Cloud computing aids in reducing supply spend

A burst of products and services are encouraging healthcare supply chain leaders to look to a centralized computer cloud to get a better handle on what they're buying and find new ways to spend less.

At an early morning session at the Healthcare Financial Management Association's 2013 National Institute, two executives from Glendale, Wis.-based Wheaton Franciscan Healthcare provided a glimpse at how its cloud-based requisitioning system allows the system to reduce costs on the surgical supplies ordered throughout the system.

Wheaton Franciscan's program is part of the growing use by provider systems of cloud-based technologies produced by group purchasing organizations and other vendors. Novation, for example, recently formed a subsidiary called Aptitude that will offer a social media-based platform to help healthcare purchasers compare price and clinical data and negotiate individualized contracts with suppliers. McKesson Corp. produced the system used by Wheaton Franciscan.

"We're pushing hard on price right now, but that's not going to do it all," said Joe Volpe, Wheaton Franciscan's vice president for supply chain. Good pricing contracts don't matter if clinicians are asking for many products that are't under contract, often simply because they don't have enough information at their disposal. Volpe said the organization successfully controls spending on commodities and the most expensive physician-preference items—such as artificial joints and spine implants—but there's an opportunity to do much better with a "huge chunk in the middle."

Its new tool is based on a growing and continuously updated body of data "scraped" from vendor and manufacturer information on the Web. The system tries to strip the noise from that information in order to match products with ones that are functionally equivalent and functionally similar. The information allows Wheaton Franciscan and its clinicians to standardize what they're using and get those products under contract. Later, the online requisitioning system steers clinicians toward formulary products. They can still ask for products that aren't on the formulary, but those requests must be reviewed and approved.

"We're letting them make an informed decision, and that's huge," said Terri Kendrick, director of procurement services for Wheaton Franciscan, which has hospitals in Wisconsin, Illinois and Iowa and spends about $500 million a year on supplies.

The system has about 6,000 employees who submit requisitions for products, and often they submit "free text" descriptions of what they want or a photocopy of the side of a package, leading to buyers wasting time and unnecessarily buying supplies off contract.

Wheaton Franciscan has identified $4.7 million in annualized savings opportunities, Volpe said. The bulk of that figure—$2.7 million—is attributed to unnecessary variance in prices and products. The actual results aren't in yet. Wheaton Franciscan rolled out the system at two hospitals this year and is working on a third.

(Editor's note: An earlier version of this story incorrectly reported the cloud-based requisitioning system applied to drug purchasing. It only involved purchasing of medical surgical supplies.)

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