Healthcare IT News: Marshfield Clinic Health System Saves $1.2M with Parts Procurement Automation

Healthcare IT News: Marshfield Clinic Health System Saves $1.2M with Parts Procurement Automation

August 26, 2021

As published in Healthcare IT News on July 22, 2021


The health system's biomed director, who manages 32,000 pieces of equipment, tells a compelling tale of moving from paper to a digital, data-driven system.

Marshfield Clinic Health System is a fast-growing health system in Wisconsin. Since 2017, it has jumped from one to nine hospitals and now has more than 1,200 providers totaling 86 specialties.

MCHS also has a health plan and a healthcare technology management department that manages more than 32,000 pieces of equipment. That department also has grown exponentially: In 2018 it managed just 8,000 pieces.


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The main campus of the Marshfield Clinic Health System in Wisconsin

The Problem

"There was no way we were going to keep up with this growth without adding substantial biomedical support staff," said Jay Olson, system biomed director at Marshfield Clinic Health System. "And when you need support staff for the support staff, that doesn't fly. In our world of managing equipment and people, the last thing you want to do is add more people.

"However, the way we ran the HTM department was very inefficient," he continued. "Like many healthcare organizations, we weren't using automation or leveraging analytics to manage the procurement of parts and services for medical equipment. Instead, we were using paper purchase orders."

Plus, each hospital had its unique parts ordering system or procurement service, which added complexity. When these individual hospitals joined the MCHS system, the purchasing processes were all different.

"On top of this, we were relying on our biomed technicians to do the bulk of the heavy lifting in purchasing: calling around or searching online sites for the best prices and deals, making snap decisions about the quality of parts and equipment, and using paper requisitions to create orders and faxing them to suppliers," Olson explained.

They also had to follow up on orders and reconcile any issues, which is stressful since they often need to get the parts quickly to fix often-crucial equipment.

"As might be expected, this was a time-consuming process, and wasn't the best use of the technicians' time," Olson said. "Their job is to fix equipment, and their first priority is to have the equipment up and running so the clinical staff can focus on patient care."

Data integrity also was a major concern. The past purchasing process lacked accurate order confirmation and tracking. Staff often discovered that orders were never actually placed. And when orders were placed, technicians had to manually enter purchased part numbers into the system, from Accruent Computerized Maintenance Management Systems.

"I have some amazing technicians that can fix high-end imaging equipment, and they save us millions of dollars a year, but even they could accidentally input duplicate part descriptions or introduce discrepancies," Olson noted.

Additionally, the purchasing compliance rules created conflicts and delays.

"We have select vendors that we're supposed to order all of our parts through, but since I can't get everything I need in one place, you have to be able to go to other stores," he explained. "However, we weren't able to do that without setting up a whole new company in our database. It's a week-long process to just get a part that nobody else sold for us."

Proposal

First, Olson took advantage of MCHS being in its rapid growth phase and made an operational change: Instead of every individual hospital department having its own biomed spend, he proved that the health system could save money by creating one in-house service.

The health system took all the costs and all the spend and put them in one account. That simplified everything so Olson could get control over ordering the parts.

Once leadership gave him the ball, he had to run with it – and he turned to vendor PartsSource.

"PartsSource Pro was the best solution for our consolidated department," he said. "Their e-commerce platform integrated easily with our existing purchasing processes and CMMS, so we didn't have to install expensive new equipment or undergo significant employee training for implementation.

"The only thing a biomed technician needed to do was login to existing systems and start the work order, click on the PartsSource area – which had a customized interface for every one of our parts – complete their shopping cart, and then close the work order when they finished the repair."

Because PartsSource's service platform is based on evidence and quality data, it also offered MCHS a way to streamline and optimize how it purchased medical equipment parts and services.

"Our biomed technicians would have instant access to internal inventory numbers and the ability to track orders, as well as the ability to consolidate suppliers and access high-quality clinical resources at the point of purchase," Olson noted. "All of this was more efficient: biomed technicians had more time in their day, as they weren't working on following up on orders, and the workflow process ran smoother.

"PartsSource ended up becoming an extension of our team, which was the best option for our operational needs," he said. "We were at the point where we either had to add staff or we had to go with the program. Go big or go home, as I like to say."

Meeting the Challenge

Olson and staff report being very pleased with the results.

"PartsSource's platform integrated seamlessly with our existing system, the Accruent Transportation Management System (TMS) and CMMS and purchasing workflows," he said. "The clinical engineering department, specifically our biomed technicians, used this combined platform for ordering, and were able to open a work order and access the PartsSource marketplace with the click of a button.

"Rather than making multiple calls or conducting time-consuming research, they had costs and reliability figures at their fingertips to support their decision-making," he continued. "After receiving a part and then making a repair, all they had to do was go back in and close the work order out. Best of all, everything technicians did – from the time they purchased something to shipping info – was available right there in the work order."

