Montefiore

Source: Healthcare Exec

Date :22/11/2007 06:47:41

Implementing change means savings for Montefiore

How Montefiore Medical Center has reduced healthcare costs by having stricter control over the supply chain

Written by Ian Armitage and Produced by Kate Bridgman

Based in the Bronx, Montefiore Medical Center, which includes three hospitals, is unique in New York City and nationwide. Montefiore admissions have increased steadily and are up more than 30 percent since the early ‘90s. As a non-profit organization, Montefiore is proud of its solid financial situation, which enables it to invest in the future.

However, Montefiore hasn’t always been financially strong as Charles Agins, Vice President of Finance, explains: “Even today, given all the wonderful changes we have made, it is a constant challenge to be competitive and survive, particularly in this environment. In the past, the medical center wasn’t performing as it should – and change was needed. Since we are an urban teaching medical center located in the Bronx, New York, we have a high percentage of Medicaid, self-pay and no-pay patients. That means we operate under difficult financial constraints and need to work hard to ensure the organization operates efficiently and is able to provide outstanding healthcare to patients.”

In order to ensure this happened, Charles needed to reduce cost, a focus that continues to this day. He has done so by introducing better supply chain management, and saved the healthcare center millions of dollars each year. “We had to do something to gain a competitive advantage and, at the same time, wanted to tackle our financial problems; this meant we had to take on systems drastically, especially in terms of squeezing out costs in the purchasing of supplies,” he explains. “We began deploying SAP software in 1996, and continue to roll this out today. We use this software for many things, including materials management and financial systems.” This enabled Montefiore to establish an internal process to standardize practices and products.

Tough negotiations

The SAP deployment provided Montefiore’s management team with the tools to overhaul all purchasing processes and policies radically.

“This has enabled us to save approximately $74 million over the last eleven years,” he says. Most savings have come through contract negotiations with suppliers. “We have negotiated with all suppliers, big and small, from copy machines to pharmaceuticals to staff cell phones,” continues Charles. “This has resulted in much longer term contracts at reduced prices, and improvements in the service. We don’t change suppliers every few months; instead, we have multi-year deals that keep prices down and improve quality, as well as loyalty from suppliers.”

The Business Information Systems (BIS) Charles has introduced ensures that Montefiore employees buy approved products from the approved contracted suppliers and remain within the budgets of the department. Associates, ranging from doctors to departmental clerks order supplies through one standardized system. “We check to ensure that the right purchases are made within budget,” explains Charles. “This helped reduce cost, and has streamlined our processes,” he adds.

This revolutionary system, which gives Montefiore the ability to see purchases in real-time, means it is possible, according to Charles “to see what was ordered and who ordered what”. This has helped Montefiore reduce shrinkage of supplies dramatically. “We are surprised, but proud of, how successful this has been,” he comments.

More must follow

Charles, who has worked at Montefiore for 27 years, feels, quite strongly, that if more healthcare providers followed Montefiore’s example and applied similar changes in practices and processes within supply chain management then healthcare costs could be controlled on a national scale. “People must be held accountable; this is health we are talking about! If healthcare providers applied processes like the ones we have, including getting more favorable contracts with suppliers and then sticking to those deals with the help of technology, then you would see costs controlled better and health care improve.”

He continues: “Healthcare runs the same across the world. You have one level of care for everybody and then you have one level of care for people who have more money. That is a universal statement that works. When you look at it, everybody looks at health as ‘what does it mean to me’, but when they have to fund it is ‘what does it cost me’. It is a mind set. When you look, we have not made hospitals or the industry accountable and become prudent buyers and this must change.”

Extraordinary healthcare

As it moves forward, Montefiore is planning developments that will strengthen its delivery of healthcare to patients and confirm its place amongst the country’s leading medical institutions.

Charles’ work has played, and continues to play, an important role in this. “We have exceeded expectations in terms of what I thought we would be able to do. We have focused on price and strengthened relationships with the right suppliers. This has meant that, financially, we have achieved more than we initially forecast.”

He adds: “We have created a strong team, which includes our vendors, and pulls together in favor of Montefiore. More than that, we have changed a mind-set here and are not afraid to challenge the norm.

“We believe in challenging things, especially price. We won’t pay sticker price; we will go and negotiate for better terms, not just price. That mindset has transformed Montefiore into a prudent buyer. The Montefiore Materials Team didn’t make our reputation when things went well, we made it when we had too.

The BIS Team implemented the necessary change to transform the business. Once you have that reputation, people believe in what you do and adhere to the systems and processes you have spent years putting in place,” concludes Charles.