Using preemptive formulary management to control user supply access at the point of requisition

Transcription

1 Care Providers Hospitals Enterprise Resource Planning Using preemptive formulary management to control user supply access at the point of requisition Formulary management is a lean management approach to managing products used with a single hospital or group of associated hospitals (IDN). The goal of formulary management is to identify, categorize and manage non-approved user activity so that a balanced approach between physician preference figure 1 There are four components to a successful formulary management program. and organizational cost reduction mandates can be achieved. When effectively implemented, formulary management may reduce the number of non-sanctioned products entering the system. It will help accelerate product and vendor standardization and contract compliance. Formulary Assignment of formulary level Manages opportunity Product family identification Creates context Content descriptive attribution Drives comparison Content normalization & enrichment Creates a foundation management also enables reduced inventory write-downs due to product obsolescence. McKesson Strategic Supply Sourcing is a preemptive formulary management solution that helps you enforce your organization s defined formulary before a purchase is made. Our solution learns your products and preferences, directing users to your preferred product choice. Through McKesson Strategic Supply Sourcing, you can provide employee empowerment with supply chain control at the point of requisition. There are four components that comprise a successful formulary management program (see figure 1): 1. Content normalization and enrichment 2. Content descriptive attribution. Product family identification 4. Assignment of formulary level

2 Distribution of Items for Average IDN GPO Contracts Zone Distinct items count Distinct med-surg items count 5 Contracts Purchase History 1 7 Item Master 1 6,852 5, ,166 9, ,7 5, ,052 11, ,094 46,497 Total 162,060 78,948 Potential universe of available contracted products figure 2 Results of a recent purchasing study at a top-five healthcare network (as named by ECRI). Content normalization and enrichment The basis of any effective formulary management program requires data that has been normalized and enriched with meaningful content so that it s consistent and contains sufficient information to allow for detailed comparison. Within the hospital setting, the item master would normally be considered the source of truth and suitable for the purpose. However, for the following reasons, this assumption is often not true: Not all products are present in the item master Insufficient descriptive detail for comparison Missing linkage to external catalog or contract data Out-of-date information In most organizations, an examination of purchase order history (see figure 2) would reveal a significant amount of purchasing activity that is onetime only and not included in the item master (Zone 2, 6). In fact 40-50% falls outside of the current item master 1. This non-itemmaster activity is often associated with physician preference items (PPI), traditionally representing low volume but high dollars. Similarly, there is often significant spend taking place in non-medical surgical items such as bin liners and toilet tissue. A recent study of purchase activity at a top-five performing hospital network named by ECRI 2 revealed that of the 98,000 items contained within the item master, only 24% were active. However, of the 162,000 unique items purchased over the measured eight-month period, only 2,000 (14%) were in the item master. Not only can the item master be under-populated from a total products purchased perspective, but it also often lacks the descriptive information necessary to drive the functional comparison of products. These deficiencies are exacerbated when you also consider product information that resides outside the hospitals in areas such as GPO contracts and vendor catalog information, where data is structured differently. An effective normalization and enrichment program helps eliminate structural differences, obtains missing information and aligns the data so it can be formatted and used. 2

3 Attribute selection drives functional comparison Product description: Glove Exam Esteem Medium Nitrile Length 12in Blue Latex-Free Non-Sterile Powder-Free Textured Fingertips Functional Equivalent Driving Attributes Noun Type Trademark Descriptive Size Composition Length Color Latexity Sterility Coating Feature Functional Equivalent Driving Values Glove Exam Esteem XP Medium Nitrile Length 12in Blue Latex-Free Non-Sterile Powder-Free Textured Fingertips figure Item Master descriptions are often confusing and incomplete, requiring an unlimited attribution process to help a requisitioner find the desired item. Content descriptive attribution Simply stated, any data element, such as a product code, unit of measure, price, or vendor name, can be considered an attribute of the product. However, because most users tend to look for products descriptively, how the description is structured is of particular importance to formulary management. There are several issues that must therefore be considered (see figure ), including: Descriptive consistency is the information pertaining to a given product complete? Attribute sequence do all the values line up so that they can be compared? Alias terms what happens if there are multiple words describing the same thing? Some content vendors have addressed this issue by creating a number of fixed attributes, or slots, in which data is populated. This approach has some merit; for example, this simplifies the number of positions in which to place key words. The data structure is less complicated and many of the commodity-type products have few descriptive attributes. However, there are also certain drawbacks. For example, a fixed scheme means that gauze dressing is seen and described in the same manner as an interventional catheter. Attributes such as size often contain multiple values that describe completely different things, such as catheter overall length versus working length or introducer length. When there are more attribute values than available slots (often the case with PPI items), a catch-all attribute such as properties has to be established to squeeze these extra values in. A more advanced methodology is to define the required attributes by product type. This method would require the following attributes for gloves: type, size, latexity and coating. Meanwhile, gauze would require: length, width and thickness. Using this approach, each noun is given attributes in accordance to the values that fully describe the product in question. Overall, having unlimited attributes requires more maintenance but provides for a more powerful system.

