Presenting the Product: Clinical Evaluation & Procurement

Putting a successful procurement process in place at your facility can yield higher returns than any lucky slot machine in Las Vegas. Before discussing our successes at Baylor University Medical Center (Baylor Dallas), I should first share the details of our prior situation. In the beginning, January 1996 BP (before procurement), we had an excess of over $5 million of inventory and assets that we were carrying monthly. We were operating four cath labs, doing roughly 4,700 diagnostic and 1,700 interventional patients annually. Before Procurement Figure 1 is a picture of a $5 million dysfunctional inventory process that was not working. We had a history of some challenges in our storeroom. We did not have centralized storage; we had remote storage. There were items stored there that should have been kept elsewhere. We were also faced with some other disparities. For example, we had eight clinicians that were functioning in the role of one inventory manager. These were clinicians whose idea of a just-in-time inventory was a rushed order overnight. One individual actually had a standing order so that supplies were delivered that we did not need. A year later, when we had time to decipher our inventory supplies, we discovered that we had 150 pediatric diagnostic guides, and we don’t even perform pediatric procedures at our institution. In addition, cath lab staff did not have any involvement with the purchasing department. Staff were not aware that there was a $150 charge for every rush order and a large percentage of the orders were rushed. We were not maximizing our buying power, even though we were the flagship hospital of an eight-hospital healthcare system and six of those hospitals had cath labs. We hadn’t taken advantage of bulk buying and the lower prices that had been negotiated by some of our affiliate hospitals. We found that our affiliates were doing one-third of the business that we were, but were paying $200“$300 less for some items than our institution was paying. We needed to have more physician involvement in the process. Many of our physicians did not realize the impact of their product choices. Since our physicians are in private practice, they needed encouragement to cooperate in cost savings measures. We also did not have inventory control. In 1996, since we did not have an automated inventory system, it was difficult to know at any given time exactly what was on the shelves. A Force to Be Reckoned With Our procurement group was formed in January 1996. It consists of: The director of purchasing for Baylor Health Care System (BHCS); The director of clinical operations for our hospital; A cath lab manager; An inventory manager; Two procurement chairs (clinicians who actually worked in the lab with the products and with the physicians); Two to four clinicians who worked in the lab. We also had representation from our affiliate hospitals, generally at a supervisor, manager or director’s level. At times, if we had cross-referenced products with surgery, the operating room or interventional radiology, we would invite those directors to also be involved with decision-making. One of the first things done by the group was to create the Monumental Synopsis Form. We actually introduced this in an open and honest meeting with all of our vendors. We sent a certified letter out to all of our current, past or potential vendors and invited them to attend a dinner. We did not give out a lot of information at that point; we just told them that we wanted to go over some guidelines. We simply wanted everyone in one place to hear the same story. We wanted to discuss our new guidelines and explain that we were now going to be a force to be reckoned with. At the dinner, we reviewed our expectations for vendors who visited the lab, discussing everything from a dress code to the way that vendor lunches were scheduled. We reviewed a patient confidentiality form and limiting their access to the lab. We also reviewed BHCS’s business ethics policy and expectations, and gave vendors some resources. We asked our medical directors and our director of purchasing to attend the dinner, to let vendors know that we were serious about what we were going to do. We made it clear to vendors that we expected these guidelines to be met from that point forward. The Monumental Synopsis Form asked vendors the following: Describe how the product was developed: “ Was this a new or old technology? “ What was the FDA approval date? (We actually had a previous experience with a vendor who attempted to bring a product into our lab that was not FDA-approved.) “Â What are the initial trial sites? (If something was in question, we wanted to know who in the city, state, region or country was using this product, and we were not above calling this institution and inquiring about their experiences with the product.) “ Is the product new or was it a replacement product? “ Is this a full line of products that we are going to have to bring in, from 1.5 mm to 4.0 mm, and sizes ranging from 2.0 mm up to 50 mm, with half sizes and quarter sizes, or is this something that’s going to replace an item that we currently have? “ Who are competitors for the product, and what are the advantages of their product over the competition? We asked the vendors to send the form to us one week in advance of the dinner. This allowed us to do some homework prior to the meeting. For example, we wanted to research pricing issues and consignment issues, because we did not want to waste time going down that road, only to find out that the vendor was not willing to work with us on those issues. Many times, we would find out that the head-to-head competition was actually against a particular vendor’s product. We would collect specs, an advantage of having clinicians present at these meetings who use these products daily. We asked the vendors questions