More than five years ago, Geisinger Health System's leaders took an end-to-end look at the organization's care delivery processes, capacity and productivity. They were troubled about the future.

"We didn't feel that health care as we were delivering it was sustainable," says Frank Trembulak, executive vice president and chief operating officer of the Danville, Pa., system.

The analysis concluded that Medicare services — a core market for the $2 billion organization — would suffer a $300 million shortfall if the existing care model didn't change.

Soon system executives set out to redefine care delivery in terms that would support quality goals and outcomes while reducing costs — a clear enough goal, but with staggering challenges. With nearly 11,000 full-time employees, two medical centers, an alcohol and chemical dependency center and more than 50 community practice sites, refocusing processes from clinical management to supply chain logistics would require huge organizational change.

Two years into the effort, Geisinger Health System has scored some impressive gains. Its ProvenCare bundled-payment model focuses on setting an agreed-upon lump sum payment to the hospital, physicians and payers for procedures ranging from coronary bypass surgery to cataract surgery. The system then warrantees the surgeries for 90 days post-discharge.

"When we started with ProvenCare, we challenged surgeons as to why a common procedure is done five different ways. We got into not only their technique and approach but the supplies they used," Trembulak says.

Another key initiative, the Geisinger Accelerated Performance Program — GAPP — is generating a series of one-time and renewable savings and value-enhancement efforts, thanks in large part to improved focus on clinical management and the supply chain.

Closing the Gap

In fiscal years 2010 and 2011, the supply chain team has generated more than $20 million in savings—a figure Trembulak believes will triple in coming years as innovation continues. Focusing on ways to remove cost permanently, the team has redefined its mission to better support care delivery.

That has translated into negotiating better contracts, getting products and drugs closer to the point of care and removing unjustified variation in the purchase of medical devices and other products. At the same time, supply chain leaders are building greater trust with physicians and nurses by assuming greater responsibility for supply-related activities. Clinicians now spend more time on direct patient care.

These changes are occurring under a model called P.I.P.E. — Process Innovation, Perfect Execution. For this program, the supply chain team earned the Association for Healthcare Resource & Materials Management's 2011 Award for Healthcare Supply Chain Innovation, sponsored by Cardinal Health.

"The elimination of expense can no longer come from just reducing the unit cost of supplies or services. It must come from redesigning how we do our work," says Deborah Petretich Templeton, Geisinger Health System's vice president of supply chain services.

In the GAPP initiative, the supply chain team generated more than $10 million in savings from restructuring contracts and distribution agreements. Talks with distribution partners led Templeton's team to identify ways for both parties to change the way they work to cut costs and share the savings. Increased dialogue with surgeons brought improved standardization for buying implantable devices, sometimes down to a single source, notes Joel Meckley, senior director of purchasing and contracting.

"One of the biggest improvements we had was in bone morphogenic products," Meckley says. "It wasn't so much savings in the price of the products; where the bigger savings came was in physicians getting together, [reviewing] their utilization and when it was appropriate to use these products."

New Ways to Work

Templeton's team also is changing the way it works, incorporating new tools and developing new skill sets.

"We have started to incorporate tools like simulation modeling into our portfolio," she explains. "This allows us to test new logistics pathways, prior to having to change them in real time. This ensures we are making sound decisions in changing delivery methods without having to disrupt current operations."

As involved as this may sound, it's not necessarily expensive. Simulation software sometimes is used, but the supply chain team also engages interns from various universities and multiple disciplines including information technology, engineering and supply chain.

Some interns continue to be engaged after they return to school, training staff on simulation modeling, developing advanced spreadsheet application skills and Web page design. One student developed a communication grid that's still used in the supply chain team's many discussions with IT staff.

Interns also helped conduct a baseline study of nursing involvement in supply chain activities. With the baseline work now done, simulation modeling is being used to determine more streamlined processes for improving logistics and product delivery, says Kevin Capatch, director of supply chain information systems.

One early change resulting from simulation modeling was to move automated medication cabinets closer to patient rooms, shortening nurses' walking time. The effort also uncovered another interesting fact. The assumption that nurses would spend less time looking for charts and documentation by having access to electronic health records wasn't panning out initially.

"They don't spend any more time looking for patient charts, but they spend a lot more time looking for where to put the information in the electronic health system," Capatch says.

Elsewhere, a clinical-use evaluation program engages clinical leadership in developing product formularies along with traditional inventory control initiatives. The CUE program is aligned by major service lines, with each team led by a clinician and supported by supply chain services. Physicians can request products online while supply chain services reviews contracts and pricing and analyzes reimbursement payment. That information then is presented to committees for recommendations.

The objective is to scan the market continuously for the latest products, equipment and technologies while promoting sound buying decisions and standardizing where possible.

"If we see an opportunity to reduce the amount of product we have through standardization efforts or we see an opportunity for utilization review, we then bring that to the committee and seek clinician input," Templeton says.

Implementing Standards

With an eye toward further reducing costs and improving efficiency, the organization is taking a leadership role in implementing GS1 Healthcare US data standards in its supply chain. GS1 standards, which have been used in other industries across the world for more than 35 years, facilitate more efficient and accurate ordering and invoice processes, while making it easier to obtain contract pricing and process rebates. GS1 standards also deliver such patient safety benefits as making it easier for facilities to reduce medication errors and to identify quickly all FDA-recalled products in facilities.

Once the data standards are in place across health care, Templeton says it will be far easier and quicker for health systems to generate comparative effectiveness research on medical products and devices.

"Everybody is now looking at electronic medical records and electronic health information exchange. Without having a base of [data] standards, that exchange is going to be very difficult," Templeton says.

Geisinger Health System's supply chain team isn't waiting around to see what develops. It has joined with supply chains from four of the nation's largest integrated delivery networks — Intermountain Healthcare, Kaiser Permanente, Mayo Clinic and Sisters of Mercy Health System — to drive greater vendor adoption of the GS1 standards. The organization, known as the Healthcare Transformation Group, is working with each system's top 20 suppliers to encourage GS1 standards adoption.

This initiative, much like its P.I.P.E. program, is about driving greater results from the supply chain."We're pushing them for end-to-end accountability for the whole process — from product development through product consumption," Templeton says.

Like its many other cost-reduction strategies, Templeton's team is focused on generating immediate and permanent gains.

Bob Kehoe is a contributing editor to H&HN.