A Positive Experience Leads to Positive Outcomes at Stanford Medicine

It may sound odd, but let’s face it, we have to move away from the idea that a responsive supply chain is just about the product. Everything is more complex, and hospital systems understand that when it comes down to it, the healthcare supply chain must focus on a patient-centered, clinically integrated methodology.  The ‘Supply Chain’ is not a chain, but more so a complex network, leading us to ask, “How does a vendor supplier fit into this discussion?” and “How can a vendor go above and beyond to meet a healthcare system’s needs?” To achieve the “beyond” the focus has become all about the partnership—a move away from the transactional to a more sophisticated and relationship-oriented approach to managing the supply network, risk mitigation, bringing forward efficiencies and ensuring resiliency at it’s core.

When Stanford Medicine formed a prime distribution partnership with Medline five years ago, its goal was to build a more clinically integrated, responsive supply chain with its vendor supplier having an integral and proactive role; this goal of creating more transparent and collaborative partnerships is becoming more and more common across the industry.

“In healthcare, most places haven’t built the infrastructure needed to compete,” Nick Trzeciak, Vice President of Supply Chain Logistics at Stanford Medicine, said early on. “What we’re building sets the baseline for not just healthcare supply chain within Stanford, but for supply chain as an industry.”¹

“It’s a collaboration. It’s a partnership—different parts of the supply network must operate in coordination and complete alignment in pushing the boundaries of redefining the art of the possible. Our core mission is to provide products to the healing hands that care for our patients at the right time, right place and right value.”²

Amanda Chawla

SVP – Chief Supply Chain Officer at Stanford Medicine

Patients—and the systems that serve them—are both valuable

The importance of reliability and service has never been more evident. Every organization aims to provide reliable and excellent service, but in the healthcare supply chain the stakes are even higher.  What we have been doing for years has only been exacerbated by supply volatility, requiring all parties to re-think how we operate along the continuum of the supply chain.

Case in point: Medline worked with Stanford Medicine’s supply chain team and GHX, the health system’s electronic data interchange and data analytics partner, to help solve vexing problems with auto-substitution, price assurance and exception management. ³ Specifically, the health system was facing three main challenges:

1. Auto-substitution had never been successfully used in Lawson, one of Stanford’s ERPs.
2. Conventional wisdom was that auto-substitution and TruePrice^TM, a best-in-class price assurance solution that Medline offers, could not and had never been able to run at the same time.
3. New and comprehensive internal structures and processes were needed to support resulting automation and alignment with GHX’s reporting.

The team’s first order of business was getting auto-substitution to work with GHX’s My Exchange and Stanford’s multiple Enterprise Resource Planning platforms (ERPs). The manual process of ordering substitutes up to this point was inefficient and costing Stanford labor, space and inventory carry costs, not to mention the risk of stockouts.

To implement an auto-substitution process for clinically approved equivalent alternatives at Stanford, the Medline linked arms with the supply chain team and conducted a deep dive into issues associated with interfacing Stanford’s multiple ERP systems with its own inventory system, identifying and documenting a myriad of differences between the primary item and the substitute item.

However, technology automation alone would not fully solve challenges around auto-substitution. Auto-substitution necessitated a robust infrastructure, requiring both Stanford and its industry partners to develop new internal structures and joint workflow processes to support the automation.

• Medline, for example, worked to modify its inventory management practices and adopt a new standard of work to ensure that appropriate stock levels of substitute items would be available.
• Stanford, meanwhile, streamlined its substitute approval process to ensure timely approval of relevant substitute items through the establishment of an internal workgroup and clinical facing task force.
• The Substitution Task Force convened daily to vet clinically acceptable equivalents—a process that used to take up to four weeks, was streamlined to an average five days and less than 72 hours in the most emergent cases.
• Both entities then came together to code a custom interface between Medline systems and the Lawson ERP to optimize data transfer, cadence and alignment within the auto-substitution program.

While all this was underway, the Stanford supply chain and Medline teams, with the support of GHX, set out to implement a best-in-class price accuracy solution for TruePrice using the My Exchange portal to monitor and measure efficacy.

“At every step along the way, the group turned to process improvement best practices to come to consensus on the best way to implement other required solutions and create collaborative structures meant to sustain improvement work after the project had culminated. In the process, we have created new industry best practices.”

Joseph M. Riggio

Vice President of IDN Market Sales for Medline

Outcomes by the numbers

• <0.5% aged accounts receivable (AR) rate
• 75% reduction in price exceptions, enabling Procurement teams to improve their collaboration with GPO, Vizient, and to focus on systemic issues related to price accuracy
• More effective utilization of GHX My Exchange through item master, contracts and transaction data
• >98% adjusted fill rate—higher than industry benchmarks and rapidly approaching best-in-class
• 40% of manufacturer backordered lines filled with approved substitutions

Key takeaway: A responsive supply chain leads to positive outcomes

With the groundwork laid, Medline activated TruePrice—an accuracy model that allows for aggregation prices over a designated period of time rather than focusing resources on ensuring the accuracy of every single purchase order—in March 2023, also establishing a more frequent communication cadence for price change notifications. Likewise, Stanford established a process to keep pricing up to date, all of which brought the price accuracy rate to 99% from upper-70% in just 18 months.⁴

Today, the Stanford and Medline teams continue their frequent collaboration touchpoints to address high-value/volume items and, in the process, have fostered a stronger partnership, clearer communication and collaboration, and well-defined ownership of tasks.