using, and the cost of those products, to identify opportunities for cost savings: As soon as they scan that barcode, it tells them immediately that the product is expired or not. Its expiration, its recall, whether that product was recalled before you put it on that sterile field, and its cost. You can literally see the cost as soon as you scan it. So if a surgeon wants to make a choice between five staplers, if he just wants a cheap stapler, he can see it; they can scan five products and go, “Yeah, this is your $5 one, this is your $50, … give me the $5 one.” (Clinician leader) Not only did clinical teams begin to work with Performance Solutions team members to identify opportunities for cost savings; they were able to integrate point of care scanning successfully into surgical team routines that offered the additional advantage of streamlining clinician time and efficiency: We have our implant tracking now and we also have our tissue tracking, which goes down both avenues. With our instrument tracking now and being able to scan, as with I’m sure most places, … we are not going to open the product package on the surgical field—because of the cost—until our surgeon gives us that go ahead. At which point that is when my implant is going to be scanned, that by scanning it I am not manually having to enter any expiration [date], I’m not having to enter that lot number, that serial code, any of that. And I will tell you personally, here at

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Mercy we have actually caught an expired item that was going to hit the field, by being able to scan. (OR nurse, Mercy hospital) Clinician teams in the surgical suite also highlighted the significant efficiencies they were able to achieve because point of care scanning streamlined the documentation of tissue tracking for tissue used in surgery: Our tissue tracking [used to be] a pen and paper system. Now with our tissue tracking, … as soon as that [tissue] hits the door, … we are able to track exactly where that tissue is. We track all the aspects of it— is it at the temperature it should be, who checked that product in, all of that through scanning. So from point of entry into my facility to the point of use on a patient, I am able to track that tissue. (Nurse, orthopedic surgery team) The same nurse further explains the challenges that point of care scanning can overcome for clinicians: A lot of our stuff comes in, and … having to keep that [paper] trail isn’t always the easiest thing when you’re using pen and paper and trying to get that paper to stay with it and all the stickers to stay with it. … There’s a lot of gaps for error [to creep in, but] with this system, you know exactly where everything is at all times. I can pull up my tissue log at any point in time; I can see exactly what tissue I have on hand, … the cost of my tissue … from a business standpoint, I can also visualize what is going to be expiring. [I can call up my vendor] and say, “I’ve got something that’s ready to expire,” and he might have another customer that can use that. And so … he is going to get me a replacement, versus catching it once it’s already expired and we are out those dollars at that point. This particular statement clearly illustrates supply chain thinking by a clinician who describes not only a more efficient clinical process of tracking tissue sample using barcode scanning, but also a keen awareness of the supply chain strategy—optimizing product use, avoiding cost by reducing potentially expired products and proactively working to reduce waste. Point of care scanning creates an awareness among clinicians of product cost, expiry and recall, motivating them to work with supply chain teams to optimize product use. The same nurse describes the sense of confidence experienced knowing that point of care scanning offers a back-up system for checking expiration dates: Especially with the implants. With orthopedics, we implant a lot here. Just knowing that you can scan it and it’s going to let you know it’s expired or if there’s a recall or anything like that, that way its good at alerting you because … you can look up things. It happens, things are implanted that are expired, … so it’s nice if you have that double-check, just “Okay, I’m good to go, I can actually give this to the surgeon.”

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With regard to point of care scanning relative to patient safety: Obviously, [equipment trays] get sterilized before we use them. But we capture all that information just in case there was something wrong with the load or anything like that. Before [we had scanning], that’s another number that we are having to put into the chart, about 15 digits … [but] now with this system we can actually just scan a barcode on the outside of the tray, and it picks up all that information and puts it into the chart for us. Once again, it’s removing that barrier or the human error, typing in the wrong numbers; it’s tracking it for us … all the way through the process. We will eventually be able to see that tray from the time it’s sterilized all the way through decontamination, so if anything were to happen we know exactly where that tray was. … We are capturing it from being sterilized [all the way] to the OR. So say someone that’s cleaning was to get poked with a sharp object, we know where that tray is. (OR nurse, Mercy hospital) The relationship between clinicians and supply chain workers has been a central focus of the Mercy strategy to integrate supply chain thinking into clinical programs. One Performance Solutions team leader describes the transformation of the relationship between clinician teams and supply chain staff: The big relationship, I call it the marriage ender, is that the clinical people stood in the OR and said, “These supply chain people cannot get the right supplies for me for my case. I’m always running and out of the room.” … [But] they’re both in it to win it together, not one competing with the other. Before it used to be, “I’m just going to throw supply under the bus because the surgeon is screaming and supply chain would get beat,” and clinical people always won. … But allowing [them] to see each other’s woes is where I was going—forcing the clinical person to go to the supply chain, and forcing the supply chain person to go the clinical setting, and making them realize they both own the relationship for the entire team, not just themselves. The first goal of the Mercy strategy was to integrate supply chain into clinical programs. The introduction of point of care scanning in the perioperative program created the conditions for clinicians to better understand concepts of inventory management of products to avoid costly waste and ensure accurate tracking and traceability of products for each clinical procedure. Similarly, it enabled supply chain staff to better understand the challenges clinicians experience during clinical cases, motivating them to work closely with clinicians to streamline processes as much as possible, improve efficiency and ease the burden of documenting product use, such as tissue samples or surgical preference trays.

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Mercy leaders knew their success would rely on engaging clinicians in positive working relationships. The next section describes their focused efforts towards gaining clinician support in implementing the Mercy strategy.

2. Achieving Clinician Engagement in Supply Chain Strategy: “Winning the Hearts and Minds” To achieve Mercy’s strategy to fully integrate supply chain into clinical programs and patient care delivery as a strategic asset, clinicians were a key stakeholder group that the Performance Solutions team knew they would have to engage and win over. The team recognized that clinicians viewed supply chain as focused primarily on saving money rather than on patient care, which was the priority for clinicians: We knew that to win the financial equation, to some degree we had to win the hearts and minds of those who would call on us, because it’s really easy to just select the lowest-cost item without considering quality [and both must be considered to achieve value]. (Supply chain leader) Mercy leaders understood that successful engagement of clinical teams would require building a relationship and culture based on trust. They needed clinicians and supply chain teams to collaborate as partners, making decisions as a team to advance the Mercy strategy. Fostering a trusting relationship was viewed by the Performance Solutions team as one of the biggest hurdles they faced: I think the biggest piece is just getting off the ground. I’d say the other hurdle is having a mechanism of developing the connectedness of the organization to see each other as partners. … The operational side, and probably the more difficult thing, ends up being the physician side, getting the physicians feeling like they’re on the same team and starting to realize that physician decisions maybe don’t have to imply every individual physician making his independent decision, but rather a group decision. (Senior clinician leader) Mercy had to overcome clinicians wanting to do their own independent work, relying on the comfort of past work practices. Trust needed to be established between supply chain and clinicians to create the partnership needed to drive the strategy forward. To achieve this, clinicians needed to be able to have trust in the process and feel confident that decisions were being made in the best interests of patients and the care team. Building trust was difficult and required getting physicians to work together with supply chain teams: That’s why it’s so hard and some people who are not physicians don’t understand: “Well, why can’t they use this [tool]? Because I’m used to using that, I know I can get outcome using that, and you’re asking me to use a tool that I’m not used to using and I’m not sure, I’m not convinced I can get the same outcomes.” … Sometimes physicians look at it like,

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“You’re asking me to put the outcomes of my patients at risk so you can save money.” So you have to get to the idea that we’re all on the same team here, we all want the best we can get, but we’ve got to make sure we can do this for as reasonable a price as possible. So let’s get all the physicians together to talk about it. Then, a lot of time it’s a physician-tophysician discussion; you can talk to other guys who use [that tool] and say, “Well, you used it; okay, I’ll give it a try, but when [physicians are] faced with that situation, [they’re] always going to go to that next procedure with the different device wondering if it’s going to work. That’s the way you think, that’s the way you approach it. (Supply chain leader) Building trust with clinician teams, in particular physicians, also required delivering on promises to solve challenges in order to bring confidence to clinical teams and ensure they trusted supply chain teams to address these challenges effectively. The Performance Solutions team hired three internal clinical consultants, who focused solely on locating products and solving problems quickly. The internal reps maintained relationships with senior leadership and clinicians to discuss issues and problem-solve. Having a dedicated team working to solve internal challenges instilled confidence among clinical staff that issues were being addressed and improved trust and communication: Their whole job was to maintain relationships with the C-suite and where appropriate, physicians or nurses, just to make sure that if we had any type of pickup in the field, there was somebody in that locale or in the remote locations that could go in and have the conversations, get to the bottom of it and solve it quickly. Let’s say we had a product that was having some market failures. In the past, you might have, let’s say, a stapler that failed or gloves that didn’t fit right or stuck together, or tape that was not as sticky, and those things would just fester and people would say under their breath, “This is a bunch of junk.” Now they have somebody to turn to and they’d say, “This tape is horrible, watch this,” and then immediately that person’s responsibility was to get back with the contracting folks, track down that vendor and for us to potentially find out, do we have a lot issue, is it a failure of the product, or did we make a bad choice? Is this really okay, but in this one particular situation we might have to say, “Look, it’s extremely humid today; we know that this product is not great under these conditions.We may have to get a specialty product if this condition presents again.” And that’s what we found in most cases: when someone had a complaint, as long as they knew that we were trying, coordinating their issue, that was all it took. And we may not be able to solve the problem even short term or even, to some degree, in the long term. But just knowing that we cared and we were intentional about the follow-up—think about it, we’re all consumers of something, and if you have a bad experience in a hotel or whatever, if somebody truly makes you feel like they’re listening you tend to be okay with it. And so that’s where a lot of our efforts went. (Supply chain leader)

