Finding Your Organization’s Secret Agents

In the last month I have attended two important industry events, the IDN Summit and Expo in Orlando and the annual MediClick User Conference in Raleigh. Both invigorated my long-held belief in the value of stepping beyond the walls of our comfort zones on a regular basis to spend time learning from our customers and colleagues.

Stepping out, so to speak, is without a doubt the best way to find out about new ways to solve common problems; and even better, to find out how to solve problems you didn't even know you had.

There is a concept called Positive Deviance, which Dr. Jon Lloyd, surgeon and senior clinical advisor with the Plexus Institute, discussed during a Summit session in Orlando. Positive Deviance teaches us how to identify individuals within our community, discover their uncommon practices that lead to success, and then use these practices to facilitate our own particular solutions and improvements.

Positive Deviance is all about "bottom up" problem solving. (I do like the term – it can be construed as an oxymoron in certain contexts or an apt description of the personality of a good friend!) Before I apply Positive Deviance to the healthcare supply chain, let me share one of Dr. Lloyd's examples of how well it can work.

Lloyd, a member of the Positive Deviance Initiative Advisory Board, used the epidemic of childhood malnutrition in 1990s Vietnam to describe the concept in action.

The Vietnamese government asked Jerry Sternin, Asian Director of Save the Children Federation, and his wife Monique, to find a solution to a major national crisis. An astounding 85% of children under the age of five were moderately to severely undernourished.

As experts sometimes do, the Sternins could have studied a subset of "representative" villages, formulated causes of childhood malnutrition and comprised a list of best practices to be implemented by the government nationwide. This, of course, would be the classic top-down approach.

Instead, the Sternins formed a team of individuals from four villages and worked closely with them "on the ground" to understand and solve the crisis from the bottom up.

The team identified families whose children appeared better nourished than the general village populations. Through a series of interviews with these Positive Deviant families, the workers discovered a list of common practices: adding available sources of protein like shrimp or peanuts to the regular diet of rice, feeding the children more than the usual two meals per day, and feeding kids more – not less, as was the custom – during bouts of illness.

Then, instead of printing up a list of best practices, the Sternins helped organize several community dinners where the rice was provided. The price of admission: a protein source. This motivated villagers to get in the habit of gathering protein, an act that enabled them to quickly solve their own nutrition problems.

The Positive Deviance approach worked. Understatement! Malnutrition rates dropped from 85% to 15% in just three months!

Dr. Lloyd's story came to mind two weeks ago when our customers met in Raleigh for the MediClick User Conference. I must tell you I stand in awe of our customers and what was accomplished together in the three days they were with us. The one-on-one coffee break exchanges, the customer-taught classroom sessions, and the peer-to-peer interactions enriched everyone, and they revealed ways we could improve our products and our company. The power of Positive Deviance was bountiful.

Let me share one example, which I was witness to by virtue of buying the beers. A supply chain director at a large teaching hospital that had recently gone live on MediClick for the Supply Chain could not get his requisitioners – usually nurses with pressing clinical duties – to look at existing backorders before placing a requisition for out-of-stock items. The nurse on the 1^st shift sees an item is out of stock and orders it. The nurse on the 2^nd shift, seeing that the item is … yep … still out of stock, walks over to the computer, enters the same requisition again, and hurries back to his clinical duties WITHOUT glancing a couple of columns over on the order guide to see that the item is ALREADY backordered. Net result: they need 5 but end up with 10, creating yet another pocket of expensive inventory bloat.

Over our vintage IPAs the MediClick newbie shared his problem with another MediClick customer. This more seasoned veteran explained how she solved the very same dilemma by using a clever teaching approach to get the folks on the floors in the habit of checking for existing backorders before pushing the "finish" button. She also talked about her high-impact meetings with the departmental managers as she showed them the havoc that inventory bloat was wreaking on their monthly expense reports. Best of all, she exuded an empathy that made the new guy realize he wasn't the first one up this creek, and she gave him the paddle.

I spent three wonderful days with our customers, on the front line if you will, and it only strengthened my conviction that they are the ultimate source of uncommon solutions. I'm not sure that they would cotton to being considered Positive Deviants, but our customers are indeed consummate change agents.

