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Clinics' Docs Get It
Is working for a large clinic a contracting professional's dream come true, or the worst nightmare?

It could go either way. If physicians own and operate a large healthcare organization, it makes sense that they would understand the wisdom of such things as product standardization and good negotiating, doesn't it? On the other hand, if they own and operate things, then who is going to tell them how to run the show?

Roy Kaiser will tell you that where he works, the doctors understand that contracting is a critical component of strategic cost management.

Kaiser is director of material management for Marshfield Clinic, a large, multi-facility clinic serving central, western and northern Wisconsin. Although he's never worked in a hospital, he believes - after talking with peers - that the main difference between working in a hospital and a clinic is this: Clinics (particularly large ones, such as Marshfield) typically need a wider variety of specialty equipment and supplies, although in lower volumes. Hospitals, however, contract for a higher volume of traditional supplies.

725 physicians
Incorporated in 1916, Marshfield Clinic has 725 physician specialists and employs close to 6,000 support personnel. They provide care in more than 40 facilities, the largest being the clinic in Marshfield. (For the year ended Sept. 30, 2005, the Clinic reported 3.2 million patient encounters, 1.1 million of them in the main facility in Marshfield.)

In addition to the center in Marshfield, the Clinic has major regional centers in Eau Claire, Wausau and Minocqua, each with an ambulatory surgery center. The Lakeland Center in Minocqua alone covers more than 100,000 square feet and houses more than 50 physicians.

Marshfield Clinic provides no inpatient care, but it does have partnerships with a number of hospitals throughout the state. For example, the clinic in Marshfield is physically connected to Saint Joseph's Hospital. Even so, the two organizations share neither contracting department nor warehouse. In fact, from a supply chain perspective, the only thing they do share is their primary purchasing group - Consorta.

Unique credentials
Kaiser joined Marshfield 14 years ago with some unique supply chain credentials. Prior to joining the organization, he had worked in the steel industry for three years in materials-related positions. Before that, he was a logistics manager in the U.S. Air Force for eight years. (He served as a reservist for the Air Force for 13 years after that.)

"I'd have to say that healthcare is much different [from the steel industry and the Air Force]," says Kaiser. "It's much more difficult to work toward the efficiencies that I was able to in other industries. That's primarily because our main productive capacity is people, not machinery. It was easy to standardize airplane inventories or parts inventories." Even so, Kaiser could see some "fairly obvious efficiencies when he arrived in healthcare 14 years ago.

For the first nine of those 14 years, he worked toward achieving incremental improvements in Marshfield's contracting and materials program. Then, five years ago, he moved his department and warehouse to an industrial park three miles away from the main clinic building in Marshfield. Counting offices and warehouse, the department occupies 30,000 square feet. Actually, the move was a matter of necessity; the Marshfield clinic needed to expand its clinical areas into the basement, which housed materials management.

Supply chain overhaul
The move gave Kaiser the opportunity to do more than simply relocate Marshfield's inventory. It opened the door to a restructuring of the Clinic's supply chain processes, including warehousing, purchasing, contracting and distribution.

Kaiser pulled inventories from distribution centers that the Clinic operated throughout Wisconsin into the new warehouse. "We realized that if we were to run an efficient standards program, it would be difficult to support it with inventories being held in five different locations," he says. He also began looking at the Clinic's purchasing practices. At the time, the outlying centers were doing much of their own purchasing and contracting, even though they had a dotted-line connection to Kaiser's department.

Then, two years after the warehouse move, the Marshfield board of directors (who are physicians) decided to embark on a "strategic cost management initiative." That's all it took to kick-start what has become a solid standardization program encompassing all of Marshfield Clinic.

Standardization program
Today, Kaiser, another administrator and three physicians comprise the Marshfield Clinic system standards committee. It in turn oversees the activities of various subcommittees, each of which focus on particular specialties or product lines. For example, there are subcommittees in GI, ambulatory surgery, business equipment and other specialties.

The Clinic encourages participation by physicians or staff representatives from the outlying facilities on each of the subcommittees. Members of these subcommittees meet telephonically via the Clinic's televideo system. When it comes time for a hands-on review of product or equipment, subcommittee members meet in one location. Many times, that location is at one of the outlying locations, not Marshfield.

'Total success story'
"The restructuring to a centralized supply chain system, along with putting in a structured standards program, is a total success story," says Kaiser. The GI subcommittee, for example, has been successful standardizing forceps and snares. The urological subcommittee has been successful with a tough product line, which includes hardware, implants, stents and wires.

"It hasn't been as difficult to get consensus as I thought it would be, especially since we have had the physician subcommittees," he says. "We've actually gotten through the majority of our major clinical product lines."

Whenever possible, Marshfield Clinic avails itself of Consorta contracts. "But we will sign direct IDN or system contracts when standardization points us in that direction," says Kaiser.

Today, internal requisitions from outlying facilities are transmitted electronically to the warehouse in Marshfield, where products are picked and then shipped to the facilities. Marshfield, in turn, purchases products in bulk from its primary med/surg supplier, Owens & Minor. If Kaiser had his druthers, he'd have a med/surg supplier act as Marshfield's warehouse, but thus far, suppliers have been reluctant to set up an operation in rural Wisconsin.

Looking ahead, Kaiser is preparing for a change next year. Although the materials department has responsibility for the labs physically located in the Clinic's facilities, it has not been involved with the main reference lab in Marshfield, which performs 3 million tests a year. But that will change next year, when the reference lab will be brought into the Clinic's purchasing and materials system.

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