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It was evident from the experience of supply chain teams that physicians tended to work autonomously and independently. However, they are also fiercely competitive with one another, and physician-to-physician influence within clinical specialties can be very powerful. It is also critical that supply chain teams understand the value and importance of physician engagement: Not too long ago, there was a suture issue where literally, the physicians were solving a supply chain problem but they didn’t even involve supply chain teams. One lead physician said, “Let me go talk to this physician. This works fine, I’ve been using this product for the last 10 years.” So it’s back to the development of a trusting culture. This doesn’t mean we always agree with each other, but it’s a culture that [assumes] “These are good people trying to do the right thing and even if we disagree, it’s okay; I just need to understand why I need to have a better appreciation for your position,” and then we go investigate it. And I will tell you—in many cases we don’t use the same product or whatever that may be, but there’s good sound logic for that [approach]. (Clinician leader) To advance clinician engagement, particularly physician engagement, Mercy leadership created an organizational governance structure for clinicians to support a significant decision-making role for clinicians in product procurement, informed by evidence emerging from analytics of product utilization and patient outcomes: The [physician leader] has built, internal to Mercy, the specialty councils, which help with decision-making to evaluate, in many cases, all the way down to decision-making on certain ways in which we will not only secure product, but actually use products, design care pathways and things like that. So, what happened at Mercy is building this undercurrent of interaction with each other, going back all the way … 17 years ago, led to joint decision-making or at least collaborating on decisions we make for products. (Mercy senior leader) The clinician-led specialty councils have made product and care pathway decisions that have had a significant impact on the cost of products and supplies. The savings were substantial, but more importantly, the realization of supply chain teams of what was possible by engaging physicians was both startling and very exciting: I have seen [doctor’s name] specialty council actually completely redo a laparoscopic cholecystectomy procedure [removal of the gall bladder by laparoscopy]. We had 27 different surgical packs at one time for lap cholecystectomy, which is a very common procedure, maybe the most common of all surgical procedures. And literally overnight [the specialty council] reduced the supply cost for this procedure by 30 percent, just because the physicians came together as a group and decided what they were going to have as their standard surgical tray, and it just blew me

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away! If somebody had told me that was even possible, I would have called them a liar. (Supply chain leader) Greater standardization of preference cards was achieved when clinicians themselves made the decision as a group regarding the products that would be used for procedure trays. This maintained clinicians’ control over their own practice while achieving the objective of standardization and best practice as each specialty council reviewed and optimized procedure trays for each type of surgical procedure. Preference for products on surgical trays is a dynamic process whereby changes in utilization of products are managed as surgeons make decisions during surgical cases: If you don’t use what’s on that card—let’s say you had 16 items or 60 items, but there’s 10 products that never got used—then do you go back and revise that preference card? So the next time that case happens with that surgeon, those pieces or items are no longer on the tray because they are otherwise wasted. That is sort of how the waste thing gets managed. (Clinician leader) In addition to engaging clinicians in decision-making, the second strategy among Mercy leaders was to create transparency to support clinicians and the Performance Solutions team to ensure that only the best products were used in patient care, with only a secondary focus on cost. Each surgeon had a personal scorecard documenting products used in their surgical cases, the cost of the products, and the surgical outcomes for patients. The scorecards for surgeons created visibility of their product utilization and case cost, which readily supported objective comparison across individual surgeons. Objective data that accurately captured case costs for each surgeon informed decisions to change products used in case, reducing variation and contributing to quality outcomes for patients. Supply chain teams understood that once the best product was chosen by clinicians, product volume would be used as a strategic asset that could be leveraged to negotiate better pricing with suppliers: For the relationship piece, we did a couple things that were unique. First of all, we had a commitment to transparency. It’s not that people don’t mean to be transparent; they just get busy and they don’t make it a priority. So one of the things that we said early on is, “Guys, we’re going to educate you as much as we possibly can. We’re going to give you information about the pricing of products and who uses these products.” And so we had a commitment to that, and we also said, “The bottom line is, our belief is if we can get everybody to buy the very best product, [then] that leveraged volume would allow us to get a better price for the best product. Before, we were paying the various prices across the ministry, and we were able to prove that many times. That was a key piece. (Supply chain leader) Transparency of cost of products and visibility at the procedure level offer clinician specialty councils the objective data to inform their decisions so that they can consider

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the cost in the context of how the product performs clinically during patient care procedures. The analytic program dashboard, data analysis and surgeon scorecard tool were all located on the SAP business objects platform, creating the transparency needed to inform clinician decisions on product value, while at the same time providing supply chain contracting teams a tool to leverage pricing negotiation with suppliers for Mercy organizations. Ultimately, transparency, analytics and clinician engagement were three factors that contributed to Mercy’s long-term goal of achieving value for patients by leveraging supply chain tools and strategies together with clinician engagement. Transparency and clinician engagement created an excitement and a sense of momentum behind the Mercy strategy. This energy has motivated clinicians further to proactively engage in working with supply chain teams. Optimization of surgical product preferences encouraged both learning and collaboration for all stakeholders: I think the excitement comes from the excitement that’s generated from our teams to have this opportunity to be able to see this. We’re in a small town in Missouri, so for us to be able to have this kind of program has really just lit a fire and re-energized my team. The surgeons see it, too. I had a doctor just the other day say, “Can I sit down with you and go over my preference card? I really want to see what you guys are seeing and what my utilization of these certain products is,” and TECSYS [inventory management software] gives us that visualization … . So they’re wanting to see our screens and see what we have access to now, which is really a neat feeling because again, that just ties the team as a whole. (Supply chain leader) Transparency of data generated by inventory management software creates objective data to inform all key stakeholders, including supply chain teams, clinicians, and senior leaders. This enables the team to track progress towards the goal of financial, clinical and operational excellence. Achieving transparency of data and product information both informs and inspires clinicians to collaborate on supply chain goals and initiatives. As the clinicians continue to engage in decision-making and collaborating with the supply chain team, the surgical teams have achieved efficiency and accuracy in ensuring that surgical trays have all the products that are needed; that these are utilized, with minimal waste; and that clinician time utilized more efficiently because nurses are no longer running from the operating room suite to fetch products that are needed during surgery. A nurse describes the impact of such efficiency on clinician workflow: The hardest part is, you have to see what [the physicians] need for the surgery, so it’s all the supplies, implants, instrument trays that you would need to perform that surgery. We have another area where we would pick everything that we would need to bring to the operating room. So you want that card to be as accurate as possible. That way, if it isn’t accurate, that means I would be running out of the room to go get things, taking myself

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away from the surgical field. This way, it’s actually tracking what items we’re using. So we now look at these preference cards daily, whereas before we were looking at them quarterly or so. It’s making [the process] more accurate, [we’re]more aware of what we need. It’s keeping us in the room … and it’s making us more cost-efficient, too, because we are able to see what we are using, what supplies we need. As the Mercy team implemented their supply chain strategy in the perioperative program, the supply chain team was learning, and being inspired by, the “power” of the front-line clinician teams. The Performance Solutions team was learning, and more fully understanding, that the decisions clinicians made every day during patient care procedures had a profound impact on the performance of the Mercy system. The supply chain team acquired a keen realization of the importance of clinical environments supporting clinicians to not only deliver the best patient care, but to do so in a way that was efficient and seamless, and in a synergistic relationship with the performance teams. This approach ensures that clinicians have the products, tools and information they need to deliver patient care. Mobilizing clinicians across organizations has shifted decision-making from an approach that was formerly organization focused to one that is now system focused, driven by clinician specialty councils. Specialty teams from each healthcare region come together to discuss products needed and how contracts should be negotiated, thus informing the contract strategy executed by the ROi team. The pricing strategy is presented to the vendors during procurement. If they meet the price, the successful vendor will win the contract for the entire system. This strategy deeply integrates clinician expertise into procurement decisions and informs contracting and sourcing teams to procure highquality products while leveraging a system-wide volume purchase to achieve pricing advantages: [The contracting teams are] driven by clinical use, clinical opinion and clinical outcomes. That’s right; a group of physicians get together. So we have an orthopedic specialty council; they have one representative from each of our locations, and they get together and talk about the items that they want to use or how we should do contracting, and we set contract strategies with them. We made vendors meet a price point for it: “You won’t get the region unless [you do], and you will be our top two—and there are only two—vendors. But you have to meet the price point, and that will be [a set price] for a total knee [replacement].”And yes, [they’ll] meet it. (Supply chain leader) The power of clinician teams extends well beyond the impact of patient care practices on Mercy’s clinical and operational performance. Clinicians are also very powerful in driving change among suppliers, as they exert their substantial influence on industry leaders to advance and accelerate the adoption of UDI, leveraging global GS1 standards:

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We’re working with the manufacturers right now to make sure everyone is using GS1 standards right. The beauty of it started in our ORs. The reps that were in the room saw how hard it was for the circulating nurse to scan their product, and they actually came to the table with us because they were going wait. So you have a process: you can’t hand that implant or anything off until you scan it, because it gives you the expiration date. The surgeons were saying, “You know what? I need this implant, and apparently your barcodes don’t work, because my nurse knows what she’s doing.” And [the vendors] started to get nervous, and they’re making calls to their head office asking what they can do to improve their barcodes because this doctor is getting ticked off. And we’re sending the message to our ROi [contracting and sourcing team] that we have to follow GS1 standards for contracting now. So this has become a nice full circle of putting the pressure on the right spot. (Supply chain leader) One of Mercy’s key priorities was bringing its hospitals together to drive towards a highly integrated, high-performing system focused on advancing the mission and supply chain strategy across the entire Mercy organization. The legacy of the Mercy system had been a culture of autonomy and independence of each Mercy hospital. Yet, in order to achieve the financial, operational and clinical performance goals at the system level, the impact of supply chain integration required economies of scale across all hospitals operating as one system. Clinician engagement had created strong momentum in advancing integrated supply chain as an asset within each hospital working with the Performance Solutions team. Hence, Mercy leveraged their strong clinician engagement to build and support connectivity and collaboration among physicians across all Mercy hospitals organized by specialty groups, while at the same time ensuring that the supply chain infrastructure supported the day-to-day work of clinician teams seamlessly. The aim was to work towards a leadership-driven system, with the staff connected and working together to make decisions for the system operating as a whole: Some of the things we’ve done with Mercy in terms of the amount of integration with the physicians we have in every community, and then [we connect] all those integrated groups through a unified Mercy clinic. So we have a structure that oversees the physician arm of the bulk of physicians that practise at our hospitals—not 100 percent, but certainly the bulk of them. And then we actually connect single specialties across the organization. We have a structure we call specialty council that connects all of the cardiology practices across the organization. That allows the people who maybe have a bit more than just an isolated front-line view, and who see the bigger picture, to discuss how that impacts all aspects of that interaction—making sure it’s an easy process to follow on a day-today basis, but also … being trackable on the backside, so people can see the outcomes across the organization. That becomes easier for us because of the fact that we’re all branded with one name—we’re all part of Mercy. … So that helps solidify the linkage across the organization as well. The driving of the strategy, I would say, probably lies more … in