This deep integration led to greater data integrity, as tracking this information automatically (and correctly) resulted in better access to the kind of data staff needed to drive activities such as a capital replacement strategy, alternative equipment maintenance (AEM) schedules and total cost of ownership.

Previously, manually entering orders could lead to confusion over inventory – whether something is in stock or even on order – or duplicate entries. From a safety standpoint, if there is a recall, the staff can actually determine where a part is in that moment.

Results

MCHS saw an immediate impact. For example, via PartsSource, the staff bought a specialized X-ray tube for $89,000 – a savings of more than $30,000 compared to the price from the vendor they had usually purchased it from. They had the part in-house the next day.

"Big wins like that, and all the little wins underneath of it, really justified the program," Olson said.

Because PartsSource orders are imported right into the database, staff members now have better visibility into their spending and purchasing behavior, which has helped them plan and control costs.

"I can actually balance our general ledger for our cost centers against our TMS, and it's spot on, because the cost of the part is tracked all the way – from the time it gets ordered to the time it gets put in the machine," he explained.

"This data-driven approach also lets us make smarter decisions faster, like having the instant comparison to either purchase a $300 new part versus the cost of sending the equipment out for repair, which is a $150 flat repair rate," he continued.

"We saw financial benefits immediately with access to this new information. In fact, after just one quarter, we saw a cost savings of 35%. At the end of 2019, MCHS' use of PartsSource saved the organization $1.2 million just in parts."

The solution allowed staff to consolidate parts procurement from multiple different original equipment manufacturers (OEMs) and suppliers into one centralized, easy-to-use e-commerce platform, integrating with CMMS and purchasing workflows, he added.

"Our odds-and-ends parts are all ordered via one-stop-shopping. We can go into PartsSource's catalog, and there they are," he said. "These parts have also been verified. But if we do have problems, we can send them back and contact PartsSource and give feedback: 'Hey, this part wasn't what it was cut out to be.' They go to a different vendor and fix the issue."

This system has helped MCHS maintain excellent return rates on defective replacement/repair parts for medical equipment. To date in 2021, the health system's quality return rate is 0.3%, with the industry benchmark being 2%; and an overall return rate of 2.4%, again beating the industry benchmark, 3%.

"Consolidating parts procurement from 471 different OEMs and suppliers eliminated significant waste in the procurement process, which alleviated the burden of purchase order management," Olson said. "Decreasing the time to procure parts increased productivity for the department.

"For example, the time from requesting the part to delivery used to be nearly 90 minutes. However, implementing PartsSource nearly halved this time throughout our partnership," he continued. "Technicians could then dedicate these hours instead to customer support and service, repairs, cybersecurity, and sustaining the incredible growth MCHS has undergone."

Plus, the automation has been a lifesaver, Olson said.

"Technicians don't have to manage and follow the order confirmations. It's all done automatically," he explained. "This allowed us to give them back time in their day to focus on different, clinically focused tasks that they didn't have time to focus on before, such as troubleshooting.

"With our existing staffing model, when employees are tied up with researching parts and working on getting equipment up and running, that's less time they'll have to look at other pieces of equipment that might need repairs," he added. "In that case, we'll call the vendor and have them help us out. But if they have extra time in the day, they can go attack another piece of equipment without having to call the vendor and/or switch around resources."

Staff members always try to keep their resources deep enough, but it's always more cost-effective if they can do it themselves, he said.

Today, as MCHS is building a tenth hospital, it has been able to keep up with the growth. In fact, it is at a point where it has added a couple of managers to oversee its southern and northern regions.

"Right now, we have an approval process, so if anyone is spending $1,000 or more on a part, I can approve it quickly, as I have PartsSource on my phone," Olson said. "Now, however, these new managers can focus on the spend and make my life easier. There's a lot of days I'll see a part order come across, and I don't have time to drill down on why it's being ordered or why he's doing OEM instead of third party. Now I can pass these on so I don't delay the orders."

Advice for Others

"Organizations should first drill down on their existing pain points and look at what their specific needs are," Olson advised. "Don't be afraid to even make a list, ranking in order of importance your most crucial needs and what you're looking for in a holistic solution and a valued partner.

"If you're in a growth phase, you have to jump on board," he continued. "Don't be afraid of a data-driven solution, even if it is different from the paper-based way you've done things in the past. If you're going to keep up with the industry, you have to keep an open mind. You don't want to cut back staff, but utilize your staff in different ways."

For example, instead of having two people placing orders, Olson has one staff member who helps with contract management, and another one who assists with all the invoicing that seems to stack up when one adds nine hospitals.

"If you can get into the growth phase like MCHS is in right now and keep services in-house and under control, you can do so much in savings moving forward," he concluded. "For 32,000 pieces of equipment, we have a director and two managers and enough staff to run it. And it's all because of the money that we're saving because of working smarter."

View the article on Healthcare IT News


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