When making purchasing decisions, Vance Moore, president of the supply chain for Sisters of Mercy Health System, relies on a basic performance improvement tenet from quality guru Edward Deming, Jr. 

"Uncontrolled variation is the enemy of quality," says Moore. "You can't be both for variation and for quality. You've got to pick one."


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The St. Louis-based hospital system used that philosophy to develop an evidence-based pharmacy formulary that is used in all 29 Mercy hospitals in four Midwestern states.

The result is that the system saves money on pharmaceuticals, and physicians find it easier to choose the right drug in their e-prescribing software. Most importantly, patients treated at any Mercy hospital receive only drugs that have been vetted as "best" by a team of physicians and pharmacists.

"Unfortunately in our industry, there is a lot of preference. Marketing oftentimes beats scientific fact," says Moore. "We don't ask physicians what they like. We ask, 'What is the very best product?' And our belief is, if we can get everybody to buy the best product, we will actually get a lower price for the best products."

Eliminating Variation

Historically, each hospital in the Mercy system had its own formulary of about 3,000 products. Because some hospitals preferred Drug X and others preferred Drug Y, the total number of products Mercy purchased came close to 7,000.

"What that says is, although one person may think a product is best, somebody else has a completely different impression of what the best care is for a similar condition," says Moore.

To counteract that problem, Moore's department funded a stipend that paid a physician to lead the development of an evidence-based supply chain.

"It was a physician-led initiative that we in the supply chain facilitated," he says. "We created the environment, and we got the executive sponsorship-all the way to the CEO of the organization-but we knew that it would not be effective to have a supply chain person at the front of the room."

Moore also hired two pharmacists to support the initiative. They were responsible for deciding which categories of pharmaceutical products would be evaluated and in what order. When physicians could not reach a consensus on the best drug in a category, the pharmacists researched and wrote white papers that examined the evidence.

The physicians used that research to make decisions. The result: Mercy now has a systemwide formulary that includes about 3,500 products-about half the number that it purchased five years ago.

Because it is purchasing a larger quantity of a smaller number of products, Mercy is able to negotiate better pricing. Indeed, the system saved $6 million on pharmaceutical purchases during the first two years of implementing the evidence-based formulary.

Making the Decisions

Cost containment was not the primary driver for standardizing Mercy's formulary. "Cost savings is an outcome; it's not an input," says Moore. "The goal was, 'Let's make sure that we make the best decisions, not the cheapest decisions.'"

Mercy's supply chain leaders applied three perspectives to developing the systemwide formulary.

Clinical. Although some patients have special circumstances that require exceptions, reducing variation in care is associated with improved outcomes. "If we can reduce the variation in care wherever patients get care at Mercy, that's a good thing," says Moore.

Operational. By reducing the number of medication options in the electronic prescribing system, physicians can more easily find the one they need-and know that the drug is in the formulary for a reason.

Mercy's headquarters is in a highly competitive healthcare market that presents physicians with many choices of where they wish to treat patients. Moore says the evidence-based supply chain makes Mercy hospitals more attractive to physicians who share the system's high standards. "If we can create an environment through the supply chain to make it easy to get the best products, then we are probably going to have a greater opportunity to retain the best physicians," says Moore.

Financial. Concentrating on the price of an individual product can be short-sighted, says Moore. Buying the more expensive item may be the wisest financial choice.

"In the long run, if we adopt this methodology of buying the best, the leveraging effect is going to drive much lower costs, not only for Mercy, but also for our patients," he says. "Ultimately, if we provide value-based care in the marketplace, we're going to get more patients. That's a good thing for us as well."

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Publication Date: Thursday, April 28, 2011