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terms of the Mercy clinical leadership seeing the value, the singlespecialty leadership across the organization seeing the value, and then making sure it all flows in such a way that the front-line co-workers dealing on the everyday basis don’t see it being an impediment to their usual workflow. (Supply chain leader) Having clinicians step back to see the bigger picture has been a key strategy in transforming Mercy from a collection of independent organizations towards a highly integrated system connected via clinician networks. The strategy enables clinicians to examine clinical outcomes and performance across the different hospitals in the system to identify clinical variation, and value relative to patient outcomes. This perspective fuels dialogue and analysis of costs due to variation, clinical outcomes and value, and financial and operational performance: It’s when you back up and take a higher perspective on it that you see the importance of being able to track and trace where these devices go and into whom, and be able to backtrack all that. So you know, if you talk about somebody in the more leadership role, I think that’s the value they’re going to see—to be able to track devices that may have failures or issues. You really need to track patient satisfaction and patient outcomes and potential recall aspects. Some would say [that tracking needs to include] getting more detail on comparative analytics on outcomes. The [most recent] upgrade really made a significant difference in outcomes, and … that stuff is hard to do retrospectively. Physicians can visualize that and they compare it, which is also a benefit because they can see what the dollar amount is and what their usage of that is compared to, “Why is my procedure $300 more?” And so yes, I’m sure they do [see the benefit]. … I will tell you, there are a lot of items that maybe we had opened before and now we are able to visualize, and they’re saying, “Hang on, wait—why don’t we hold those two back until we get going? I’ll let you know which one I want.” They’re kind of realizing, and it opened their eyes a lot. It really gave us some visualization to some opportunities that we hadn’t had, that maybe weren’t as obvious to us prior. The metrics give them a common goal. They’ll get in each other’s huddles when they’re talking about their metrics together. If they’re talking about it separate, they stay separate. (Supply chain expert) It was widely viewed that adoption of point of care scanning, and integration of scanning into clinical workflow, would be a challenge that supply chain teams must overcome. However, change management processes to engage clinicians in learning barcode scanning technologies and processes were welcomed by most clinician staff: After we actually saw the scanning, we wanted the training and we were like, “That’s it? That was the training?” That is going to make it easier, you know. Because a lot of people don’t like change, but I think after they

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actually realized it’s a change for the better, it sold itself. (Perioperative nurse) Clinician engagement was a hallmark of the Mercy strategy that enabled and successfully achieved the implementation of the Mercy integrated supply chain strategy. Relationships of trust between supply chain and clinician teams were supported by the Performance Solutions team, together with infrastructure to support problem-solving and overcoming challenges. Possibly of most importance: physicians across the system were empowered to bring their clinical expertise to decision-making on product procurement, standardization and traceability of outcomes to achieve a highly integrated supply chain strategy, deeply embedded in the perioperative program to contribute to clinical, financial and operational performance.

3. Establishing Control Over Information and Data: Information Infrastructure to Achieve Transparency of Data in Real Time One of the key strategies of Mercy leadership was to get control of data and information. Figure 6 describes the basis for this component of the strategy, whereby data is viewed as the key enabler of progress in advancing supply chain transformation across the system. Mercy’s vision identifies the value of health system data. But data must first be transformed into information, through the application of descriptive analytics, before knowledge can be generated. In the view of Mercy’s leadership, only when knowledge creates insight is it possible leverage data to offer evidence to guide action. Figure 6. Key enabler: Data is the foundation of progress Key Enabler: Data is the Foundation of Progress


Accountable system focused on achieving value, tailored to population needs Prescriptive analytics inform risk mitigation proactively to enable personalized quality care

Real-World Evidence

Value-based action Predictive analytics is enabled


Knowledge that can inform decisions Descriptive analytics are enabled


Information kept in silo Limited transparency


Source: Moore, V. 2017. (3)

Structured and unstructured Very little value

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Health systems generate massive amounts of data in many different forms, and the challenges of analyzing these are significant. The multiple sources of data exist in completely separate data infrastructures that do not connect to other types of data. For example, inventory data (financial data that may include patient billing, invoicing and purchase orders) and patient data are managed through separate software and IT infrastructures. And patient data itself is collected in both structured (e.g., digital laboratory results) and unstructured (e.g., written clinician progress notes) formats. In order to transform disparate data types and sources of data, the IT infrastructure of clinical environments must be able to link inventory and product data with patient data and financial data systems. When infrastructure is connected and integrated, knowledge, insights and actionable tools to inform decisions about products used in care processes are possible and achievable. When Mercy created the ROi organization to advance supply chain services, they set out to create the system-level information technology and infrastructure needed to connect formerly disparate data from operations, finance and patient care to enable analytics to inform system-wide strategy and decision-making. Data capture and analytics tools were required to link data and identify sources and types of variation, viewed as the key to achieving operational efficiencies, high-quality patient care and optimal financial performance. Data analytics focuses on leveraging the product-level information from UDI—accurate charge capture to enable accurate case costing—that is then used to inform decisions on standardizing products and care processes. The Mercy data analytics strategy configures the information infrastructure across the system to support comparative effectiveness research and post-market surveillance of products to create the real-world evidence of value for patients and eventually, for patient populations more broadly. The ROi strategy created infrastructure to mobilize data analytics that would examine variability and opportunities for standardization, and assess cost per case by leveraging UDI product data. This approach developed a rich database that supports both comparative effectiveness research and post-market surveillance. Ultimately, transforming data into knowledge and insights to inform actionable decisions was viewed by senior leadership as the pathway to fiscal viability, sustainability and performance of the Mercy system (9). Although the Perfect Order project created the infrastructure for integrating data from disparate sources, the ROi and Mercy teams were quickly faced with the realities of data integrity and accuracy: The data piece was big, and when we first started to get into that, we realized that we were calling items different things. They were different prices, they were all kinds of things that were out there, and actually the UDI was something that BD mentioned to us … almost from the first day. [Name] said, “Wouldn’t it be nice if we had in this industry a uniform code for a product that no matter which hospital it’s in, we know exactly what it is.” We kind of created our own UDI; … whatever was on the box, we

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created a unique identifier for that [stock-keeping unit] for our entire ministry‌ . That became the start for us of utilizing standards to drive efficiency, but also to help us with our effectiveness, and those are two key measures going forward as well. Data standards and UDI standards to identify products had not yet been adopted by either industry or health systems at the time of the Perfect Order demonstration project. Currently, although industry is moving towards adoption of global (GS1 or HIBC) standards across all product lines, there remains significant progress to be made. Figure 7 captures the complexity and the challenges that must be overcome by industry in order for health systems to fully integrate and implement supply chain processes. Figure 7. Challenges with data integrity in the Perfect Order project

Source: Moore, V. 2015. (9) Once Mercy and BD began to partner, they realized the magnitude of the challenges with the flow of accurate and connected data across the system. One challenge was the many product numbers used to identify the same product, making it impossible to identify a unique product item when automating inventory processes to support the perfect order. When BD examined the many customers they supply products to, there were over 350 different terms used to identify BD as a supplier to the health system, with a heavy reliance on proprietary numbers assigned to each customer. These could be a clinical unit, a program, an organization or a health system, all identified with unique proprietary numbers. Although this was not a significant issue with Mercy, the high degree of variability of terms among health systems is a significant challenge for supplier such as BD, and many others.

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Reconciling data describing product attributes was a significant challenge for Mercy and ROi to overcome. Uploading accurate GTINs (global trade identification numbers), assigned by the manufacturer to uniquely identify a product, into the Mercy IT infrastructure was also a challenge for both partners, as BD was faced with the problem of adopting GS1 standards and assigning a GTIN to every product supplied to Mercy. Similarly, supply chain teams were challenged by the transition from a manual process (ordering products, invoicing, generating purchase orders and tracking shipments) to a “no touch� automated process of replenishment (including product utilization, purchase order, invoicing and receipt of product into inventory). Figure 8 illustrates the flow of product GTIN barcode information in the operating room setting at Mercy in order to link product information with patient identification to support recalls. Figure 8. Patient room/operating room: Perfect order and beyond

Source: Rocchio, B.J. and Mantel, M. 2017. (22) For manufacturers, the data requirements to fulfill the need for unique device identification (UDI) information on all products presented several challenges. One was the sheer number of product stock-keeping units (SKU), which must be labelled clearly and accurately on every single product supplied to health systems. The second challenge is to meet the demands for specific product attribute data (e.g., latex content, sterile) requested by each individual health system or organization. Manufacturers are working towards full adoption of global standard barcodes on every product; however, managing product data for each individual customer is a substantial challenge. Figure 9 illustrates the data management steps required of manufacturers.