4 Product family identification Effective comparison of products depends largely on the ability to define product families that contain comparable items. For simplicity we will define two types of comparisons here: Functionally similar products that can be potentially used to perform the same type of task or procedure Functionally equivalent products that can be used to perform the same type of task or procedure without any adverse effect to patient care Functional similarity is useful when one wants knowledge about a range of associated products. For example, when looking to compare a range of exam gloves, having a specific size would not be an important condition. However, when looking for a specific replacement item, size (as well as other considerations such as latex, sterility and coating) would figure into the equation. By selecting key attributes (see figure 4), the user has the ability to sort the data into discrete groupings or product families. Once established, product families can be used to: Drive product/vendor standardization by comparing products within a family Identify lower cost products that serve the same purpose figure 4 Using product family as a data element can help easily identify many equivalent items noting those that are under contract. Formulary Management Level figure 5 Formulary level data helps to create a priority to guide and control procurement, and indicate organizationally preferred items. Identify equivalent items under contract Identify alternative products that can be used in a backorder situation Assignment of formulary level By combining formulary management and assigning numeric level values, your organization can exercise control and direct access to products. Each product that is or potentially will be used by an organization is given a formulary level number, 1-4, (see figure 5) based on the following set of definitions: Level 1 = Products held in inventory Level 2 = Item master/non-inventory Level = Non-item master/ under contract Level 4 = Non-item master/ non-contract 4

5 Within these levels, products can also be designated as preferred items to allow certain products of equal formulary level to be promoted over others. As users interact within McKesson Strategic Supply Sourcing, the system promotes equivalent products to the user based on their highest formulary/preferred status. Using artificial intelligence technology, the system automatically detects non-approved, or rogue, purchasing and will instead promote the organizationally preferred item to the user during the requisition process. During the promotion process, the AI engine helps users evaluate their choices and indicates the calculated cost savings for each preferred product presented (see figure 6). Over time the AI engine learns your products and preferences. Similar to the way data engines for consumer shopping sites (e.g., Amazon) suggest items based on buying history, the AI technology suggests the best choice item based on your specific formulary and contracts. Currently, McKesson is the only vendor that can provide artificial intelligence systems for procurement. Visibility is maintained throughout the approval process so that all parties are aware of the requested product together with the possible substitutions. When the preferred product is not selected by the requisitioner, an exception reason is recorded for downstream review and analysis. Benefits of McKesson Strategic Supply Sourcing preemptive formulary management Improved workflow is also achieved as each level of formulary is given a separate approval path based on the level of the product. For example, Level 1 and preferred products can be set up to require no approvals to help eliminate all non-value touches throughout the requisition/purchasing process. Preemptive formulary management is an effective tool to help: Improve operational performance Identify non-compliant purchasing behavior Control supply costs Eliminate off-contract, non-formulary purchases Improve customer experience Improve quality Preemptive formulary management provides an effective mechanism to control user access to supplies at the point of requisition. When used in conjunction with a systematic ability to identify functionally equivalent product alternatives, preemptive formulary management can identify financial threats posed by the introduction of non-approved products, find contracted alternative products and automatically suggest approved substitutions for backordered products. 1 McKesson/Meperia healthcare marketplace data, Healthcare Supply Chain Achievement Award Winners Circle, ECRI Institute, accessed September 9, 201, Products/Pages/Healthcare-Supply-Chain- Achievement-Award-Winners-Circle.aspx. McKesson/Meperia healthcare marketplace data, 201. McKesson Technology Solutions 5995 Windward Parkway Alpharetta, GA figure 6 During the requisition process, the user is presented with the organizations preferred items. Copyright 201 McKesson Corporation and/or one of its subsidiaries. All rights reserved. McKesson Strategic Supply Sourcing is a trademark of McKesson Corporation and/or one of its subsidiaries. All other product or company names mentioned may be trademarks, service marks or registered trademarks of their respective companies. HSPM805-09/1