A Complex Web
How Franciscan cleaned up its data and accounts payable processes
The organization
Franciscan Health is a leading healthcare system serving patients at 12 hospitals across Indiana and Illinois.
The challenge
Data and invoice inaccuracies, price misalignment, inefficient processes, backorder management and manual credit processing.
The outcome
Improved data and price accuracy, reduced invoice discrepancies, streamlined implementation and industry impact with other suppliers following suit.
As health systems work on optimizing inventory and supply management, price accuracy plays a pivotal role in streamlining operations and reducing costs. Franciscan Health, a leading healthcare provider, partnered with Medline, a global manufacturer and distributor of medical-surgical supplies, to tackle challenges in their supply chain. By focusing on price accuracy, accounts payable processes and innovative solutions, Franciscan was able to achieve significant improvements in efficiency, cost savings, and overall supply chain performance.
Franciscan has recently undergone significant changes, including moving off of previously fragmented systems and switching corporate office locations. These changes, coupled with challenges from their previous primary distributor, led to numerous inefficiencies in their supply chain and accounts payable processes.
CHALLENGE
Ripple effects from data inaccuracies and more
At a certain point, Franciscan found itself at a critical juncture, grappling with a multitude of interconnected challenges that threatened to undermine its supply chain efficiency and financial operations. At the heart of these issues lay a complex web of data inaccuracies in their item master database. These inaccuracies were not merely minor inconveniences; they were the source of cascading problems that rippled through the entire supply chain ecosystem.
Purchase orders were being generated with incorrect information, leading to a domino effect of discrepancies that culminated in invoice mismatches. This situation created a logistical nightmare for both the procurement and accounts payable teams, who found themselves constantly scrambling to reconcile these differences. The frequency of invoice discrepancies further exacerbated the challenges faced by Franciscan’s finance team. The constant need to reconcile differences between purchase orders and invoices was not just time-consuming; it was also resource-intensive, diverting staff attention from more strategic financial management tasks. This reconciliation process often led to delays in payment, straining relationships with suppliers and potentially impacting the organization’s ability to negotiate favorable terms in the future.
Compounding this issue was uncertainty surrounding pricing. The organization frequently encountered misalignments between the prices they expected to pay and the actual amounts charged. This price misalignment not only complicated budgeting and financial forecasting but also eroded trust in the procurement process itself. Staff members found themselves second-guessing every transaction, unsure if they were truly getting the value they had negotiated for.
“We felt like we needed to come up with a better method of making sure that all invoices were accounted for and matched the purchase orders in the system, allowing payment in a timely manner. Medline has assisted by implementing a tool that allows us time before the invoice hits the system.”
Marie Gilliland
Corporate Administrative Director Supply Chain and Accounts Payable
Backorder management emerged as another significant pain point for Franciscan. The organization frequently found itself in situations where critical medical supplies were unavailable, with no clear path to securing suitable alternatives. This not only posed potential risks to patient care, but also created additional work for staff who had to spend valuable time searching for and vetting replacement products.
Adding to the challenges was Franciscan’s recent transition to a new cloud-based Enterprise Resource Planning (ERP) system. As staff was managing existing challenges, they also had to get caught up to speed on the new ERP.
All these issues created a situation where Franciscan was constantly fighting fires rather than focusing on strategic improvements and patient care. It was clear that a comprehensive solution was needed—one that could address these issues at their root and pave the way for a more efficient, accurate, and reliable supply chain operation.
ACTIONS
An integrated approach involves clean data and a responsive partner
Recognizing the complex nature of the challenges faced by Franciscan, Medline proposed and implemented a comprehensive, multi-faceted approach. The cornerstone of this strategy was a collaborative data cleanup initiative. Medline dispatched a dedicated team to Franciscan’s facilities for an intensive onsite data review. This wasn’t a cursory examination; it was a meticulous, item-by-item analysis. The team scrutinized each entry for relevance, accuracy, and currency. This painstaking process allowed them to identify and remove discontinued items, correct inaccuracies, and significantly streamline the data. The result was a cleaner, more accurate item master that would serve as a solid foundation for all subsequent improvements.
With clean data in place, Medline introduced their Price Assurance program, a proactive system designed to catch and correct pricing discrepancies before they could snowball into larger issues. This program established daily price assurance meetings between Franciscan and Medline teams. These meetings served as a forum for addressing pricing concerns in real-time, ensuring that both parties were always on the same page. As the process became more efficient, these meetings were eventually scaled back to every other day, striking a balance between vigilance and operational efficiency.
Communication emerged as a critical focus area in the partnership. Medline and Franciscan worked together to develop a more open, collaborative communication style. This wasn’t a one-size-fits-all approach; instead, Franciscan was given the flexibility to tailor how they received information from Medline. This customization significantly improved the efficiency and effectiveness of their interactions, ensuring that critical information was always conveyed in the most useful format.