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Figure 9. Data management steps in manufacturing Manufacturer (BD) Factory

Manufacturer (BD) Distribution Centre

• Production order and GTINs pulled from ERP • GTINs and production data (lot, expiry) printed on products • GTINs used to track products during manufacturing • GTINs used to track content of shipments • Manufacturing data stored in ERP system for all product data

• GTINs and ASN used to verify receipt of products • GTINs used to assure accuracy of picked products • GTINs and barcoded production data used to create and track shipment • Shipping unit content barcoded and tracked with pallet licence plate (SSCC) • ASN contains GTINs, SSCCs and GLNs sent to customer • Inventory and delivery information stored in ERP system

Customer (Mercy) Warehouse • Use GTINs to validate receipt of order and order accuracy • GTINs used to put products into inventory and then to distribute and track products sent to clinical units • Manufacturer-assigned barcode and product data used in inventory management to rotate inventory, reduce risk of product expiry, ensure quality control • GLNs used to track products in Mercy system to optimize distribution and pricing accuracy

ASN = advance shipping notice GTIN = global trade item number ERP = enterprise resource planningSSCC = serial shipping container code GLN = global location number Source: Moore, V. 2015. (9) Mercy conducted a global search for inventory management software that could meet their needs for managing product data and inventory processes, and applying analytics tools to transform data into knowledge, insights and actions. The critical challenge for the success of their strategy was the ability to link different sources and types of data to enable the analytics tools to create evidence to support operational, financial and clinical decisions. Data integration was required to achieve the following:

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• • •

Link inventory data to clinical care data to track product utilization, support demand forecasting and optimize inventory management. Link product UDI to patient data to determine accurate case cost capture and enable tracking and traceability for automated recall. Link provider identification and care process data to product data uploaded into the patient’s EHR to assess long-term value and quality-of-care outcomes.

After an extensive search, Mercy partnered with a Canadian inventory management company, TECSYS Inc., to co-design a tailored solution to meet the very specific needs of the Mercy system. The goal was to create the system capacity to integrate data and information pathways among product information, inventory processes, clinician teams and care processes, and patient medical records: What we are seeing is the recognition of activities that need to happen that support how the clinician needs to do their job at the front line. If I were to reverse-engineer this [in] creating a supply chain process, I would start in the very simplest place. I would start with replenishment or my receiving. I’m not doing that any more. I’m looking [at the situation] in an entirely different way. I’m starting at the point of consumption [during patient care] and working backwards, which is in the middle of the process. It is neither one of those; in fact, it’s a trigger. But the change puts everything on its ear and says consumption is where things are most important, and backing that up is when things change. And that requires respective changes for TECSYS too, because they’re a warehouse system. … They identified what was triggered that needed to be solved with technology, something in the process. These are identified points that can solve problems for clinicians as they move through their workday. Supply has a workflow, clinical has a workflow, and this all points to it. (Supply chain leader) An integrated supply chain strategy necessarily required consideration of how inventory processes interface with clinical workflow processes to offer the seamless, automated system to support the Mercy strategy. The TECSYS software creates visibility for supply chain teams while at the same time providing the cues to clinicians when a product is expired: One of my favourite things about the TECSYS program is that it gives us what they call our CUI [clinical user interface] screen. On that screen it has everything, all of that information is built in right there, so I can see my implants that came on that card, I see which implants I’ve already implanted, I can see my trays, my supplies [and] any changes that I’ve made. … Every time I’m scanning something it is keeping track of what I have done … , so I can come back to it and say, “Did I charge for that” or “Did I scan that piece in”; it is all going to be tracked for me right there. … Since we have gotten the TECSYS [program] and are using the scanning, now you just scan the barcode on the package and everything populates

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for you. There’s no more searching and no more chances of putting the wrong numbers in. Another big plus is [that] if you scan … an expired product, a huge box would pop up on the screen warning you, “Don’t use this product, its expired.” So there’s a safety feature built into it that way. (Clinician leader) The inventory software creates a clinical infrastructure that offers transparency for clinicians and supply chain teams. Figure 10 shows a sample of the CUI screens. Figure 10. Real-time case costing: TECSYS case documentation for the OR

Real Time Case Costing

Source: Tecsys Inc. (personal communication, January 2018) It is noteworthy that the simple scan of a product automatically populates a number of fields of data for the clinical team to identify the products that have been used in each surgical case. The system notifies surgical teams of which products must have a UDI entered in order to proceed with the case, noted by the red “required” indicator on the screen. Clinicians are automatically notified of an expired product as it is scanned, thus eliminating the labour hours of monitoring inventory expiry dates manually. For supply chain teams, it creates visibility of product utilization, reduces waste and automates replenishment of product based on accurate demand forecasting. Scanning the product barcode information at the point of care is immediately integrated into the patient health record software, which allows all products and care procedures to be tracked and traced immediately to the patient and recorded in the patient record. This documents all patient care processes and the products used during care: You scan that [implant], and it gets uploaded into that patient’s chart. If that patient shows up, say, six weeks from now in pain [and] something is wrong, we can track it back and say, “Wait a minute, let’s have a look at

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these screws, those were whatever—maybe titanium. … I’m making this up [for illustration purposes]. (Clinician leader) In addition, Mercy has integrated a “quality dashboard” into their system to measure and examine safety outcomes. Surgeons receive a scorecard of patient satisfaction, ranked relative to the scores of their peers: We have something called a surgeon scorecard that [enables surgeons to] go in and look at their scorecard monthly and see what they themselves are achieving relative to patient satisfaction. … And we pull in their individual scores to their scorecard so they can see patient satisfaction. They see their top three cost cases by volume. So my total-joint surgeon probably sees total knees, total hips and shoulders— let’s say the top three cases. They see what their cost is, and then all their peers are listed by their ranking number, which is interesting, right? (Supply chain leader) The integration and flow of data that links inventory management data with clinical and provider level data creates an information technology of infrastructure in clinical settings characterized by transparency. This enables Mercy teams to analyze the outcomes of clinical care for patients, the operational impact of care and the financial outcomes for the Mercy system. Access to data that has been analyzed to provide critical information and insights is enabled and supported by Mercy’s supply chain strategy: We had a lot [of data], and I can tell you, it’s painstaking to get to it. But at least at Mercy I can get to it. In my past job I had no idea, I was just like, “Yeah, change the preference cards [products used in cases], get them all standardized.” … But when I got here I had access to some data, and I was like, “Okay, I can see the opportunities to improve.” (Supply chain leader) The transparency of data is proving to be very useful for applications well beyond inventory management and clinical care outcomes, such as leveraging data to inform system-level challenges such as litigation: We had a lawsuit that came about in Mercy where it was a young person who died in our cath lab and the husband … was distraught. So thinking we didn’t do everything we could do right, he was filing a lawsuit; the attorneys were starting to exchange information. Actually, the point of use scan that we use in the cardiac catheterization lab saved us because it showed not only that we had used the right product to try to save her, but the time that we used it. So the process of scanning before you open helped us, because it says at 11:32 we opened this sheath, at 11:35 we opened that. (Supply chain leader)

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In addition, the purposeful integration of supply chain teams and technologies with clinical teams and care delivery processes has fuelled a new working relationship between teams that formerly functioned very independently in their roles: [Before the integration at Mercy,] we all worked in our silos, we all had our area, we all did our jobs and you know, we were all trying to meet the common goal of our patients’ care. But really, there wasn’t a lot of interaction together. There might be a, “Oh, do you have my tray?” or “How are we supply-wise?” or “Is there a back order?” But now, because we have worked together and because of TECSYS and the way that this whole program is formulated, myself and the leader of the supply chain and instrumentation, we now not only meet weekly, but we also attend each other’s daily and weekly huddles. We have a shared leadership program now among the two departments. It really bridged a lot of gaps. (Clinician leader) There were some challenges with data integration, chief of which was getting all suppliers to adopt global standards. In order for Mercy to succeed in their data strategy, product barcodes from all suppliers needed to be accurate and easily scanned at the point of care to support clinician workflow. If a product does not scan, then the clinical team must enter the barcode manually before continuing with the care procedure, resulting in increased labour costs and reduced operating room productivity. Barcodes are applied by product manufacturers, who must manage product data accurately and efficiently. However, not all product manufacturers have adopted global barcode standards for all products, presenting a challenge: There were some barcodes with certain companies that weren’t working when we first opened, so it is going to be regulated [per FDA requirements for manufacturers to adopt either GS1 or HIBC standards] so that everyone has global standard barcodes on the product. So, they are getting switched over. I have seen companies, even since we have started, that didn’t have the correct barcodes; they have already switched. … That was part of the cleaning up that we did at the beginning in making sure we had all of our products actually in our database. So that’s where we would find that, if we scanned it and it wasn’t popping up, we could still put it in on the fly. So we do have options to do that manually, because we charge for that item if we are using it. But that has also helped me regulate what my vendors are bringing in to the room, because now we have [entered the] products we use here. So if nurses are like, “Hey, this product is not scanning,” I’m like, “Well, why isn’t it scanning?” Because is it something that’s not approved to be used in that surgery. So I’m actually able to take control of what’s coming into my ORs because of this. (Clinician leader)

