Doug Bowen, MBA, CMRP Vice President Supply Chain, Banner Health Dorance Dillon Director of Supply Chain Management, Yavapai Regional Medical Center Les.

Panel Discussion: Physician Preference Contracting in Arizona

February 1,2011Doug Bowen, MBA, CMRP

Vice President Supply Chain, Banner Health 

Dorance DillonDirector of Supply Chain Management, Yavapai Regional Medical Center

 Les Feka, MBA, CPM

Director of Supply Chain Operations, Tucson Medical Center

Mike Hildebrandt, CMRPAssociate Vice President of Supply Chain, Scottsdale Healthcare

Tam Tang B.S.E, MBAAnalyst, Catholic Healthcare West

Introductions

Facility Overview◦ Banner Health◦ Yavapai Regional Medical Center◦ Tucson Medical Center◦ Scottsdale Healthcare◦ Catholic Healthcare West

Panel Questions

Agenda

Banner Health•Non-profit Secular Multi-State Health System, formed in 1999•23 Acute Care Hospitals•Long Term Care Units, Surgery Centers, Home Health, Clinics, Hospice, Behavioral Health, Home Medical Equipment•3 Regions within Banner Health•4,520 Licensed Beds •35,300 Employees•>60 Physician Clinics•>550 Employed Physicians

“I realized that my role at Banner Health was not to try to tell a physician which products to use. My real role was to try to manage the cost of the products coming in to Banner. The benefit of capped pricing is that you can allow as much physician choice as you want, and the hospital is going to pay the same price for the same product no matter who the vendor is.”

Doug Bowen, Vice President, Material Management Banner Health

“A Team Approach to Cost Containment” HFM Magazine, April 2008

Capped Pricing at Banner

Banner is committed to an all-play physician-driven free market strategy

◦ Surgeons are assured professional independence to use the implant that best meets their patients’ needs

◦ All vendors will be asked to meet the fair price points in all implant sales to Banner Facilities (Non-contracted vendors will not be allowed to conduct business at Banner)

◦ Reasonable control of implant costs consistent with current market and reimbursement levels

Banner’s Contracting Strategy

2003 – Cardiology 2006 – Total Joints: Hips, Knees, Shoulders 2007 – Spinal Implants 2010 – Heart Valves

Capped Pricing at Banner

Surgeon resistance◦ Surgeons had to be trained on use of new implant

systems◦ Only 3 surgeons left BH hospitals due to not being able to

use their preferred total joint vendor “Special” circumstances at certain hospitals

◦ Small, rural hospitals often have only one specialty surgeon; don’t want to alienate them

Assurance that correct pricing was billed by the vendor◦ Built Lawson item numbers for capped pricing◦ Created charge sheets that contain capped price and

charge code info (we no longer accept vendor charge sheets on totals)

Hurdles that Banner encountered

Communication◦ Inform and engage surgeons and administration◦ Use multiple means to communicate

Conference call w/live meeting PowerPoint Letters Internal website

Data ◦ Know your data

◦ Research Vendors Benchmark pricing Contracting programs at other facilities

Banner’s Keys to Success

Formed in 1940 as not-for-profit, locally owned & locally operated, healthcare IDN.

2 Great Hospitals…One caring Spirit: Prescott & Prescott Valley – Totaling 206 beds. 1800 Employees

Women’s center, Wound Care, Home Health, Hospice, Imaging Centers, etc.

6 Physician clinics, with 17 physicians

Yavapai Regional Med Center

TMC HealthCare is Southern Arizona's regional nonprofit hospital system with 642 adult, pediatric and behavioral health beds. The hospital serves more than 30,000 inpatients and 122,000 outpatients yearly.

TMC's campus also serves as home to the Tucson Orthopedic Institute, the Cancer Care Center of Southern Arizona and the Children's Clinics for Rehabilitative Services.

Tucson Medical Center

Value Analysis Capped Pricing Data Mining

TMC’s Contracting Strategy

Scottsdale Healthcare is a not-for-profit organization led by a volunteer board of directors comprised of leading local citizens. That means we answer to our community, rather than stockholders. 

A leader in medical innovation, talent and technology, Scottsdale Healthcare was founded in 1962. Today, we serve the entire Northeast Valley and beyond through two comprehensive medical centers and the first hospital north of the Loop 101. 

Scottsdale Healthcare also offers outpatient surgery centers, home health services, and a wide range of community health education and outreach services. Not to mention clinical and research services not typically found in community healthcare systems. 

Our compassionate staff members and expert physicians are dedicated to providing world-class patient care. Supporting Scottsdale Healthcare's staff in providing patient and family-centered care is a corps of  800 volunteers who donate more than 155,000 hours of service each year.

