PREMIER'S NEW ONLINES CONTRACT MANAGEMENT SYSTEM STRENGTHENS THE SUPPLY CHAIN FOR IMPROVED MARKET SHARE, CUSTOMER CLARITY, SAVINGS AND SATISFACTION
EACH YEAR PREMIER GENERATES $21 BILLION IN SALES OF SUPPLIES AND EQUIPMENT TO HEALTH-PROVIDER MEMBERS Tracking an enormous amount of products and competitive pricing as well as categorizing items as contract or non-contract was daunting, but necessary. Increasing competition from Group Purchasing Organizations (GPO) contributed to the technology challenges. As a result, the company's market share was impacted.
Headquartered in San Diego - with offices in Chicago, Charlotte and Washington D.C. - Premier, Inc., is the nation's largest alliance of more than 200 leading hospitals and healthcare systems. With a health-provider membership base of more than 1,400, Premier is dedicated to reducing supply costs and improving the efficiency of its supply chain while protecting the clinical quality of products that healthcare providers purchase, from medical supplies to pharmaceuticals.
THE SITUATION
Each year Premier generates $21 billion in sales of supplies and equipment to health-provider members. Tracking an enormous amount of products and competitive pricing as well as categorizing items as contract or non-contract was daunting, but necessary. Increasing competition from Group Purchasing Organizations (GPO) contributed to the technology challenges. As a result, the company's market share was impacted.
To keep its members' hospitals cost-effective and competitive inside the healthcare supply chain, Tom Palmer, Premier's Director of Business Intelligence, looked to improve ways of doing business by creating an online contract management system to help members reduce administrative and supply chain costs - without using multiple vendors. Coined "Spend Manager", the initiative set out to make Premier more competitive and cost-efficient for its members.
THE SOLUTION
Premier realized the need to upgrade its reporting and analysis systems to resolve root cause issues. The sheer volume of data was overwhelming with overlapping items on the manufacturer and distributor sides - compounded by contract, non-contract and off-contract issues making cost and product comparisons difficult.
"Our member hospitals want to know they're getting the best products at the best price in order to manage costs," says Palmer, "which means Premier has to offer analytical tools that let them see critical information like what they're getting and how it compares with other products and costs." Recognizing the need for a BI application that could cleanse the data, make it comprehensible to users, then link the data back to contracts for spending analysis and management benefits, Palmer turned to Lancet Software, a trusted ally with extensive BI expertise with whom Premier has done business for more than seven years.
Working closely with Premier, Lancet played a key role in developing Spend Manager, the online contract management system to help members reduce administrative and supply chain costs. The system allows for contracts requiring price activation (electronic Letter of Commitment) and contract conversion opportunities, while offering potential savings based on national benchmarks. It also offers product consolidation and operational opportunities while creating a "supplier" scorecard highlighting product offerings and category analysis. Facility and departmental information, price parity and contract spending are now available. And, members can drill down for on-demand and online access to information including dashboard, summary, and detailed reports.
"Spend Manager provides report access directly to the members via the Internet," says Randy Mattran, Vice President, Lancet. "Using a graphical dashboard view and a high-speed database, users quickly find the information they need to support decisions about future purchasing. They can also get detailed reporting about cost containment and management. It's a huge win for hospitals and a great value-add for Premier."
Lancet designed, deployed and continues to manage the life cycle of Spend Manager, part of a strategic solution that integrates Premier's electronic catalog, contract offerings and price-activation process with members' procurement, fulfillment and settlement processes.
THE RESULTS
Premier's members now realize improved performance measurement as well as better insurance and risk management. Members and clients benefit from lower supply expense ratios, higher quality in key clinical areas of interest to regulators and the public, and reduced insurance cost and risk levels.
Member costs have gone down by identifying increased contract spending and a greater understanding of pharmacy off- and non-contract purchasing trends as well as assurance that members receive the value of GPO prices and savings. In addition, comparison of contracts within Premier's portfolio and integration with any existing materials management information system (MMIS) is now possible. Palmer notes, "The result is delivery of higher value than conventionally offered by simple order processing and the ability to provide benchmarking of price and volume information against peers and marketplace, a huge improvement over the way supply chain issues were examined in the past." And, because Spend Manager aggregates data on one platform, more cost-reduction opportunities for our hospitals can be identified.
For Premier, the benefits were immediate. Using supply chain optimization BI tools deployed by Lancet, Premier identified numerous opportunities to increase its contract purchase activity - and to advance market share. Spend Manager reveals areas in which contracts are not fully utilized, and can facilitate behaviors and process changes that maximize member savings and Premier administration fees. Plus, it offers the additional advantages of increasing the usage of existing contracts and increasing volume for specific contracts or products in order to reach a better price tier. Spend Manager identifies contracted product alternatives and opportunities to "standardize" on a contract or product while automatically identifying where there might be a need for additional contracts, products or product packaging.
"We see opportunities for Premier to increase administration fees because we've made it easier for members to identify where to increase contract spending," Palmer notes. "It also enhances the value we offer with Premier services and membership."
"The supply chain represents as much as 40 percent of operating expenses for many healthcare systems, with a quarter of that cost related to overhead and logistics," says Palmer. The solution deployed by Lancet helps member hospitals optimize purchasing practices, capture immediate savings and improve processes for sustained results. Palmer adds, "Lancet helped us craft an integrated solution - at a cost far below fragmented, multi-vendor approaches - allowing members to analyze their purchases and manage contracts online at critical points. Lancet delivered measurable results that benefit the hospital alliance and restored Premier's competitive position."
Lancet delivered measurable results that benefit the hospital alliance and restored Premier's competitive position.- Tom Palmer, Director of Business Intelligence, Premier