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The value of accurate barcodes on products enables accurate cost capture for each surgical procedure, while also informing procurement decisions on which products are permitted in the surgical setting and which ones are not. Additional challenges with product barcodes are discussed by a Mercy supply chain leader: We found barcodes that go nowhere, … two products which are exactly the same, [but] they’re charged differently, [and although] they’re packaged exactly the same, they have two different barcodes. Further progress must be made for suppliers to achieve fully implemented global standard barcodes labelled on every product that are accurate, scan successfully and enable accurate product UDI data to upload into patient records during and following surgical procedures: The top 20 [suppliers]—it was getting their adoption [of barcoding on products] moving forward [that we needed]. But we actually hit somewhat of a wall in that there was no further movement. … And part of that was because [clinician leader] said the physicians were not engaged, the clinicians were not engaged. They weren’t pushing the right buttons. (Supply chain leader) The value of getting control of data across the Mercy system is that the infrastructure in clinical environments documents and tracks every product, linked to patients, surgical teams and accurate cost capture of every surgical procedure. Automation of product inventory that links to financial data creates an environment that enables clinical teams to seamlessly conduct surgical procedures while capturing the necessary data for financial tracking, operational efficiency and, most importantly, enabling decisions on patient safety. Capturing and managing data creates knowledge and insights that inform actions: If we go back to the data piece, … at least in the supply chain it was just figuring out what we’re paying for what, so it was very financial based in the beginning just to understand what we had. Then we started getting into what the data began to reveal to us: As we started to standardize our data, we started to find out, “Hey, you know what, in Springfield they’ve got a six-month supply, and we just ran out in St. Louis.” Do we really want to order from the vendor, or can we transfer freight from a location that has too much? So it became highly efficient at inventory management and also the movement of goods. As we started using the barcodes on the products, we could then scan things that would give us verification at various points along the delivery chain—how are we doing on service?— and there would be oftentimes, in the early days of ROi, we’d get a call from a clinician and they say, “I opened up my supplies and something is not there,” and we’d go, “Okay, great, we’ll ship you one out FedEx

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immediately.” … And here’s what we found out when we started tracking by barcode. We could track that we scanned the item into the tote, and we delivered the tote to the location, right up to the minute we did that. But often somebody would go to pick up the item, but somebody else had beaten them to it and opened up the tote and gotten into it and taken it away. So it was not that there was a service failure; rather, just an increased demand for something that we might consider [ordering in greater quantity] because clearly, you have high demand for these products. So it helped us better associate what was needed to meet a great service standard and whether we make great service standards. (Supply chain leader) The next section of this case study documents Mercy’s outcomes to date as its supply chain strategy continues to be implemented and scaled across all Mercy organizations.

System Outcomes of Supply Chain The Mercy Strategy focused on three key objectives: (1) high-value care delivered by clinical programs, (2) sustainable change in operational performance and (3) strengthened financial outcomes across the system. Mercy’s vision focused on overcoming waste in clinical care—unnecessary care, provider error and avoidable conditions—as well as operational process waste, including inefficiency and lack of coordination. The quality framework driving the strategy is the Institute for Healthcare Improvement’s Triple Aim Measures. Table 1 maps Mercy’s key strategies and outcomes relative to each dimension of the Triple Aim.

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Table 1. Mercy strategy advancing Triple Aim Triple Aim Dimensions Quality Patient Outcomes

Mercy Strategic Goals


Patient safety

71% reduction of serious reportable adverse events Automated warning at point of care Reduced risk of expired products Comparative effectiveness research to identify best outcomes for patients Reduced discrepancy in GTIN scan 12% reduction in OR turnover time; automated processes to reduce time required for manual documentation 284% improvement in frequency of preference card optimization 37% improvement in co-worker satisfaction Accurate cost capture for individual cases 28.4% increased charge capture

Expiry recall Risk reduction Comparative effectiveness Service Experience

Minimization of distractions Improvements to clinical workflow Standardization

Financial Impact

Improvement in clinical satisfaction Cost per case Charge capture

Source: Rocchio, B.J. and Mantel, M. 2017. (22) Outcomes capture the impact of Mercy’s supply chain strategy as the organization continues to implement and scale the strategy across the 45 hospitals in the Mercy system.

1. Quality of Clinical Care Outcomes Mercy leaders have prioritized quality of care at the lowest cost as central to their supply chain strategy. As the mission statement for the Mercy system states: We will relentlessly pursue our goal to get health care right. Everywhere and every way that Mercy serves, we will deliver a transformative health experience. Patient experience and value are central to the leadership mandate for Mercy Health. The supply chain strategy in the perioperative program began originally in 2008 when clinicians in operating rooms were documenting by exception, and manually entering

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product barcode numbers into the patient’s clinical record. At the time of this case study, Mercy had implemented an automated inventory management software (TECSYS Inc.) that enabled point of care scanning of product barcodes, automatically uploaded into the patient record to link the product UDI information to individual patient outcomes and case costs. The outcomes described in this case reflect implementation of the automated software and point of care scanning in two Mercy hospitals. Automation of point of care scanning and linking product UDI to patient records offers much greater accuracy of product use and patient outcomes to evaluate quality of care. The outcomes and findings to date reflect the outcomes for the two Mercy hospitals that have completed implementation of the automated point of care scanning and inventory management software, summarized as follows: •

For adverse event reporting, items can be tracked and traced back to the patient, procedure and clinician.

Products that do not scan successfully at the point of care are not used in a surgical case until the barcode is validated and the product is accurately identified in the system, either by manually checking product identification in inventory, and/or entering the product UDI in the patient record, at which point the team proceeds with the surgical case.

Real-time safety alerts for expiry and recall have been built into point of care scanning to ensure clinicians are warned that a product has expired to prevent use of expired or recalled products in surgical procedures.

Automated tissue tracking using point of care scanning to document tissue data in the patient’s record has been implemented across the perioperative programs in two hospitals.

Global standards adoption (GS1 or HBIC) has been implemented to support inventory tracking and traceability.

Data capture of products, patients and providers during care procedures has enabled comparative effectiveness research to assess quality and value of patient care across surgical patient populations.

The key outcomes relative patient safety continue to emerge as data analytics tools are implemented to examine value and patient outcomes.

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Figure 11. Integrated supply chain infrastructure in clinical programs

Source: Dudley, C. 2018 (February 9). (Personal communication)

2. Operational Outcomes The operational impacts of the supply chain strategy, and introduction of point of care scanning in particular, within the perioperative program were substantial. At a high level, point of care scanning enabled the following outcomes: •

A single scan of a barcode automatically uploads the product information into the patient’s health record and the Mercy information infrastructure system.

Preference care optimization and standardization at the point of consumption to identify changes in produce use, and waste to optimize surgical packs or trays.

Clinical workflow has been enhanced to reduce burden on clinicians due to efficiency in scanning products into the EHR, overcoming the burden of manual documentation.

Team and patient satisfaction has improved due to greater efficiency and time savings for the clinician team.

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Each of these operational outcomes was described at length by clinicians who helped to implement the point of care scanning solution. A nurse working in one of the perioperative programs describes the impact of scanning during surgical procedures: I could not imagine going back to when we did not have the scanning—I will tell you that most definitely. When you are in the OR and you’re on a case and your supplies come up on your tracking system, and you have to insert [an implant and] you’re trying to guess the name of [the item]—these supplies may have unseen names or manufacturers, device size or code. Whereas having that ability to scan—just as in the supermarket, you know, beep, beep, beep right along the way—and you’re able to provide patient care at that point, … oh, it has hours a day savings, many hours a day. And that’s not just on the side of the team that is in the OR, but on the side of administration as well. Our business manager utilizes it throughout the day, as well as myself, as well as supply chain. … You’re probably spending 60 percent of your time charting [during a surgical procedure], or you used to be. I would say [that’s now] probably cut in half. … There are still other things you have to chart, but you’re definitely freeing up your time with all the implants you’re putting in. This nurse highlights two important outcomes of the point of care scanning strategy. First, it streamlines and reduces the time required for nurses to document procedures and products manually in patient records. This outcome has the effect of saving significant amounts of nursing time, reducing labour costs, the number one expense in the perioperative care program. The second, and perhaps equally significant, outcome of the technology is the impact of integration of information, creating a single point of access for all information needs for clinicians, operational managers and supply chain teams for managing inventory. This integration outcome supports the Mercy strategy of bringing teams, staff and organizations together across the entire system. When the technology is fully integrated, all teams will use the same source of transparent information. Given that the Mercy system has a single EHR and information system, it also means that senior leadership have visibility of operational outcomes, across every organization in the system. Once the solution is fully scaled, the various teams can come together to work collaboratively, informed by complete transparency of information. Automated recording of product information during surgery was particularly important for specialized procedures such as implanting tissue. Scanning enables tracking and tracing, automatically locating where the tissue is, the temperature at which it must be maintained, and the patient who will receive it, linked to the surgical procedure they are undergoing: So when we actually implant tissues, there’s this whole other process we have to follow because of the chain of custody. So [scanning] has made my life so much better. It’s [changed] a manual process to an automated

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process, so it’s really taken away a lot of paperwork—really, we were duplicating processes because we were having to write things down, put it in the chart. Now we just scan it and we’re good to go. (Clinician) A recent Cardinal study of inventory management identified that one in four patients receives expired products during patient care procedures (23). Tracking tissue using point of care scanning verifies that the tissue has not expired, thus ensuring that inventory is maintained safely. In the event of tissue that is approaching its expiry date, teams can return such products to the vendor at no cost to Mercy, offering further savings. The system automatically cues both supply chain staff and clinician teams to product expiry dates, further contributing to cost savings while reducing the risk of using expired products. The integration of supply chain in the perioperative programs was viewed very positively by clinicians due to greater efficiency achieved by reducing labour hours during surgical procedures. This operational outcome resulted in greater productivity in operating room procedures: The cases are moving faster because [the nurses are] not out of the room—everything is there that they need, the turnover is faster because they’re not searching the shelves for things for the next case… and the turnover, which was 30 minutes, is now down to 15 minutes … . So we’re cutting out significant time, we’re getting patients out of the OR earlier and putting more cases on the schedule. You have to measure it over time. … [Now]we can go back with data and say you know what, … our average went from X to Y. Well, obviously the variant is something we sustained versus it just happened to be a pickup. We didn’t talk about the [post-anesthesia care unit], where obviously it had an impact, too. [The cost is] about $50 an hour or $60 a minute in a complex OR … . Our routine surgeries have OR costs somewhere between $45 and $50 [per minute]. (Clinician leader) One of the key operational outcomes of this strategy to date is not just efficiency but increased productivity, meaning the surgical cases are being completed more efficiently, in reduced time, the perioperative program to book more surgical cases within the available operating room time. This efficiency has a direct link to increased revenue being generated from the perioperative program. Recall that one of the key drivers of the strategy was the pattern of operational outcomes, demonstrating the increase in surgical cases across the Mercy system over recent year, but the context of the decline in revenues, which was a result of growing operational costs of the perioperative program (i.e., supply costs and labour costs) despite increasing case volumes. This strategy is demonstrating a significant impact on efficiency and productivity of surgical