Scottsdale Healthcare

Capped Pricing whenever possible

Provide Physician Choice

2010 – Spinal Implant Capitated Program

2010 – Cardiology

2011 – Total Joint Capitated Program

2011 – Bone and Biologics

Partner with GPO to get Benchmark Pricing Data and Physician Utilization Information

SHC Contracting Strategy

Begins with senior administration, service line directors, supply chain, physician leaders and department managers

Develop physician compact agreements

Conduct physician surveys annually

Supply chain reports at medical staff and section meetings

Provide capital equipment support to physicians

Provide GPO physician practice purchasing cost savings and support

Work with physicians to improve quality process flows – (block times, start times, scheduling)

Gain physician support prior to any cost savings initiatives

Recognize physician's by name for success stories

Celebrate successes

SHC Physician Communication Process

• Fourth largest not-for-profit system in the U.S.

• Consistent year-over-year operating performance

• $10.9 billion in assets• Leader in quality and safety• Employing 53,000 people• Associated with more than

10,000 physicians• Offering care to a population of

more than 22 million people• Serving growing communities • Helping to shape healthcare

reform

Catholic Healthcare West

2000 - Cardiology ◦ Facility market share & volume

commitment for price tier◦ System market share aggregation to

leverage price with preferred vendors ◦ System aggregation and blended

commitment to 2 preferred vendors

2007 – Total Joints Implants◦ Cap pricing◦ Local and regional contracts

2010 – Spine Implants◦ Price parity

CHW Contracting Strategy

Gather spend data and analysis◦ Total spend by surgeon and device◦ Margin gaps◦ Practice pattern variations◦ Sourcing approach (formulary or discount) ◦ Savings and revenue opportunity

On-site observations / interviews ◦ Surgeon – sales representative relationships◦ Price compliance in the market with surgeon

consulting relationships

Phase 1Detailed Survey & Analysis

CHW Contracting Strategy

Established Cardiovascular Operations Council◦ Service line VPs, Directors, Medical Directors

Appoint task force committee for select contracting projects

Surgeon Involvement◦ Make a case for change and improvement◦ Jointly develop the constructs / discount tactics

Sourcing◦ Customized constructs with definitions understandable by

surgeons◦ Model price points with defined constructs

Coordinate with Board / Medical Executive Committee

Execute purchase agreements with vendors

Phase 2Cardiology & Total Joints Strategy

CHW Contracting Strategy

Manage the implant formulary ◦ 100% charge capture◦ 100% on contract ◦ 100% maintenance of the implant log (ie,