Your Positive Deviants are out there, too, brimming with knowledge. They are patients, and they are also the nurses, techs, engineers, cleaning staff, even physicians from our own organizations or others. Seek them out, sit down for a chat, and be inspired by what you learn that can help you create a better supply chain.

Just as the villagers who were motivated by the improved health of their children, once you start, you won't stop – the successes and flow of ideas are addicting. And upon your next promotion, make sure to shout out a big thanks to your allies and enablers: those lovable Positive Deviants.

Innovations in Healthcare Supply Chain Contracting: Part IV

Nick Toscano – Considering Self Contracting? Some Advice

Nick Toscano has developed a reputation as the go-to guy for IDNs considering non-traditional options for their supply contracts. We saw him last week at the IDN Summit in Orlando where we heard other attendees address him as the "father of the integrated service model."

His consummate modesty makes him slow to embrace such a lofty title, but there's little doubt that Nick has parlayed his 30-year career with health systems in New Jersey to become a respected voice and trusted advisor to hospital executives looking for guidance on supply chain strategy.

As part of our series on innovative supply chain contracting, we asked Nick to share his thoughts on self contracting, the impact of committing volume to suppliers and the importance of clinical integration in the supply chain.

MediClick: Is there a provider profile you use to determine what IDNs would be good candidates for self contracting?

Nick Toscano: One of the main criteria is spend, which should be within the $150-200 million range at a minimum. But you need to determine what approach works best for your organization.

Some systems have implemented a hybrid self-contracting/GPO model. They use the GPO for commodities so they can focus on the physician preference items. There's nothing wrong with that. It's an issue of the level of investment and commitment you want to make. If you can go after 70% of your med-surg spend, that's a great start. It doesn't have to be $150 million.

But contracting is just a piece of clinical integration. It's an element of strategic sourcing, utilization management, patient demand factors and clinical outcomes — all things that drive to the value chain and total cost. You need a team of qualified folks to measure and monitor that because what is perceived as the lowest product costs can frequently drive high overall costs without the clinical oversight. Clinical Integration processes are about documenting the efficacy and overall effectiveness of products to the care delivery process and patient experience.

MediClick: How were you first exposed to the self contracting model?

Nick: I was with a large multi-hospital system in Atlantic City and was recruited to be COO of the New Jersey Hospital Association (NJHA) cooperative, the largest regional group purchasing system in the country at that time.

NJHA was different because it used a committed volume contracting process. Participating organizations had to commit their volume to RFPs and contracts up front. We had to qualify products, especially clinical products, so we started the value analysis and clinical integration process. We were one of the first organizations to do that.

We had teams of folks, including clinicians, who supported the process and pre-qualified products. We were able to commit an 80% of utilization rate to suppliers. We enjoyed participation and high compliance levels that were unheard of in the industry at that time. Other GPOs simply awarded multiple source contracts and didn't have the compliance levels that we did because they weren't committed volume organizations. They were trying to create critical mass and leverage their spend based on certain commodities to get a better price. At that time, they didn't have an integrated clinical process or clinicians who supported the effort.

MediClick: NJHA was ahead of its time in how it collaborated with clinicians. How did you accomplish that?

Nick: Our supply chain officers as well as our board – which was made up of CEOs of New Jersey hospitals – recognized that in order to build a sustainable model we needed to engage clinicians in the process. We needed them to understand that we're not necessarily looking for just a low price product; we're looking for a product that they would utilize – one that offers value in patient care.

We also had a significant burning platform in NJHA. At that time New Jersey was the first state and pilot program for the Medicare DRG system. So needless to say, our CEOs were very motivated to get their cost structures in line with the new revenue stream.

In the past, clinicians had been made to feel that purchasing wanted to buy the lowest price product without consulting them or evaluating the quality. So we went through an extensive change management process to understand each other's roles and respect each other's needs while collaborating around the patient.

It took time to get clinicians to participate, especially the physicians. We had a group of nurses that were engaged but few physicians. But over time it grew.

MediClick: During your career, when did you break away from the normal mode of operations and start seeing self-contracting as a viable business model?

Nick: I went back to the provider side to work for one of the largest multi-hospital systems in the state, West Jersey Health System. Because they collaborated with NJHA, they were used to the committed volume process. As innovators, they wanted to expand it and get their arms around spend by integrating with their medical staff.