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cases while also reducing the cost of inventory labour, which will drive a positive impact on revenue. One additional operational outcome of point of care scanning is the management of products referred to as “on the fly,” meaning products that are unexpectedly needed during surgical procedures and are therefore not on the surgical tray: That’s correct, and another [area where] we have really seen great success is with “on the fly” items, which are items that weren’t on the case card, they weren’t on the surgeon’s preference card, and they weren’t even on a maybe list that we had. It’s an item that was added to that case. [Now scanning alerts us that the item hasn’t been entered in our system.] … But where we really get a bang for our buck is when we have reps that sometimes like to sneak supplies into our ORs. (Clinician leader) This observation references the influence of sales representatives from vendors who supply surgical products to the perioperative procedures. Staff describe their perception that items are “sneaking” (covertly) into surgical cases by supply and vendor representatives. These representatives bring new products into the operating room, and when a surgeon requires a product during surgery, the company representative just brings the product into the OR from the sales kit. This presents a significant challenge for hospitals because these products have not been entered into inventory; they are not recorded anywhere in the inventory management system, and the cost of the item is unknown to the operational managers. If the product barcode does not scan, the surgical team cannot use the product during patient care, until the product can be verified in the inventory software and the barcode number can be corrected so that the product can be tracked to the patient record. This policy was implemented to support the point of care inventory strategy. If the product barcode scans, and it is opened for a surgical case, the hospital is charged for the item automatically, adding further expense that is difficult for operational leaders to anticipate. These are known as “on the fly” products. Well, on the backside every day I look at a report that [identifies] those on the fly items. And I go through and say “Okay, maybe we had to use this, hang on, what did he bring this item in for?” And so then that allowed us to get to those vendors and say, “You know, we have a process and we need to abide by this.” So it is really beneficial. (Clinician leader) The point of care scanning and automated inventory management software effectively overcome the challenge of “on the fly” products for the perioperative program. It also enables program managers to identify what products are brought in by industry reps, and to track what products are needed “on the fly” and why. This creates visibility of products brought into surgical suites, enabling the manager to hold sales representatives accountable for following the required processes. Visibility of all products is important for operational and clinical accountability, to ensure that surgical

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teams and vendor representatives understand what products are used and why, while also respecting inventory and care documentation processes.

3. Financial Outcomes One of the priority goals of the Mercy strategy was to overcome the financial challenges they were experiencing with the growing costs of supplies and labour in the perioperative program, which accounted for two of the five highest-cost drivers for the system. Changes in bundled payment models had contributed to declining revenue for Mercy despite the surgical case volumes increasing over recent years. Thus, Mercy was facing a “perfect storm”: growing demands for care, growing costs of both surgical supplies and nursing labour, and declining reimbursement, resulting in declining revenue. Mercy leadership had no other option but to reduce costs per case in the perioperative program in order to be able to continue to manage surgical volumes, reimbursed by bundled payments to sustain revenue. The financial impact of the integrated supply chain strategy in the perioperative program has already demonstrated a number of impressive financial outcomes as Mercy continues to scale the strategy across the system. At the time of this case research, Mercy had implemented automated supply chain processes in two hospitals, one a level III trauma centre and one an orthopedic hospital. There were three types of financial drivers that leaders identified as key areas of focus for the strategy to achieve their financial targets: •

Asset Inventory Management: dynamic inventory management in high-cost programs to track product utilization that informs decisions on standardizing inventory stock to achieve best value for patients at the lowest cost.

Inventory Reduction: demand management of inventory and sophisticated supply forecasting based on utilization for patient care to minimize inventory waste.

Charge Capture: automated capture of product utilization that drives accurate case costing and creates transparency of supply expenses relative to quality outcomes at the level of the individual surgeon and patient.

Within one month following inauguration of the point of care scanning and inventory management strategy in the perioperative program, the charge capture of supplies jumped more than 28.4 percent, because the system was able to capture supplies accurately as each product was scanned for each surgical case. Mercy pursued a number of strategies to reduce the financial costs of supplies in the perioperative program. Implementation efforts focused on three areas: •

Reimbursement: improve the charge capture of products, and use the data to conduct comparative effectiveness analysis to determine which products offer the best value for patients.

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Inventory Management: measure and track inventory asset valuation; reduce inventory expenses by consolidating inventory levels across Mercy distribution and warehouse to better align with demand; manage consigned inventory; maintain and optimize preference card accuracy; and create inventory visibility and achieve standardization.

Process and Workflow: redesign clinical workflows; eliminate risk to patients from expired or recalled products; streamline the process of recalls; leverage UDI to determine best value for patients; track and trace equipment and instruments; track and trace tissue while complying with regulatory requirements.

The financial outcomes of Mercy’s inventory management strategy are emerging as implementation of the strategy continues. To date, a total of $20,730,800 in savings has been identified (22), accounting for outcomes in two hospitals: •

Asset Inventory and Inventory Reduction: Total, $7,730,800 o $2.4 million in unrecognized inventory assets o $4.7 million in improved inventory utilization o $4,800 automation of replenishment o $167,000 reduction in cycle counts o $459,000 preference card accuracy

Charge Capture Outcomes: $13 million in optimization of charge capture

The most impressive impact on financial savings to date is the substantial improvement in charge capture, illustrated in Figure 12.

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Figure 12. Preliminary financials: Quantity of supplies being captured

Preliminary Financials Quantity of Supplies being Captured

Go Live

28.3% Improvement*

This equates to an 7.9% improvement in Gross Supply Dollars Captured ($215 increase per case)

* This is only 2 months of data and needs to be trended before an assumptions can be made

Source: Rocchio, B.J. and Mantel, M. 2017. (22) A second strategy with similarly impressive financial outcomes was the reduction of case costs by standardizing products to reduce the cost of carrying multiple, similar types of items (e.g., joint implants) for specific surgical cases. Decisions to standardize products (reduce the number of similar products used in surgical cases) were led by clinicians at Mercy, who work across the system organized into specialty councils where specialist physicians (e.g., orthopedics) meet regularly to examine the data on the types of products used in surgeries, the outcomes being achieved for patients and the value of products relative to patient outcomes. The automated data analytics, based on data generated at the point of use for surgical cases is analyzed by the specialty councils to generate the knowledge, and real-world evidence, of outcomes and value. The reduction in case costs was driven primarily by looking at variation in clinical practice across surgeons and reducing the use of more expensive items that do not produce a better outcome for patients. Clinicians are organized into clinician councils to examine the evidence and data on utilization and then make the decisions on standard of care for all Mercy organizations based on quality outcomes for patients relative to cost of the product. Figure 13 is a stark illustration of the inventory reduction achieved through standardization of products used for total knee arthroscopy. The results identify a fouryear period following implementation of the supply chain strategy.

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Figure 13. Perioperative results: Total knee arthroplasty

Total CPI Adjusted Intraoperative Supply Cost Per Case, May 2012– January 2016 (n=11,834)

Source: Moore, V. 2017. (3) The third strategy that contributed to significant financial savings was the accurate capture of inventory assets in surgical programs across the Mercy system: Our measures are comparable, so I’ll give you some anecdotes. When they first started the cath lab at Springfield, they estimated they had $800,000 worth of product on the shelf. When we left the cath lab after the first implementation, it was at $1.9 million. The estimated valuation of the inventory was much lower than what proved to be accurate. Scanning clinical inventory offered an accurate accounting of the value of inventory being managed in the system. The automated inventory management system also provided transparency of product utilization and supports more effective planning of products needed to support patient care: Being in the OR side, what is really nice is the visualization that it’s given us as to what supplies were actually used, how often am I really using this wound protector, if am I using it 70 percent of the time, is it worth having our supply chain pull that and then possibly return it … . There has been a huge amount of savings on that side as well. We are able to actually identify what that case cost is based upon what we are actually needing to pull for that case the majority of the time. And what’s on the preference card all these years … and never used. And so we are getting a more accurate look at what items are needed for cases, and how many we need to have on hand. And because TECSYS also allows us to see our realtime inventory, it lets us see the dollars that I have sitting in my court at all times. (Clinician leader)

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One of the value propositions of the automated inventory strategy is the visualization of data in “real time,” whereby product utilization is profiled for all stakeholders and is immediately updated as products move across the system. Asset realization was a key area of impact for Mercy: The three things that are the most important for us were asset realization, inventory reduction and charge capture. We estimated [that asset realization] would be about 10 percent, 10 to 25 percent. We exceeded that already. So if I go up to the OR and say, “What have you counted at the end of the fiscal year? You said I have this dollar amount,” if I go into the system and count a different number, there’s more assets realized or less assets realized. … It’s a spike. So we had a funny anecdote when we were at Springfield and … the CFO there tells us, “There’s no way you’re going to find this number; it doesn’t exist.” A month after the process he calls and he says, “I just found a pallet with $1.7 million of solution that I didn’t know I had. Get out here as soon as you can.” It exists everywhere. (Supply chain leader) As Mercy continues to implement their strategy across the entire system, the financial impact of the strategy is emerging and continues to be captured and profiled by their senior leadership. Figure 14 illustrates the financial impact of their strategy over the past four years. Figure 14. Fiscal-year comparison of perioperative operations

