supply chain improvements Lean healthcare organizations empower their members (physicians, nurses, administrative staff, etc.) on the front lines by teaching them how to identify wasteful process steps, followed by problem solving in their routine daily work or on project teams to remove waste and create added value <strong>for</strong> their patients. It is important to explain that while the JIT supply chain is recognized as an effective Lean tool, it does not come without a serious commitment to process improvement and thoughtful, data-driven preparation. By definition, organizations utilizing the JIT approach do not carry extra inventory beyond what is needed to function over a specified, minimum period of time. Incorrect application of JIT may result in a hospital experiencing a materials shortage in the event of a surge in demand. To protect its patients, hospitals must consider external factors that could impact its ability to meet demand <strong>for</strong> critical inventory, such as vaccines. A proper analysis is needed to uncover external factors that might cause a spike in demand <strong>for</strong> materials or a break in the supply chain, thus compromising patient care. Examples include a natural disaster, passage of new legislation that hinders on-time delivery of imported goods, or other transportation interruptions. Based on the level of risk each situation presents, hospitals must determine how to adjust their stock levels, order quantities and replenishment cycles, while ensuring the supply chain is protected with a first, second, and sometimes third source should a supplier’s availability of materials change when the order is processed. How Hospitals Saved Money Some organizations, such as New York City Health and Hospitals Corporation and Denver Health, successfully implemented JIT materials management by properly weighing risks versus value. Both hospitals have experienced significant savings while increasing quality patient care. New York City Health and Hospitals Corporation (HHC), a $5.4 billion public health system and the largest municipal healthcare system in the U.S., had storage rooms holding more than $10.2 million in supplies. Typical of overstocks created by batch ordering in bulk quantities, some of these materials expired be<strong>for</strong>e use resulting in waste. As one example of how JIT was applied to HHC reduced the cost of gloves by almost $4 million per year. It cut down on the varieties stocked from 20 varieties to just two, enabling HHC to negotiate the price of the 132,000 cases it used each year from $58 to $28 per case. revamp its supply chain, HHC reduced the cost of gloves by almost $4 million per year. It cut down on the varieties stocked (different colors and thickness) from 20 varieties to just two, enabling HHC to negotiate the price of the 132,000 cases it used each year from $58 to $28 per case. Now supplies arrive, as needed — 5 days a week — slashing gloves inventory by 50 percent and providing an annual savings of nearly $4 million. Denver Health, a 500 bed hospital and Level 1 trauma center, provides more than $2.1 billion in care <strong>for</strong> the uninsured even as government aid <strong>for</strong> public hospitals has dropped by $18 million. Be<strong>for</strong>e utilizing the JIT supply chain approach, Denver Health’s surgical patients who received tube feedings were automatically brought four to five cans of nutritional <strong>for</strong>mula into their room each day. When a patient was discharged, the unused <strong>for</strong>mula, which costs $1.22 per can, was thrown away, resulting in waste and expense to both hospital and patient. Denver Health used JIT principles to design a system to minimize costs of <strong>for</strong>mula: identifying a new area on the floor where cans were stored and designing a replenishment system to ensure availability and freshness. This allows the nurse to easily retrieve a can from the designated area and deliver it to the patient as needed versus wasting unused cans and ordering unnecessary can deliveries. Since adopting this new delivery system, approximately $10,000 of nutritional <strong>for</strong>mula has been saved. Through Lean supply chain management and other Lean applications system-wide, Denver Health has saved in excess of $150 million over the past 6 years — all while improving patient care. The JIT materials management approach has proven to assist Denver Health and HHC in realizing true cost savings while increasing efficient patient care. Both organizations have affected cultural change by valuing the critical importance of removing waste and trans<strong>for</strong>ming the entire supply chain — sourcing decisions, quality sourcing, order quantities, inventory levels, replenishment cycles, transportation methods and marketplace conditions — all driven by value in the eyes of their patients. By reflecting on how JIT and Lean can assist healthcare leaders in reducing waste, improving quality and lowering costs at their organizations, the bottom line has a better chance at receiving a clean bill of health. 50 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
The Key to Breakthroughs in Patient Care InterSystems HealthShare is a strategic in<strong>for</strong>matics plat<strong>for</strong>m. It connects applications, unlocks all data, creates a unified view of every patient, enables rapid development of new functionality, and provides insights based on real-time active analytics. Across a hospital system, or a community, or a nation. InterSystems.com/Key3EIN © 2012 InterSystems Corporation. All rights reserved. InterSystems HealthShare is a trademark of InterSystems Corporation. 8-12 Key3ExIn <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong> 51
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