WJHS eventually merged with Memorial Health Alliance to form Virtua Health, an organization that had a more integrated supply chain and allowed us to leverage our spend across the network.

Because this new organization would bring about significant market share, the federal government required us to complete a Community Benefit Report to ensure the new organization would offer community benefits. We committed a large portion of our report to reducing overall supply chain and healthcare costs in the region.

We knew that our traditional business model wouldn't get us there, but it was a challenge to buck the industry trend and set up our self-contracting model. So we decided to work with manufacturers who saw us as early adopters. We got two of them to help us develop our integrated contracting approach. When the industry players saw two large manufacturers collaborating with us, they started paying attention to the model, understanding it, working within it and driving results.

We started self contracting and focusing on physician preference, more committed volume and more standardization. Then because we could offer market-share improvement, we were able to leverage our direct relationships with suppliers to support good utilization management. You become the customer to the supplier, whereas through the GPO you're just another hospital name on the contract.

MediClick: You learned at NJHA that to get committed volume and save costs you had to have clinician buy in. How did you build trust among clinicians at Virtua?

Nick: Our clinicians felt the national contracts rarely considered their real, local needs. They needed a voice to influence decisions. So at Virtua, we focused on the local needs of the physicians. It wasn't simply about reducing prices. It was about supporting patient care in a high-performing healthcare system.

Since we knew that anyone working with patients was busy, we committed to the clinicians that we were going to put the right people in the right place to give them a voice. We developed a supply chain clinical team, full-time clinicians with great clinical experience and a commitment to work with physicians.

Virtua became one of the first health systems to have full-time clinicians within the supply chain.

This accelerated our cause more than anything. Our infrastructure enabled us to monitor utilization and contract compliance. When we went off contract, it was for a clinical reason. That didn't happen often so we were able to stick to our 80% commitments.

I am proud to tell you that today Virtua Health remains an industry leading supply chain/shared services practice.

MediClick: What kind of advice do you have for anyone thinking about self contracting?

Nick: First, it's imperative to have the support and commitment from your senior leadership. And it's not just the CEO or CFO who need to support you, it's the other stakeholders who need to understand and support what you're trying to accomplish because they will drive success.

Then you must build the business case. Build the plan. Build the justification. Articulate the investment and the ROI in ways that will show financial and performance-level returns.

Your infrastructure must allow you to monitor your progress. You need to be able to see the spend analytics, measure compliance and track success.

Shape the vision so stakeholders understand how this model will build your relationship with physicians. Get the right people on the bus with you – qualified clinicians who have a commitment and a passion for this. Communicating this is extremely important. Don't make assumptions that people know the good work that your team is doing.

Campfires and Supply Chain Innovation

When I was a boy, our family did a lot of camping. Tent camping – the real thing. I loved it, not realizing it was the only type of vacation we could afford. My dad was a lowly resident at Duke, and money was carefully titrated. Our weekly dinner menu seldom changed: meatloaf Mondays, creamed chip beef Tuesdays, tuna casserole Wednesdays, and the dreaded fried liver Thursdays. No amount of ketchup could ever squelch my Thursday gag reflex. (To my mother's credit the "special nights" of fried chicken and spaghetti were rapturous.) Camping was different though. Anything cooked over an open fire in the great outdoors tastes good. Even beanie weenies in an iron skillet.

I loved camping. It taught me good lessons about being happy with simple things and about self-reliance. Take the ritual of starting the family campfire. It was a rite of passage ceded solemnly to me by my father when I turned 12. The pressure to perform was immense – success signified manhood, failure unleashed the merciless ridicule of my 2 younger sisters. The ritual began with the painstaking selection of kindling and the studied arranging of rocks for the fire pit. Then, at a moment when the air was still, I would ease a thumb-struck wooden match into the nest of dry leaves, nurture the frail glow breath by breath, twig by twig and stick by stick … until the flames finally danced hot. Only then would I step back and bestow on my family the gift of fire.

The memory of campfires came back to me last week at MediClick's first Strategic Partners Forum, an extraordinary gathering of innovators who are leading by example a mission to transform the healthcare supply chain. I watched as the group, initially tentative and polite, progressed into a candid and spirited exchange, demonstrating keen insight into the problems of the healthcare industry and accepting a shared recognition of their status as role models for change.