Source: Rocchio, B.J. and Mantel, M. 2017. (22)

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This financial analysis reveals a 29.5 percent decline in labour costs over the four years of the strategy, accounted for a $276 reduction in labour costs for each case. The reduced labour costs were attributed to changes in skill mix of staff and reduced numbers of staff needed for the surgical cases. Similarly, the supplies costs per case have declined 33.3 percent, resulting in a reduction from $2,055 per case to $1,371 per case, a very significant savings for surgical cases in the two Mercy hospitals. Although revenue per case has declined 30 percent over the last four years, from $17,597 in 2014 to $12,017 in 2017, Mercy was able to maintain their overall revenue for the perioperative program at $2,289,173,790.00 in 2017. Overall, reimbursement models have changed, resulting in a declining revenue per case from $17,597 in 2014 to the current, $12,017. In order to drive revenue given the reality of changing funding models, Mercy has successfully decreased their supply and labour costs while increasing their surgical volumes, to drive a growth in revenue of $81,242,551 from the perioperative program (from 2014 to 2017) over the course of the four years, since the onset of their supply chain strategy. Perioperative program savings are not the only savings reported by Mercy leaders. Recall the most recent perioperative program strategy has revealed substantial savings. However, savings in the cardiology program are also emerging following the work of Dr. Drozda, and additional savings from other initiatives in the lab and pharmacy are similarly contributing substantial savings for Mercy. Figure 15 shows the financial impact of data analytics savings in key program areas. Figure 15. Results: Data analytics—saving Mercy millions while ensuring the best patient outcomes



Source: Moore, V. 2017. (3)


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These findings capture the significant impact of the Mercy strategy across both patient care delivery programs and support services such as Performance Solutions, which have applied the tracking and traceability of equipment across the system. As the Mercy system strategy continues, the impact appears likely to continue. The future directions of the Mercy strategy are captured in the next section.

Real-World Evidence: “The Promise of the Future” Leaders envision the future Mercy Health as one focused on value, informed by robust data collected in real time, and then analyzed to create real-world evidence to inform decisions that achieve value. Mercy is in the process of creating the capacity to conduct comparative effectiveness research to capture evidence of value that will continue to inform leaders of progress towards their strategy, ensuring that the best possible care is delivered to patients: I just got something from the FDA today on real-world evidence that will pre-empt some of these long-term double-blind trials. If it’s out there and it’s real and it’s validated, the FDA is beginning to open up guidelines on that, where we can accept [getting regulatory approval for products] much sooner. That could never have been done if we didn’t have data to support it, so real-world evidence is okay when you’ve got data to support it. But I think that’s the thing, that’s the promise of the future—we’re a long way from that right now. (Clinician leader) The progress made at Mercy to date has contributed visibility of data that captures every patient, and every product used in surgical procedures, linked to patient outcomes to determine value. This clinical infrastructure enables clinicians to identify expired products, automates the recall process for products, enhances clinical efficiency and generates data documenting care processes in real time, creating the visibility to to strengthen value for patients, clinicians and the organization: I think it’s continual improvement and iteration process. … As we’ve demonstrated in supply chain, it’s sharing information transparently with the people who can evaluate it. Then, those who are strong and capable of actually driving variation out using evidence—wherever that is. And even if it’s off-label use—if we have enough evidence to support it, even if it’s not internationally or nationally followed, if we can find that this leads to a better outcome, we can then begin to start following it on our own. (Supply chain leader) Generating data that is analyzed by empirical methods to create evidence of value is viewed as critical to the future of Mercy Health. However, to generate real-world evidence, Mercy will need to develop the necessary research capacity to conduct comparative effectiveness research.

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I would tell you we’re collecting it all today, the actual analysis and projected studies. … We’re just not there yet. We’re collecting it, so I believe that’s truly the future as we start to look at populations. Where under these conditions, these medications are better. … I’m not a [clinician] to be able to make those calls. What my job is, is to make sure that we have the data so the clinical leaders can actually make those decisions. I think it’s going to be more continuum-based and yes, we focus on those, in the OR and things like that. Because often those are the most expensive products, and we definitely want to know we’re getting our money’s worth for what we’re paying. But I think that will follow in chronic illness management, or whatever else, as well. (Supply chain leader) Mercy Health has made very impressive strides towards a complete transformation of supply chain as a strategic asset across the organization. The changing landscape of funding models with a strong focus on value has created the impetus for health systems to find ways to optimize clinical care and achieve operational excellence while ensuring strong financial performance outcomes. Supply chain is widely viewed as accounting for 40 percent of the costs of U.S. health systems. Mercy has transformed the notion of supply chain from being a cost centre to a strategic asset, able to drive quality and operational excellence as defined by the Triple Aim, while at the same time strengthening financial outcomes. Mercy leadership has created the clinical infrastructure to automate tracking and traceability of every product used in every surgical procedure, linking inventory and product data to patient medical record data to enable comparative effectiveness research, creating evidence for best value for patients. Data sources are connected and integrated, creating a seamless data system that is visible to all stakeholders, in real time. Integrated data is analyzed to generate realworld evidence of the cost to serve per physician, per procedure, per patient, per location and per day (25). As funders and payors transition from fee-for-service to “payfor-value” payment models, health systems will have to capture and measure value to remain sustainable. Figure 16 summarizes Mercy Health’s transformation.

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Figure 16. Transformation: A changing landscape for success

TRANSFORMATION: A Changing Landscape for Success PAST EFFORTS





Come to Me


Go to You

Provider Centric Central Responsive Assessment Treatment Tactical - Specific Area Computerization


Distributed Predictive Analysis


Prevention Strategic - Entire Enterprise


Respectable / Incremental


Administration / Physician



Patient Centric

Automation Transformative / Phase Shift Physician / Administration





Source: Moore, V. 2017. (3) Not only is Mercy integrating both supply chain data systems and patient data systems; they have mobilized clinicians across the system to achieve a highly integrated model for decision-making that includes clinicians working with supply chain teams and administrators to make strategic decisions in order to achieve the best value. Supply chain as a strategic asset has demonstrated impressive results across the Mercy system, which is now moving towards full integration, powered by analytics to achieve high-quality operations and financial performance.

Summary and Key Findings Health systems in the United States are structured and driven largely by revenue generation, which is critical for remaining viable and sustainable as health system costs continue to climb and demands for services continue to grow. U.S. health systems operate very differently from those in other OECD countries, where health systems are publicly funded, mandated to deliver health services within fixed global budgets. In this case study, the primary driver for supply chain transformation was sustaining and potentially increasing revenue, while also maintaining quality outcomes for patients to support market growth. The central goal of Mercy’s strategy was to offer the best quality outcomes at the lowest cost. Mercy is ranked one of the top five health systems in the

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U.S., well known for their expertise in virtual care and advancing supply chain transformation. Mercy had begun their supply chain transformation in 2003 with medication scanning at the point of care to more accurately capture charges, in order to manage case costs and improve safety. In 2009, Dr. Joseph Drozda’s work built on the lessons learned of medication traceability: he implemented the BUILD project to achieve tracking and traceability of cardiac catheterization products, documenting patient outcomes relative to care procedures and product use (e.g., stents). The BUILD project was also designed to provide evidence of real-world value to inform Mercy team decisions, as well as manufacturers, on product performance in cardiac care to advance product innovation. The focus of this case study was the implementation of a perioperative program supply chain strategy designed to reduce surgical case costs (both supply and labour) and strengthen quality of surgical outcomes for patients, because revenue projections for this program were declining in the face of changing reimbursement models. Mercy leaders viewed supply chain as a strategic asset; they believed that when integrated into key programs, such as perioperative, supply chain would create transparency of product utilization and patient care processes when these were linked to patient outcomes. The resulting data would provide evidence to inform strategic decisions and reduce waste, optimize efficiency and achieve the best possible outcomes for patients at the lowest cost, driving value across the organization. The key findings of this case are summarized below. •

“One Mercy”—Supply Chain as the System Integrator: Although revenue is a fundamental driver of change and innovation, this case demonstrates important outcomes of Mercy’s supply chain strategy beyond revenue. One of the key outcomes was leveraging supply chain infrastructure as an “integrator” across the Mercy system to bring all organizations and teams together. The “one Mercy” goal successfully leveraged their supply chain strategy to connect teams and organizations, creating work environments focused on decisions in the best interest of Mercy as a whole, rather than decisions in the best interests of a single hospital or team. Supply chain as a strategic asset helped overcome the historical autonomy and independence of each organization. The concept of “one Mercy” was demonstrated throughout case outcomes. Clinician councils brought physicians together across Mercy to make decisions on best practice with a view to decreasing variation and increasing quality outcomes for all Mercy patients. “One Mercy” demonstrates the impressive integrator function that supply chain infrastructure serves—a strategic system asset that brings organizations, teams and system stakeholders together to make decisions and implement strategic initiatives that achieve value for the entire system and for patients.

