A large, integrated regional health system shared how it has used comprehensive variance analysis to identify savings opportunities—including price line/product variance and contract variance—and has reduced expenses by identifying functionally equivalent items to replace off-formulary spending requests Monday at ANI: The HFMA National Institute. 

Wheaton Francision Healthcare in Glendale, Wis., which operates 11 hospitals and more than 70 clinics in Wisconsin, Illinois, and Iowa, developed a new formulary-based requisitioning process to better manage clinician spending and gain greater visibility and control of its supply chain. 

Gaining Greater Control of Clinical Supply Expense 

The system faced a number of challenges in gaining control of its clinical supply expenses, including lack of standardization for product descriptions for key products, which made side-by-side comparisons difficult. Additionally, the health system’s item master structure was ineffective, failing to support the majority of purchases, and data were volatile, disparate, and inaccurate, according to Terri Kendrick, director of procurement services for the health system, and Joseph Volpe, vice president of supply chain for the health system. 

The health system’s new formulary-based procurement process provides greater control at the point of requisition and improves visibility by identifying comparable items currently on contract and improving tracking of miscellaneous supplies and services. 

Lessons Learned

Key takeaways from the session include the following:

  • The key to success in reducing supply chain expense is visibility into the data (understanding what is being purchased, what is not being purchased that is on contract, and the volume of specific purchases across the organization).
  • Being able to see items that are being purchased that are on formulary, but do not have catalog numbers and cross-referencing to the contract allows the organization to support matching to price and suggestions for generic substitutes.
  • Because new product introduction is dynamic, a formulary-based requisitioning solution must take into account new items that will be added into the hospital, as not everything will be introduced according to the standard process.

Publication Date: Monday, June 17, 2013