It is my experience that profound change often begins as a single spark, but it is fueled to critical mass by the unique power of peer-to-peer interaction. By collaboration.

This is true in many of history's most acclaimed developments. Rosa Parks' refusal to give up her bus seat is my own favorite. In healthcare, Scottish biologist Alexander Fleming's 1928 accidental discovery of the penicillin fungus was actually pretty inauspicious, until others revisited and expanded upon his work some time later. Ultimately, the deciphering of penicillin's chemical composition and refinement of its therapeutic action led to the age of antibiotics and launched an entire pharmaceutical industry. Experimentation, implementation, refinement, replication – all are fostered and accelerated by collaboration.

This is what I saw happening at the Strategic Partner Forum. Some of the members have implemented self-contracting and self-distribution models. Others are currently focused on bringing their market share clout to bear on preference items while relying on national GPO contracts for commodities. All are determined to improve their ability to prioritize opportunities, optimize pricing, measure savings, measure vendor performance, and calculate fees. All are interested in the impact of GS1 and government reforms. All have the courage and the vision and the commitment to lead the way.

MediClick may have supplied the spark, but the Leadership Forum quickly took on a character and durability of its own. I am confident that this forum – this Forum of Innovators – will become the recognized industry focal point for taking back control of the healthcare supply chain. Stay tuned for more.

The Night I Became an “Expert” Negotiator While Stranded at an Airport

My frequent travel means I've seen my share of airport terminals – and airport conflicts.

Nothing compares, however, to my experience at a large Midwestern airport on my way home from a client visit last month. Snow was falling as a winter storm pelted half the country. Air traffic was grounded from the Midwest to the Northeast. Flights were delayed and passengers were stranded.

When it became clear I would be in that airport for the duration of the night, I molded myself into the permanent slouch of a vinyl chair, relaxed by repeating my travel mantra ("serenity now"), and plopped open my latest reading, Getting to Yes: Negotiating an Agreement Without Giving In.

As frustrated passengers lined up to barrage the lone airline agent with angry questions, I began applying the book's principles to each conversation. One woman in particular was a great subject for this musing. As her saga unfolded, it became – at least to me – a powerful allegory for our interactions with supply chain vendors.

Here's what happened.

Still bundled from the outside chill the young woman's gloved hands gripped the gate counter, vehemently demanding that the airline agent find a way to get her home. Immediately! As her threats mounted, the agent lapsed into party-line mode, calmly citing the weather conditions and safety issues that were "out of his control." His matter-of-fact, not-my-fault attitude only fueled her agitation. She wanted attention! She wanted solutions! She wanted it now!

While I realized a sort of negotiation was happening, the rising tension obscured what it was they were bargaining over. The woman was angry, but what specifically did she want the agent to do? The agent didn't want an unhappy flyer, but how could he satisfy an impossible request?

Clearly, both parties needed to step back and look at the conflict from another perspective.

My book provides some help with this. Getting to Yes authors Roger Fisher, director of the Harvard Negotiating Project, and William Ury, co-founder of Harvard's Program on Negotiating, encourage readers to use techniques where neither party loses and the relationship comes out intact. This should be familiar ground to supply chain folks. Look at the underlying interests in a negotiation, the authors suggest. Ask yourself what motivates you to take your position and consider what motivates the other party to take his.

As the economic downturn persisted this past year, the supply chain was under particularly high pressure to help hospitals reduce costs. The situation could have produced a lot of supplier arm twisting and other aggressive tactics as materials managers tried squeezing a penny of savings from a nickel of spend. But, not surprisingly, I saw a different approach. One that works.

Hospital supply chain managers invited their suppliers to the table and engaged them in very candid but civil discussions about their common interest: namely, making sure the hospital made enough margin to continue conducting procedures in which physicians used the supplier's devices. In many cases, hospital contract negotiators shared detailed financial data with the vendor reps. What were the reimbursements? How did that compare to the fully burdened costs? And when the margin was too low (or the procedure was losing money), what could be done about it?

I was heartened to hear that many suppliers were responsive to this approach. It makes sense, i.e. they should be responsive! A supplier's direct relationship with a physician can only take them so far. If the procedure loses money for the hospital – and if the supplier's product plays a primary role in that – something has to give. Once acknowledged and understood… we have common ground! And from this common ground can come a win-win negotiation. The hospital can continue conducting the procedures (but at a lower supply cost), and the supplier gets to keep the business (albeit at a lower price point).

