East Tennessee Children's Hospital had the opportunity to greatly improve a fragmented, decentralized supply chain management processes with a high inventory value and manual inefficiencies.
The hospital asked NTT DATA Services to assess its current supply chain management processes, design a centralized, streamlined model leveraging MEDITECH, and help with implementation and change management.
“We cut our standing inventory from $4 million to $2.5 million while reducing our outdated inventory by half with a streamlined, centralized model, designed with guidance from NTT DATA.”
Managing hospital operations is complex. While patient care is always the core mission, hospitals must also optimize the performance of their staff, facilities and supply chain operations. But complicating that are today’s value-based payment models, which drive hospitals to continuously seek new efficiencies without sacrificing the quality of care.
Knoxville-based East Tennessee Children's Hospital is one such case. With 152 beds, it’s one of four, state-certified Comprehensive Regional Pediatric Centers serving seriously ill children in a 200-mile radius. “Since our founding in 1937, we’ve had an open-door policy that no child will be denied care,” says Steven Godbold, Vice President of Operations and Chief Operating Officer. “Today, close to 70 percent of our patients are on TennCare Medicaid, challenging how we afford to deliver the excellent care we’re known for.”
From the day he joined the hospital in 2016, Godbold’s top concern was to ensure the hospital’s clinical staff could focus on providing the best care possible. In addition, he must watch expenses closely. One big opportunity was supply chain management. “Almost everyone could order supplies, then stock them in closets all over,” he recalls. “Our process was paper-based and inefficient, as inventories were being managed by individual departments.”
As a result, inventory levels, turnover and visibility were poor, too. “It wasn’t easy to tell how much stock we had, but we knew it was much more than needed,” Godbold says. “We’d usually wait until year-end for accounting to tell us what we had. We had no way to track trends and resolve performance issues. We had to reduce our inventory costs. In fact, we were discarding millions in aged inventory each year.”
For assistance, Godbold partnered with NTT DATA Services. NTT DATA Services had helped the hospital deploy MEDITECH version 6.0 in 2011. NTT DATA provided healthcare consultants who had extensive experience with supply chain management and MEDITECH. They used a proven methodology to assess, design and optimize the hospital’s supply chain workflows and processes, then prepared the organization for the changes and followed through to ensure those were sustained.
The assessment took six weeks. Among the most important findings: MEDITECH offered supply chain monitoring and reporting tools that were being unused or under-utilized. Another discovery was one of the hospital’s surgical procedures was being billed at less than the allowable amount to insurance providers, resulting in a net revenue loss of $500,000 the prior year.
”We cut our standing inventory from $4 million to $2.5 million while reducing our outdated inventory by half with a streamlined, centralized model, designed with guidance from NTT DATA,” Godbold says. “Now we have one central point for ordering and one for receiving, for both office and medical supplies.”
By using MEDITECH’s supply chain monitoring and reporting tools, the hospital moved from manual, decentralized processes to a centralized and electronic process. This enabled it to boost ordering efficiencies and dramatically reduce costs. “While moving much more toward just-in-time inventory management, we saved $1.3 million in costs our first year with the supply chain model that NTT DATA helped us deploy,” Godbold says. “Our reporting capabilities have vastly improved transparency and visibility, too, giving us daily and monthly snapshots whenever we want.”
To help with change management and hardwiring the newly optimized processes into the way they do business, the hospital added one of the NTT DATA healthcare supply chain experts to serve as interim Materials Management director. “Our supply chain optimization team member from NTT DATA was on-site four days a week,” Godbold says. “By having the NTT DATA expert so involved with our staff, we ensured the changes became hardwired in our organization. This made all the difference in our success.”
Most importantly, the supply chain optimization ensures excellence in care. “With our new streamlined processes, our frontline care team is able to concentrate on patient care and not have to worry about supply chain needs, where their supplies might be or where they're coming from,” Godbold says. “NTT DATA has truly transformed our operations, enabling us to work smarter, not harder.”