• Mayo Clinic Cuts Supply Costs Through Participation in Regional Network

    Dec 13, 2011

    Upper Midwest Consolidated Services Center has helped Mayo save nearly $16 million in supply costs since 2008 by obtaining better pricing through volume purchasing and supplier consolidation.

    Mayo Clinic, Rochester, Minn., has employed a combination of sound, established practices with inventive approaches that target continuous improvement in supply chain management. Some of those strategies include:

    • Engaged senior physician and administrative leadership
    • Well-defined objectives that support enterprisewide goals
    • Well-defined financial and operational metrics

    "In the past year, Mayo has reduced supply chain operating costs by 20 percent," says Jim Francis, chair of supply chain management. "Excluding the cost of supplies, Mayo's operating plan is at $37 million-about $8 million less than the previous year."

    Another key component to that savings is Mayo's participation in the Upper Midwest Consolidated Services Center (UMCSC).

    Created in 2008, the UMCSC helps healthcare organizations obtain better pricing on supplies through volume purchasing and supplier consolidation. Mayo is one of 34 health systems located in eight states in the Upper Midwest that are part of the network.

    Since joining the UMCSC, Mayo has saved nearly $16 million in supply costs. In 2010, Mayo saved $7 million, or about 8.8 percent of its supply costs. Savings by category of spend since joining the USCSC is depicted in the exhibit below.


    The initial focuses of the UMCSC were physician preference items, clinical preference items, and general commodities. Focus is now shifting to areas such as purchased services, distribution costs, and laboratory.

    This article is excerpted from a longer, more detailed case study, "A Model of Supply Chain Success: Mayo Clinic," which appears in the October 2011 issue of HFMA's Healthcare Cost Containment newsletter (subscription required).