Avera McKennan Doctors its Supply Chain for Success

Nets orthopedic savings from Premier Supply Chain performance improvement engagement

Nets orthopedic savings from Premier Supply Chain performance improvement engagement

Charlotte, NC — March 14, 2006 — Avera McKennan Hospital and University Health Center in Sioux Falls, S.D., have selected Premier's Supply Chain Performance Improvement specialists to reduce orthopedic procedure costs by at least $400,000 over the past six months.

More important, say officials of the flagship of the region's largest health system, is the process that's been put in place to make sure those cost savings continue in ensuing years. Before the improvement project started, Avera McKennan's orthopedic procedures were not profitable, said Steve Statz, senior vice president of Hospital Operations and project team leader.

"What we developed with Premier and implemented is a solid and sustainable system that can withstand pushback from our vendors," said Statz. "Every month there are fewer and fewer issues. This is here to stay."

Statz added": "If we had done it ourselves, I'm convinced we'd have only saved $100 or $200 a case — if we were lucky — and there'd have been no sustainability."

Catherine Whitten, a senior clinical associate for orthopedics in Premier's Supply Chain Performance Improvement unit, led the effort. She analyzed three months' data then made a site visit to validate data, interview staff and observe total joint cases. Her findings revealed that there was significant opportunity to reduce costs.

A 16-surgeon orthopedic group performs most of the surgeries at Avera McKennan. The payer mix is more than 85 percent Medicare and third-party fixed payment. The hospital was losing money on every Medicare joint replacement. Devices accounted for 43 percent to more than 75 percent of reimbursement.

Implant costs were a significant component of costs that needed better control, Statz said. "When Premier helped us put that in front of our major orthopedic group, the light bulb went off. Then they wanted to know how they could help," Statz explained. "We engaged them. That was the key. Our service line is now profitable, and we can continue providing quality orthopedic services."

With Premier's help, Avera McKennan and the surgeons developed a product formulary of orthopedic devices based on a therapeutic interchange model. Using a pre-care form, the surgeon decides what device is to be used a week before a surgery. After the case, a post-case sheet is filled out, and the two are compared. There is room for change if for some reason — bone density, for example — a different device is installed.

"This was a tremendous collaborative effort by the Avera McKennan team. They completed a process that usually takes six to nine months in just five months," commented Whitten. "The team was decisive, timely, moved forward expeditiously and did an excellent job."

Premier said its Supply Chain Performance Improvement team offers fee-for-service consulting services to help hospitals and health systems accelerate performance throughout the supply chain. The team's experts use Premier's comparative data resources and group purchasing contracts to help healthcare organizations achieve top supply chain performance. Client hospitals have validated more than $200 million in savings during the past two years.

Additional Articles of Interest

  • — Leading crafts company Creativity Inc. has found that, with a bit of trust and a lot of teamwork, a little consulting can go a long way in addressing supply chain pain points. Read more in "Crafting Success in Supply Chain Transformation," cover story in the December 2005/January 2006 issue of Supply & Demand Chain Executive.