Digital supply chain gives LHIN big purchasing power
By Rosie Lombardi
There are some big savings hiding in the nooks and crannies of supply chain processing in healthcare. Many wasteful inefficiencies can be eliminated if standardization is introduced and manual steps are replaced with end-to-end digital processing from procurement to payment. One organization that is doing this successfully is TransForm Shared Services Organizations, which handles IT and supply chain management for five hospital systems in the Erie St. Clair LHIN of southwestern Ontario.
One major piece of TransForm’s strategy has been to work with its vendors to improve data quality, says Derek Robertson (pictured), chief business development & supply chain officer at TransForm. To that end, TransForm has been working since 2011 with its ERP vendor MediSolution, which provides some advanced capabilities in its Virtuo MIS Supply Chain Management module to improve workflow, data integrity and drive savings.
One prong of the strategy is the standardization of product identifiers across hospital systems, explains Michael Conn, National Sales Director at MediSolution. The Virtuo MIS Materials Management Module uses the Global Trading Identification Number (GTIN), which is a global standard used to uniquely identify products or services and easily communicates information about those items to trading partners, explains Conn.
This feature addresses an issue that is growing increasingly urgent as healthcare budgets are slashed, says Conn. “Historically, healthcare has been slow to adopt a particular supply chain standard – hospitals identify their inventory using several different numbering systems. So item 1234 is a box of gloves in one hospital’s system but it’s gowns in another. Hospitals can’t afford to make these mistakes.”
In another piece of the strategy, MediSolution worked with TransForm and its suppliers to implement advanced eCommerce capabilities that provide a completely digital source to settlement process, he says.
“Our software eliminates the need for paper documents such as packing slips and invoices that hospitals deal with on a daily basis. Rather than processing invoices manually received by fax and emails that are disconnected from the ERP system, TransForm has been able to save a lot of money by receiving electronic invoices from its supplier community, using electronic data interchange (EDI).”
TransForm introduced electronic invoice and purchase order matching during the reconciliation process and invoices are now automatically routed between Materials Management and Accounts payable.
This step required some footwork to put in place. Surprisingly, many major suppliers don’t have systems in place that are capable of providing electronic invoicing, says Conn.
“TransForm and MediSolution worked jointly to advocate to the supplier community, urging them to make electronic invoicing available so healthcare can use 21st century tools to make processing more efficient.”
The last prong of TransForm’s strategy was to automate contract pricing updates. Ensuring that contract pricing with suppliers are up-to-date with the most current price for each product is typically a cumbersome manual exercise for hospitals.
“Historically, it’s been a manual process of going into their ERP system, eyeballing every single item and changing the price on an effective date. We’ve been able to automate that whole process. We receive an electronic (EDI) file from the supplier with the start date of the new pricing on that contract, and it is then imported into our Materials Management system. It updates their entire Item Master, Item by Item on the start date of the contract.”
Hospitals and shared services organizations (SSOs) that implement Virtuo MIS will see savings in just a few months after they go live, says Dean Tessman, VP of Canadian Health Solutions at MediSolution. Over 30 hospitals, SSOs and other companies Canada-wide have implemented its Virtuo MIS advanced supply chain modules.
“There’s a fairly quick ramp-up time, depending on how it’s rolled out and how many steps were manually processed beforehand. If a hospital is manually ordering supplies, receiving paper invoices and sending paper cheques to suppliers, it will realize an almost immediate benefit once it starts using our software.”
Many hospitals have older ERP systems in place that don’t offer advanced supply chain capabilities. Tessman says MediSolution can work with existing ERP systems, so ripping and replacing an existing ERP can be avoided. “We do our best to work well with the other existing products and systems that are being used at that hospital.”
Implementing advanced supply chain functionality is something hospitals and SSOs have to seriously consider going forward in order to cut costs, says Tessman.
“Hospitals are facing continual pressure to reduce their costs, but they’re hesitant to cut in areas that would potentially affect patient care. So they need to look more on the administrative side to find areas they can reduce costs without this risk, and supply chain management is a good one to consider. That’s why I think we’re seeing more and more advances, both in hospitals looking for this type of technology as well as the types of things that hospitals want to do with it.”
Posted December 21, 2015