We have previously discussed the need for healthcare organizations to engage suppliers in improvement efforts and provided some points to consider to begin building a robust supplier partner program. (How to Partner with your Suppliers to Improve Care and Reduce Costs) Denver Health has adopted the mindset that suppliers are an extension of their hospital and has worked towards mutually beneficial, long-term partnerships with key suppliers. How is it going? What has been accomplished?
Denver Health approached their high-leverage suppliers—prioritized by spend and volume as well as the suppliers’ focus on quality improvement—and proposed partnering relationships with the goal of improving quality and reducing waste within both the supplier and customer organizations. The organizations chosen for the first phase of their partnership efforts included two distributors and three direct suppliers. The hospital’s intent was to start small, achieve wins, and expand from there.
With the desire to move up the relationship continuum (see graphic) as far as possible, Denver Health and the supplier partners agreed to work together to:
- Streamline the system for the acquisition and flow of products and services
- Align incentives and strategic plans to form the basis for joint problem solving
- Tap into the innovative potential of the suppliers’ R&D departments along with Denver Health’s clinicians and supply chain professionals to improve reliability, reduce cost, improve outcomes, and enhance quality
- Create a framework for lasting partnerships
To get things started, Denver Health invited representatives from each partner to enroll in quality improvement courses through the Denver Health Lean Academy to provide a common language and understanding of improvement. Each supplier partner was also invited to the hospital to see the process ordering flow, the inventory situation, the flow of supplies in several departments, as well as the overall flow and use of their products within Denver Health. The suppliers reciprocated by hosting hospital representatives at their organizations to see their order processing and fulfilment flow, delivery capabilities, R&D, and clinical resources. Mutual inter-organizational priorities and goals were also set.
The underlying belief for Denver Health and each supplier partner was that collaboration would unlock value for both partners (see graphic). This value includes not only improved acquisition and flow of products and services, but also more effective use of the products and services purchased.
To assess the value achieved and ensure ongoing improvement, a performance scorecard for each partnership was agreed upon and a quarterly review process was put into place. The quarterly reviews provide an opportunity for both partners to regularly review performance, discuss issues and opportunities, plan next steps, and determine how to most effectively spread the learning within and between the respective organizations. The scorecard categories and targets included:
Since the inception of the partnerships, many innovative steps have been taken to achieve mutually beneficial, long-term improvements. The types of actions taken by both Denver Health and their supplier partners have included:
- Creating standard work using best practices
- Better management of risk factors
- Channel optimization
- Product standardization
- Error reduction
- Philanthropic benefits
Denver Health’s benefits have been significant and have gone far beyond the obvious tangible measures (e.g., cost savings, reduction in the number of price discrepancies, better product flow, improved quality, etc.). The intangible benefits—such as increased trust and confidence—have surpassed everyone’s expectations. One example is a jointly sponsored internship between Denver Health and one of its distributor partners for college students majoring in healthcare supply chain management at a nearby university. Creating a pipeline to encourage talented and interested young people to enter the profession was deemed essential by both organizations. Plus, it helped forge a stronger bond between these organizations and a local university. The interns split their time between Denver Health and the distributor, which augments their classroom education by allowing them to see healthcare from different perspectives, more fully appreciate the complexities of the healthcare system, and to bring fresh eyes toward improvement.
The supplier partner effort has required significant time and effort as well as a strong commitment by the executives and materials management professionals. Like any relationship, supplier partnerships require ongoing care and feeding. Mutual respect and understanding, a two-way flow of information, and listening are critical for sustaining a partnership. As is the alignment between the organizations on the value of the relationship, business ethics, standards of excellence, and commitment to continuous improvement. The efforts by Denver Health and their supplier partners have been a win for everyone, especially the patients and the Denver community.
Today’s blog was written by Aaron Fausz, Ph.D., director at HPP.
Aaron has more than 20 years of experience helping organizations align and improve their personnel and technical systems to accomplish strategic business objectives. He has consulted with leading healthcare organizations across the country and has proven success guiding organizations through strategically driven changes and enhancing business performance. Aaron also has significant experience in needs assessment, best practice analysis, performance measurement, process improvement, and behavioral change management.
Aaron holds a Ph.D. in Industrial/Organizational Psychology from the University of Tennessee with a minor in Industrial Engineering.
Graphics created by and used with permission from Intermountain Healthcare.