Back at the airport, a similar resolution seemed to be unfolding. When the angry passenger finally took a breath, she began to realize she needed to compose herself before the agent could help her. At the same time, the agent knew other frustrated passengers were witnessing this scene spiraling out of control. They both had a vested interest in calming down the confrontation. In finding common ground.

When the would-be passenger shed her overcoat and began to relax, she was able to get to the real reason for her frustration. After a grueling two-day business trip, she needed to get home to her 11-month-old baby boy. It was the first time she'd been away from him.

The gate agent now had something to work with! Wanting to make the customer happy – only limited by his inability to magically put airplanes back in the air – he pulled up a weather report on his computer that showed the snow stopping, both at the departure and arrival airports, within the next two hours. He also gave the passenger a pass to the airline's luxury lounge where she could privately call the baby's caregiver to check on her son and make arrangements for the night.

Simply by offering comfort and reassurance (see "empathy"), the agent eased the frustrated passenger's anxiety. After confirming her baby was ok and arranging for his care overnight, she relaxed until the plane boarded. After witnessing what the agent did for this distraught mom, the other passengers stopped seeing him as the adversary and started treating him as a fellow victim of the wintry weather. My next few hours in the faux leather chair were very peaceful.

Conclusion: when you keep a cool and level head, and you make the effort to understand the underlying interests that motivate each party's position, a fair and amicable agreement is often within reach.

I bet you have similar stories. If so, please share.

Summer Break & Empty-Nester Syndrome

My wife and I will soon be joining the empty-nester's club. Though she has a few weeks to go, our youngest daughter has already begun the countdown, eager (too eager I might say) to join the ranks of college freshmen.

Before she heads off, we're taking a brief vacation for some quality family time. And since I'm doing my best to pry my daughters from Facebook for a couple weeks, I should probably refrain from blogging. So, we're going to take a brief summer hiatus from the Culture of Savings Project before getting right back into the stories next month.

But first, a few comments…

The Culture of Savings Project has generated a lot of interest, and we're condensing the accumulated practical wisdom into a whitepaper that we'll make available (free, of course) in September. But we're not done collecting stories yet. If you know of people with ideas to contribute, just reply to this email and make the suggestion.

Next, take a moment to read this interesting article in the latest issue of Materials Management in Health Care about ways supply chain executives are working their way into the hospital C-suite. Yes, they quote me a couple times in it, but I think you'll find it worth your while anyway.

If you're going to be in Tampa next week for AHRMM's Annual Conference, be sure to stop by booth #308 and visit with us. We'll be talking a lot about what your organization can do to strengthen its culture of savings.

Finally, we look forward to bringing you more stories from the interviews we've conducted over the past few weeks. Next month you'll hear from Tony Johnson, Senior VP and Chief Supply Chain Officer at Novant Health in Winston-Salem; Bob Barbier, CFO at University of Louisville Health Care in Kentucky; Charlie Miceli, VP of Supply Chain at Fletcher Allen Health Care in Burlington, VT; and more.

In the meantime, keep enjoying these humid, bug infested, but glorious dog days of summer.

Sincerely,

Mike

Peer Reviewed by HFMA

Let me briefly deviate from my normal blog content to congratulate the people of MediClick and our customers on a job well done! Late last month, MediClick for the Supply Chain became the only materials management system to receive the Healthcare Financial Management Association's (HFMA) prestigious "Peer Reviewed" designation.

HFMA took MediClick and the product through a rigorous review process, to say the least. They evaluated MediClick as a company, the quality of our customer support, and the value the application brings to our customers. They reviewed our financial statements, interviewed our customers, and conducted their own independent assessment of MediClick for the Supply Chain.

We're gratified to have our accomplishments recognized. Since 2000 the people of MediClick have been dedicated to developing the most innovative solutions for the healthcare supply chain while simultaneously providing the best customer support in the industry. You could say it's an obsession.

As always, our customers deserve my special gratitude. They have been gracious in their feedback and constantly push us to be better.

Thank you to the MediClick teams for their dedication to our company and these products; to our customers for their input and encouragement; and to HFMA for this recognition.