Creating New Revenue by Achieving Economies of Scale: Mercy leaders leveraged their extensive expertise in supply chain strategy and services to create ROi Inc., a spin-off company owned by Mercy, to deliver supply chain

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services to Mercy organizations as well as other health system customers. This strategic decision advanced supply chain as a new revenue stream for Mercy, simply by sharing their extensive supply chain services. The importance of this strategy essentially enabled ROi to leverage greater market power for negotiating contracts for all Mercy teams. This approach not only offered greater economies of scale, but also standardized pricing and supply costs across the entire organization. Negotiating lower product prices, optimizing distribution and warehouse costs for themselves and for their customers, and manufacturing offlabel products were just a few of ROi’s services and products that contribute to Mercy’s revenue growth. This centralized approach to supply chain services creates significant leverage for organizations in dealing with suppliers, who readily compete for contracts with entire regions, to secure larger, more lucrative contracts. •

Re-Engineering Supply Chain Processes Starting at the Point of Care: Mercy’s supply chain strategy was described as being “re-engineered” to enable clinicians to deliver care to patients. Mercy leadership redesigned every process in the supply chain to support efficient, safe and effective delivery of care. For example, supply chain infrastructure automated and integrated supply chain processes in clinical environments, creating transparency of data in real time and informing clinician decisions to achieve best care outcomes for patients. Real-time data on product cost at the point of use informed decisions on the best and safest products at the lowest cost. Automated cues to inform clinicians of product expiry or recall reduced risk and strengthened patient safety, communicated at the point of use by scanning product barcodes. The ability to track and trace products used in care processes, linked to outcomes, allowed clinician councils from across Mercy to standardize products and care procedures to reduce variation, contributing to cost savings. Every care process and product was captured at the point of care, linked to individual physicians. This level of transparency was an extraordinary opportunity to examine practice patterns across Mercy and inform decisions on standardization to reduce variation and waste, and strengthen quality. The re-engineering of supply chain infrastructure to support clinicians to deliver effective, safe and efficient care has created the necessary system transparency to optimize financial, operational and clinical performance for Mercy as a whole.

System Transparency—“You Come to My World and I’ll Come to Your World”: Integration of supply chain in clinical programs within each Mercy organization was fundamental to achieving the goals of financial, operational and clinical performance. Integration of supply chain expertise with clinician teams overcame the silos across Mercy whereby formerly, clinician teams managed supply chain tasks, and supply chain teams had limited insight into the workflow routines of clinicians. When supply chain services and tools were integrated into clinical program teams, there was an awakening for supply chain teams, who described clinicians as “in survival mode”—managing as best they could to deliver care with

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the products and equipment provided to them. Conversely, clinician teams were inspired and embraced opportunities to streamline workflow and care routines by automating processes such as manual documentation, simply by scanning product barcodes. Essentially, supply chain teams “came into the world� of clinical teams, enabling them to integrate supply chain tools into care processes. This reduced the burden of manual documentation of products used in perioperative care. Clinicians described savings hours of valuable time and having the confidence in being notified automatically in the event of product recall or expiry. Automated processes for clinicians improved efficiency and productivity, while at the same time achieving substantial cost savings through reduced waste and standardized care processes. Clinician time was released to focus on patient care, which also increased capacity in high-cost settings such as perioperative, to further drive revenues. The vision of supply chain as a strategic asset across Mercy was highly successful in overcoming the silos between operational and clinical teams, who were able to work side by side to achieve system-level optimization and performance. This leadership strategy is illustrated in Figure 17.

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Figure 17. Mercy leadership vision: Supply chain as a strategic asset

FINANCIAL • reduce costs • strengthen revenue

PERFORMANCE GOALS OPERATIONAL • reduce waste and create efficiency

Re-Engineered Supply Chain from Point of Patient Care • automate supply chain processes and data capture • inform and enable clinician decisions on product use, safety • enable workflow efficiency, productivity by reducing supply chain tasks and returning time to patient care

CLINICAL • best outcomes at the lowest cost

“One Mercy”: Leverage Economies of Scale, Drive New Revenue • contract services to other health systems to create new revenue stream, market reach and leverage economies of scale from multiple systems • collaborate and learn from other health systems

OUTCOMES: BEST VALUE AT LOWEST COST System Optimization • automation of care processes reduce burden on clinician teams. • real-time data capture to streamline inventory management, inform procurement decisions on products that offer best value for patients. • reduced error due to manual processes • transparency for management of consignment products • single point of access to data • clinician confidence and trust in system infrastructure

Best Value: Quality and Safety • real-time data offers transparency of products, patient outcomes, case cost to define best value • point of care scanning cues clinician recall and product expiry at point of care • surgeon scorecard creates accountability for practice routines and quality performance, reduces variation through standardization to achieve cost savings and best value for patients

Financial Performance and Return on Investment • increased revenue by $81 million over 4 years • 33% decrease in supply cost/case; 29% decrease in labour costs/case • accurate cost capture • established market credibility and leadership in supply chain services for Mercy and other health systems • automated “Perfect Order,” synchronizing data from manufacturer to patient outcomes

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System Optimization: The value of supply chain infrastructure in optimizing clinical and operational processes across Mercy is a key finding in this case. The automation of supply chain processes created transparency for stakeholders, possibly for the first time in the perioperative program. The use of products during surgery, the cost of wasted products and the utilization patterns relative to surgeon preference cards were all examples of transparency that enabled and informed clinician decisions to eliminate variation, reduce case costs and automate inventory processes. The supply chain strategy had a substantial impact on optimizing processes to drive the best value for patients, at the lowest costs, through automation and transparency of outcomes.

Best Value: Quality and Safety: Mercy created a robust supply chain infrastructure in perioperative settings to not only deliver value, but also to bring leaders and clinicians across all organizations together to make informed decisions on quality and safety for patients. The accomplishment of being the first U.S. health system to demonstrate the perfect order showed that the sophisticated supply chain infrastructure, automated to inform and provide realtime data to operational and clinician teams, could drive value for the Mercy system. The vision of creating “one Mercy” was evident by the well-established clinician engagement strategy, whereby clinician councils included physicians from across all Mercy organizations. They worked together to examine the objective supply chain data that described product use during surgery, cost of products, accurate case costing and preference trays. This approach created total transparency of surgical case costs, product use and variability among surgeons. Transparency naturally creates an accountability among physicians to examine why costs or outcomes vary from surgeon to surgeon. Thus, the supply chain infrastructure had the dual effect of bringing clinicians together to contribute to the “One Mercy” vision, and also engaging clinicians to work with Performance Solutions teams to reduce costs, drive revenue through efficiency and safety, and achieve value for patients. It also helped ease the burden of supply chain tasks on clinician teams by releasing time for clinicians to care for patients.

Financial Performance and Return on Investment: Mercy leaders focused their supply chain strategy on achieving the best value for patients at the lowest cost. Revenues were a key outcome for Mercy, focused on creating new revenue streams (ROi Inc.) and reducing costs of delivering care. The key was to optimize operational and clinical processes by automating and integrating supply chain infrastructure in clinical settings. The revenue created by ROi leveraged market reach and economies of scale for Mercy by negotiating procurement and contracts for entire regions and systems rather than single organizations. The integration of supply chain processes, thinking and expertise into clinical programs was at the the centre of Mercy’s strategic plan to drive quality, safety, operational performance and, most importantly, revenue and fiscal sustainability. Impressive reduction in supply and labour costs per case has restored Mercy’s

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financial stability and sustainability, as demonstrated by the $80 million in revenue it achieved over the past four years. The findings and outcomes of the Mercy strategy of supply chain as a strategic asset to drive value have demonstrated clear evidence of the power of supply chain strategy in health systems. The automation of processes—creating transparency of care processes, products used in care, clinician quality and practices—has created new accountabilities across Mercy for system actors to collaborate to further optimize processes and achieve best value for patients at the lowest cost. What Mercy has achieved is a highly integrated and automated supply chain strategy that has enabled a leadership-driven system with staff connected and working together, informed by real-time data and evidence, to make decisions to achieve value for patients and for Mercy as a whole. These key findings serve an important opportunity for learning among global health systems.

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References 1. Transforming the Health of Our Community. 2. Truven Health Analytics. 2017. An Analysis of the Performance and Alignment of America’s Health Systems. 3. Moore, V., COO, Mercy Health System. 2017 (September 26). Keynote speaker, SCAN Health inaugural networking event, St. Louis, Missouri. 4. 5. Gartner Announces Winners of the 2016 Supply Chainnovators Awards. 6. InformationWeek IT Network. 7. Woehrmann, K. 2013 (October 23). Pioneering a Top 10 Health Care Supply Chain. 8. ROi Supply Chain Solutions. 9. Moore, V. 2015. SMI Fall Forum. Perfect Order and Beyond. 10. ROi Supply Chain Solutions. 11. ROi Supply Chain Solutions. 12. Black, D., and Zimmerman, A. 2011. Perfect Order and Beyond. BD and Resource Optimization & Innovation, LLC. d=Core_Download&EntryId=605&language=en-US&PortalId=0&TabId=134. 13. Conway, K. 2011 (March). The Perfect Order: Lessons Learned from BD and Mercy/ROi. Healthcare Purchasing News. 14. Achieving “Perfect Order” and Beyond.

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15. Health IT Outcomes. 2011 (March 21). Sisters of Mercy Health System (Mercy) Is First in Nation to Implement End-to-End GS1 Standards to Achieve “Perfect Order.” 16. IT Briefcase. 2011 (March 21). Sisters of Mercy Health System Is First In Nation to Implement End-to-End GS1 Standards to Achieve “Perfect Order.” 17. 18. 19. U.S. Food and Drug Administration Center for Devices and Radiological Health. 2012 (September). Strengthening Our National System for Medical Device Postmarket Surveillance. andTobacco/CDRH/CDRHReports/UCM301924.pdf. 20. Sedrakyan, A. 2012 (March 12). Metal-on-metal failures—in science, regulation, and policy. The Lancet, 379 (9822): 1174–1176. doi:10.1016/S0140-673660372-9 21. Drozda, J., et al. 2016. The Mercy unique device identifier demonstration project: Implementing point of use product identification in the cardiac catheterization laboratories of a regional health system. Healthcare, 4: 116–119. 22. Source: Rocchio, B.J. and Mantel, M. 2017. SMI Fall Forum, Dallas, Texas. 23. Cardinal Health. Survey Finds Hospital Staff Report Better Supply Chain Management Leads to Better Quality of Care and Supports Patient Safety. 24. Alexander, S. 2016 (May 24). The supply chain: A gold mine for succeeding in value-based payments? Modern Health Care.

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Contributors The World Health Innovation Network would like to acknowledge: Dr. Joseph Drozda, Mercy Health Mr. Curtis Dudley, Mercy Health 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

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