To address the persistent challenge of backorder management, Medline and Franciscan implemented an innovative auto-substitution process. Franciscan’s value analysis team took on the task of reviewing and approving substitute items, which were then integrated into their system. This allowed Medline to automatically substitute approved items when primary items were out of stock, effectively reducing backorders and streamlining the ordering process.
The partnership also focused on improving EDI (Electronic Data Interchange) integration and reporting. New reports were developed to compare expected versus received EDI transactions, providing a powerful tool for quickly identifying and resolving integration issues. This enhanced visibility into the data flow between the two organizations proved invaluable in troubleshooting and process improvement efforts.
Recognizing that no two healthcare organizations are identical, Medline worked closely with Franciscan to develop customized strategies tailored to their specific needs and processes. This included fine-tuning the frequency and format of price assurance meetings and reports, ensuring that the partnership remained agile and responsive to Franciscan’s evolving needs.
Internal collaboration at Franciscan was also enhanced as part of this initiative. The partnership fostered closer cooperation between Franciscan’s procurement and accounts payable teams. This cross-functional collaboration improved mutual understanding of each department’s processes and challenges, leading to more efficient problem-solving and a more cohesive approach to supply chain management.
Finally, to address the challenges related to credit processing, a new, proactive approach was developed. Under this new system, invoices were paid in full, with credits processed separately. This approach eliminated the complications associated with short-paid invoices and streamlined the entire credit management process.
This comprehensive, multi-pronged approach demonstrated Medline’s commitment to not just solving individual problems, but to fundamentally transforming Franciscan’s supply chain operations. By addressing issues at their root and implementing forward-thinking solutions, the partnership laid the groundwork for long-term efficiency and accuracy in Franciscan’s supply chain management.
OUTCOME
Results around accounts payable processes and more surpass expectations
The partnership between Franciscan and Medline yielded transformative results, surpassing initial expectations and setting new benchmarks for healthcare supply chain management. At the core of these improvements was a dramatic enhancement in data accuracy. The collaborative data cleanup effort, which involved a meticulous review of Franciscan’s entire item master, resulted in a significantly cleaner and more precise database. This improvement in data integrity had a cascading effect, reducing discrepancies across the board and providing a solid foundation for all subsequent enhancements.
Financial turnaround
Franciscan had about $1.5 million in past due amounts before the partnership, which was reduced to a net credit position afterwards.
One of the most notable outcomes was the substantial improvement in price accuracy. The implementation of Medline’s Price Assurance program, coupled with regular price assurance meetings, led to a significant reduction in pricing discrepancies. Franciscan reported that they were able to align pricing much more rapidly than they had initially anticipated, improving price accuracy from 91% up to 98%. The team has maintained 98% price accuracy for 12 consecutive months, a testament to the effectiveness of the new system and collaborative approach taken.
The improvements in data and price accuracy had a direct impact on invoice processing. The proactive approach to price assurance, combined with the enhanced data integrity, led to a marked decrease in discrepancies between purchase orders and invoices. This reduction streamlined the accounts payable processes, significantly cutting down the time spent on reconciliation and allowing the finance team to focus on more strategic tasks.
Backorder management, previously a significant pain point for Franciscan, saw substantial improvements through the implementation of the auto-substitution process. This innovative approach not only reduced the impact of backorders but also improved overall product availability. The system found itself spending far less time searching for alternative products, allowing them to allocate efforts to more value-added activities.
Lessons learned
- The importance of clean, accurate data as a foundation for supply chain efficiency.
- The value of proactive, frequent communication between healthcare providers and their suppliers.
- The benefits of a collaborative approach to problem-solving and process improvement.
- The impact of streamlined processes on an organization’s ability to focus on its core mission.
- The potential for innovative solutions, such as auto-substitution, to address common supply chain challenges.
The cumulative effect of these improvements led to a marked increase in overall efficiency. As one team member succinctly put it, “It’s just so much simpler. It really is. It truly is.” This increase in efficiency allowed Franciscan to redirect resources to other critical areas and even accelerate the implementation of new projects. For instance, they were able to start implementing low unit of measure (LUM) ordering much sooner than they had initially planned.
Working collaboratively like this can have a ripple effect on an organization. And perhaps most importantly, these supply chain improvements had a direct positive impact on patient care. By reducing inefficiencies and streamlining processes, Franciscan was able to refocus on their core mission of providing care to their patients.
The success of this partnership has had far-reaching effects beyond the partners. Other suppliers in the industry, including major players like Cardinal Health, have begun implementing similar price assurance processes based on the model developed through this collaboration. This industry-wide impact underscores the innovative nature of the solutions developed and their potential to drive positive change across the healthcare supply chain landscape.
“Every supplier is different. With some, we may not have the same level of openness. They may not want to collaborate with us as easily or explore alternate solutions that may help things go smoother. And yet, that collaboration is crucial.”
Tara Myszak
Manager of Procure to Pay, Franciscan