to help us understand why it would be advantageous to bring the product into our lab. Regarding pricing, our belief is that we should never pay retail prices. We negotiated prices for BHCS, rather than continuing with individual facility pricing. Occasionally, there were items unique to one hospital; for example, our hospital is the only one that performs brachytherapy. In these cases, we asked if consignment was available, and if not, why not? Other than a few niche products, our mandate was that everything comes in on a consignment basis, including the capital to use these products. If the product was not reimbursable, we would weigh the pros and cons as an institution and as a healthcare system: Is this a product that is a referral from marketing or public relations? Is there something that would outweigh the detriment of not being reimbursed? Is this a product that can wait six months until it is reimbursed? Procurement at Present As a result of the changes we made, my job has become much easier. For example, we now have a tracking mechanism. We have a paper trail of what comes in and out of our lab. Our consignment-only policy also has been very successful. We can now put our available money and resources into other things that are more worthwhile. Our institution has put this money into recruitment and retention efforts. When we brought vendors together, we created a level playing field. We said we would start with a clean slate and all previous relationships were a thing of the past. We treat each vendor the same, regardless of what they are selling or the price of that product. We constantly look at inventory surplus to get rid of excess. This is an ongoing process. You must constantly look at a product’s life cycle. Is it time to get rid of this product and bring in a new one? Can we reduce levels? Have our practices changed? Is there a physician who used that product who is no longer with us? We constantly evaluate our inventory. Our inventory manager is essential to this entire process. When we redesigned our new hospital and built the storeroom, we wanted the manager’s desk to be out in the open, in the middle of things, so that he could see exactly what is happening in the lab. Initially, our inventory manager did not have a business or purchasing background. He started as a transporter. We educated this gentleman. We got him in the labs, got him in scrubs, and got him into courses. He now runs the procurement process, is a frontline to all of our physicians, and educates new employees regarding the procurement process. We also have created a monthly meeting. We get together and share ideas, philosophies, and stories from the past month, but more importantly, this is a vehicle where all of the vendors get together and present their product on one form, in one fashion, one time a month. Everybody knows that when you are introducing a new product to Baylor Health Care System, you are going to go to the procurement meeting, which is on the fourth Wednesday of the month. We have new rules regarding vendor activity in and out of our labs. We had so many drop-ins from vendors that we finally implemented a badge-access only lab. There is only one door that stays open during the day, and it goes into the storeroom, directly past the inventory manager. The vendors check in and receive a special badge. We have trained our staff to question anyone who comes in without a red vendor badge. We also provide scrubs to the vendors and have a vendor area where they can place their personal belongings in a locker. They are then escorted into the lab by the inventory manager. Based on our volume and the regional levels of pricing, we will not reduce pricing. We do not want to attach to market share and we do not want to be attached to reimbursements or rebates. We sent out RFPs (requests for pricing), and chose stents and balloons using a financial hierarchy and worked our way down. We felt that they were a good thing to tackle because of their price, their relationship to each other and the impact they have on our business. We told vendors, You can comply with our expectations, or not comply. If you comply, you can educate our staff about your new product at the Tuesday morning staff meeting. At that point, you start our evaluation process. You have a week, with more time if needed, for certain niche products and dependent on space or volume. We want a truthful evaluation, and you cannot do that in just a few days. Therefore, you comply, we will give you valuable space in our lab. Vendors do not have access to the lab if they do not have a new product. We give compliant vendors two lab days to promote any product that they are currently selling to us. Noncompliant vendors are told that they will be reevaluated for elimination from our inventory. Prior to sending out these guidelines, purchasing was involved in the pricing effort and physician buy-in. Figure 5 shows a recent picture of our lab. It really is this organized. We have reduced our inventory from more than $5 million six years ago to about $2.5 million today. We have now increased our volume of diagnostic patients from 4,700 to 6,700 and increased our interventional patients from 1,700 to about 2,500 annually. Our inventory assets as of May 2002 were under $500,000. In summary, Rome was not built in a day and neither is a procurement process. Be patient; it should pay off in the end. Jerry Don Williams is an experienced manager, facilitator and trainer with more than 14 years experience in cardiovascular medicine. He specializes in customer service, staff development, clinical recruiting and cost containment. Jerry is the team leader of the Baylor Hamilton Heart and Vascular Hospital Invasive Cardiovascular Labs. Jerry would like to give a special thanks to the current procurement committee for all of their efforts in this process.

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