Working at an academic teaching hospital, Bob Barbier is dedicated to the facility's mission of helping advance the practice of medicine. An important job of the supply chain, he believes, is supporting that mission by making sure clinicians have the tools and equipment they need to develop and test new medical technologies.
Despite his passion for high-tech healthcare, Bob doesn't work on the clinical side of medicine; he's in charge of making sure the hospital can pay the bills for it. As Senior Vice President and CFO at University Hospital, part of University of Louisville Health Care in Louisville, Ky., it's Bob's job to keep the bottom line in check while making sure the hospital keeps up with the best medical advancements.
"There is some remarkable technology being used in medicine today," Bob explains. "It's the kind of industry this country needs to sustain. Our ability to do research and development needs to continue in order to improve the practice of medicine."
With dwindling hospital margins and an increasing indigent patient population, Bob admits it's a challenge. But he is determined to win that battle. We sat down with him to find out how he balances rising supply chain costs with those of the ever changing medical advances.
MediClick: How do you balance your mission as an academic teaching hospital with the need to control supply costs?
Bob Barbier: Technology will continue to change. In an academic environment you at least get to see some of those changes as they happen. Our ability to do research and development needs to continue because you don't want to be lagging in the market.
We take medical technology for granted now. Think back to medicine 20-30 years ago; we didn't even have MRI back then. And medicine will be much different in another 20 years.
The process of medicine will advance, too. Today, surgeons can perform hip replacements without cutting through the muscle. Through a laparoscopic approach, physicians make a tiny incision and work their way to the bone without damaging muscle. You can walk a whole lot faster because your muscles aren't being torn.
At University Hospital, we want our physicians to be aware of these new things. Some of our physicians actually work with companies around the world to develop new technologies and supplies. So they're going to use a bit of new stuff along the way, which kind of moves the whole practice forward. We recognize we're going to have to pay for some of that.
You have to be careful not to challenge the physicians on everything. Probably 89% of what they do is perfectly fine. Those are the times when we simply try to negotiate the best price for their supplies.
Other times, we explore the new technology. That's when we have to get the conversations going with physicians. We recognize there is a high level of sensitivity around the whole quality topic. So we need to ask a number of questions. What is the recovery period? How does the patient deal with this type of implant or process? Is it a week in the hospital or three days? What is the infection rate? Is there a recall?
MediClick: As CFO, what are some of the challenges you see University Hospital face as it provides quality care to its patients while you maintain the margins?
Bob: I think folks want what a good delivery system for the science that healthcare can provide. You want your family to have the best healthcare experience with a fast recovery and no infections.
But healthcare is more transactional rather than a cohesive system. If you're feeling bad you go see a doctor. He sends you to a specialist, who sends you to get an MRI and blood drawn. It's very transactional. If you're sick or injured, you come to the hospital; but if you're feeling fine, you don't think about us.
This thing people call a "system" is actually an amazing array of technology, education, science, art form, experience, preference, bias, competence, with an overlay of an administrative nightmare.
Our job is to provide quality healthcare that makes people healthy and productive. However, if we're not treating sick people, we're not bringing in any money. So it's a double-edged sword.
Plus we have a steady 30% indigent care patient population. Last year, that number rose slightly. An outside service reviews our uninsured patients and works to get them on Medicaid or disability. They have moved about 5% of that 30% to a government-based system, bringing in a little more than $20 million in collections on accounts.
MediClick: What role does the supply chain play in University Hospital?
Bob: At the University of Louisville, we created an executive level position for the supply chain because utilizing supplies is a big cost driver. Physically moving all of the supplies is difficult. Simply being able to get the appropriate pharmaceuticals in and distributed is a big trick. You have to order it, get it here and deploy it to nine floors of clinical space. That's in addition to all of the other non-clinical supplies we have throughout the house.
We've already moved to an inpatient robot in the pharmacy to perform unit dose distribution. A pneumatic tube system picks up the drugs and drops them off where they are needed. We also went to a low unit of measure format here recently so we could shut down our warehouse. Now supplies come in and move directly to the floors.
To help facilitate communication between buyers and payers, we've combined our purchasing and accounts payable groups under one executive. Have you ever ordered something on one side of the building and paid for it on the other? Getting the two sides to communicate is a huge task.
Together, buyers and AP clerks have created efficiencies in invoice discrepancies, which has saved us a great deal of money. We don't want to pay the wrong price and have to go find it later.
MediClick: Is there anything University Hospital has done in the past 18 months to reduce costs or to tighten the belt in response to the economy?
Bob: We're an incredibly thin organization with a lean staff. Not only do we have the hospital with the emergency room, but we also have an outpatient cancer center, a world-renown radiation oncology department and an accredited stroke center.
In a new building on the University of Louisville campus, we installed an outpatient surgery area with a full array of radiology, pharmacy and lab in support of 8-9 floors of physician practices. Unfortunately the economy flipped when we had this big capital project and cash going to debt services. Demand fell off.
At that time the hospital execs went to the management to gather savings ideas. We stopped non-essential travel, eliminated unnecessary office expenses, cut back in some of our computer replacements. We adjusted our contracts where we could.
The hospital successfully created a nurse staffing model that eliminated the expense of our outside nurse staffing agency. We want to have nurses at the bedsides, we just don't want to have too many.
We picked targets, looked at them with the docs and did what was best for the care of the patients. We're not quite at a clinical utilization model where we can use statistical analysis to determine patient outcomes with each product, but we're getting there.
The bottom line is we want to make sure we're advancing the practice of medicine in the right way. So we're hoping to implement some type of medical supply committee to vet some of these new wonderful ideas. That way, we have enough useful information to work with the doctors to cut costs.
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