When Cedars-Sinai came together with Torrance Memorial Medical Center and then Huntington Health, the affiliations weren’t only game-changers for patients across Los Angeles seeking high-quality, affordable care. The new relationships also created an opportunity to form a systemwide supply chain function aimed at more efficiently and effectively navigating a medical supplies and services industry that has seen significant challenges since the onset of the COVID-19 pandemic.
The results have been transformative. By consolidating supply chain processes, Cedars-Sinai Health System has managed to achieve big savings at a time when hospitals nationwide are facing serious economic difficulties, driven partly by the fast-rising cost of medical goods, equipment and other resources. High-quality, affordable supplies and services support high-quality, affordable care and have made the organization more resilient than ever.
The “Secret Sauce”
When people think of hospitals, they likely imagine doctors and nurses in scrubs along with assorted machines that do everything from taking scans of the brain to displaying vital signs on a screen. They’re less likely to think about how the scrubs and machines got there.
“And yet, that’s the secret sauce,” said Motz Feinberg, vice president and chief supply chain officer of Cedars-Sinai Health System. “An efficient and effective supply chain is what allows world-class healthcare professionals to practice the art and science of medicine.”
Supply chain includes the sourcing and acquisition of medical items, equipment and services, as well as the storage, distribution and use of resources.
“The better you are at managing your supply chain, the better your hospital runs, and the more likely you are to deliver great care to patients while creating a safe and rewarding workplace for staff,” said Bryan Croft, senior vice president of Operations at Cedars-Sinai.
But how does integrating with other hospitals improve an already sound supply chain?
Power in Numbers
The answer lies in the power of numbers. Cedars-Sinai Health System serves a community of millions in one of the largest regions in the country. That makes it a big client for vendors who sell what hospitals need, including tiny cotton balls, 4,000-pound CT scanners and everything in between—gloves, IV bags, sterilizers, surgery beds, scalpels, robotic equipment and much more, along with warehousing and storage. Other vendors offer a slew of additional services, from waste pickup to technological support.
Over the years, as the health system added new affiliates and grew, the organization became a bigger client for the supplies industry, giving it the opportunity to review and renegotiate better contracts.
“We have saved money on almost every contract we’ve reviewed, despite a sharp rise in prices in a difficult economy,” said Phil Cutler, executive director of Supply Chain Operations and Support Services at Torrance Memorial. “We’re fair to our vendors, but we focus on what’s best for our organization because that’s what’s best for our patients.”
In some cases, that has also meant switching vendors. At Torrance Memorial, Cutler recalls one such move that saved the organization about $1.5 million while also improving quality. The entity is also benefiting from switching to Cedars-Sinai’s longtime medical and surgical supply distributor, which will result in significant savings.
Similar changes are underway at the more recently affiliated Huntington Health, which has some 14 vendor contracts under review. Significant savings are expected to result from revised contracts and from vendor transitions in several areas—including cardiac rhythm-management supplies, trauma implants, orthopaedic spine implants and lab support. These and other supply chain changes at Huntington Health are slated to save $2 million this year.
“We’re also providing all entities in the health system with analytical decision support. For example, with our engagement, Huntington Health is reducing its onsite inventory, which will lead to both financial and efficiency improvements,” said Feinberg.
While consolidating purchases has obvious benefits, each hospital still has distinct needs. For example, Cedars-Sinai runs the largest heart transplant program in the country, while that procedure is not offered at Huntington Health or Torrance Memorial.
“We don’t always order or require identical things, and we have to make sure we’re prepared for our own patient populations,” said Cutler. “But hospitals often do acquire many of the same items, or form similar portfolios with the same vendor, and that’s where the big advantages of affiliation come in.”
Building Resilience
Approaching vendors as a single entity doesn’t just mean better prices, it also means a more resilient supply chain—an organization’s ability to prepare for unexpected events, respond to disruptions and recover by maintaining continuity of operations.
“When the pandemic hit, there was widespread concern about supply shortages throughout the healthcare field,” said Feinberg. “We never compromised on safety or quality of care, and the pandemic really brought home the benefits of our integrated supply chain.”
If one hospital was running low on an item, it could borrow from another member of the health system while waiting for the next delivery, instead of turning to a backup vendor. This was invaluable when prompt resupply was critical, as was often the case. But it’s important even when there isn’t a global pandemic putting immense pressure on healthcare providers and suppliers. In general, hospitals don’t keep a lot of extra supplies on hand due to concerns about waste and expiration dates. In the health system, there is also an emphasis on devoting space to patient care rather than to supplies.
In addition, providers are often used to working with a particular vendor’s equipment, so switching isn’t always a desirable option. Consolidation has another advantage: The health system’s entities can leverage one another’s strengths.
At the end of the day, everyone benefits, and everyone has something to offer. “Cedars-Sinai is here to assist while also implementing what we learn from the other hospitals,” said Croft. “As in any good relationship, we support one another in any way we can, and we look forward to continuing to grow together.”