recalls, serial numbers)◦ 100% coding validation

Track contract compliance and utilization

Track/report implant cost per case and volume

Phase 3Manage Growth Reporting

CHW Contracting Strategy

By Facility Across all ContractsQ1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Facility Med/Surg Contracts Pharmacy Contracts Utilization CombinedBakersfield Memorial 94% 90% 95% 97% 92% 100% 100% 100% 57% 63% 75% 81% 91% 89% 94% 96%Dominican 93% 95% 93% 89% 67% 88% 75% 86% 50% 56% 56% 57% 85% 90% 87% 86%Mark Twain 81% 84% 88% 86% 92% 96% 92% 93% 71% 79% 93% 86% 82% 86% 89% 87%Mercy Folsom 93% 92% 94% 97% 81% 77% 88% 93% 88% 81% 100% 81% 90% 88% 94% 94%Mercy General 88% 89% 93% 86% 96% 92% 92% 93% 93% 88% 88% 88% 90% 90% 92% 88%Mercy Bakersfield 97% 96% 98% 95% 88% 82% 71% 87% 88% 64% 69% 75% 95% 91% 91% 91%Mercy Merced 96% 96% 93% 94% 85% 96% 100% 93% 92% 78% 81% 81% 94% 94% 93% 93%Mercy Mt. Shasta 93% 90% 92% 96% 82% 100% 100% 93% 88% 89% 93% 92% 91% 91% 93% 95%Mercy Redding 95% 92% 92% 92% 85% 100% 100% 100% 75% 88% 88% 94% 91% 93% 93% 94%Mercy San Juan 92% 92% 98% 95% 96% 85% 92% 80% 79% 69% 63% 75% 92% 89% 94% 90%Mercy Southwest 100% 94% 98% 98% 88% 81% 77% 77% 89% 88% 88% 88% 97% 91% 94% 93%Methodist 90% 92% 95% 97% 92% 100% 100% 97% 83% 88% 88% 88% 90% 93% 95% 96%Saint Francis 91% 94% 93% 95% 88% 96% 100% 100% 64% 93% 69% 71% 88% 94% 91% 94%Sequoia 92% 94% 91% 92% 73% 88% 96% 93% 93% 94% 94% 94% 89% 93% 92% 92%Sierra Nevada 92% 93% 88% 94% 96% 92% 96% 96% 81% 63% 81% 94% 91% 90% 89% 94%St. Elizabeth 93% 93% 94% 93% 92% 86% 100% 96% 100% 94% 94% 93% 93% 92% 95% 93%St. Joseph's - Stockton 93% 92% 94% 91% 81% 100% 92% 93% 83% 94% 78% 67% 90% 84% 92% 89%St. Mary's - S.F. 88% 82% 83% 90% 92% 100% 100% 100% 67% 70% 63% 81% 87% 96% 84% 91%Woodland 91% 96% 95% 94% 96% 92% 100% 100% 93% 86% 93% 100% 92% 95% 96% 96%Arroyo Grande 94% 95% 94% 98% 83% 96% 81% 85% 100% 93% 100% 81% 93% 93% 92% 94%California Hospital 97% 93% 93% 93% 96% 96% 100% 100% 92% 86% 71% 86% 97% 93% 93% 94%Chandler Regional 91% 93% 91% 87% 96% 96% 100% 93% 100% 88% 81% 81% 92% 93% 92% 87%Comm Hosp San Bernardino 94% 93% 93% 95% 92% 92% 88% 83% 89% 88% 88% 94% 93% 92% 92% 92%French 90% 91% 91% 95% 92% 92% 96% 93% 88% 94% 88% 86% 90% 92% 92% 94%Glendale 95% 95% 95% 94% 85% 92% 100% 93% 86% 69% 69% 79% 92% 96% 93% 93%Marian 100% 96% 95% 90% 92% 92% 92% 87% 83% 100% 100% 100% 97% 90% 95% 90%Mercy Gilbert 91% 92% 90% 89% 92% 92% 100% 100% 64% 69% 75% 69% 89% 91% 90% 89%Northridge Roscoe 92% 90% 91% 91% 85% 83% 92% 86% 93% 94% 72% 72% 91% 88% 89% 88%Saint Mary's Reno 88% 90% 95% 97% 83% 88% 83% 73% 64% 81% 81% 81% 85% 88% 92% 91%St. Bernardine 93% 88% 87% 88% 96% 77% 96% 90% 89% 83% 56% 56% 93% 88% 85% 85%St. John's Oxnard 91% 92% 93% 95% 73% 83% 81% 79% 58% 75% 81% 94% 85% 91% 90% 92%St. John's PV 91% 92% 92% 96% 73% 100% 92% 86% 94% 94% 100% 93% 88% 93% 93% 94%St. Joseph's - Phx 94% 96% 93% 91% 100% 96% 100% 93% 79% 67% 69% 75% 94% 93% 92% 90%St. Mary - Long Beach 97% 93% 96% 95% 92% 85% 92% 93% 88% 83% 81% 94% 96% 91% 94% 95%St. Rose Delima 93% 95% 92% 94% 96% 100% 96% 97% 100% 100% 94% 100% 94% 96% 93% 95%St. Rose San Martin 91% 91% 97% 90% 85% 96% 92% 90% 100% 100% 100% 88% 91% 93% 96% 90%St. Rose Siena 91% 93% 94% 95% 88% 96% 88% 90% 81% 100% 88% 88% 90% 94% 92% 93%

CHW System 93% 92% 93% 93% 88% 92% 93% 91% 83% 83% 82% 84% 91% 91% 92% 92%

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Significant Incremental Improvements

Hip Implants: Average Implant Cost and Volume by Hospital (Q4F09)

Focus on These

Facilities

CHW Hip chart

Knee Implants: Average Implant Cost and Volume by Hospital Q2FY09

From Worst Performance to Best New Facilities for Focus

CHW Knee chart

Stent Usage By Facility - FY08 Q2

14%

30% 32%38% 40% 42%

47% 47% 49%55%

60% 61% 64% 65%69% 69% 71%

75% 77%

70% 68%62% 60% 58%

53% 53% 51%45%

40% 39% 36% 35%31% 31% 29%

25% 23%

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DES Stent Bare Stent DES Avg

Drug Eluting Stent UtilizationCHW Stent Utilization

In collecting data, what source do you utilize for◦ Internal benchmarks

Hospital to Hospital Budgetary goals Surgeons, volumes, cost per procedure Vendor contract variation

◦ External benchmarks GPO IMS Health Inc. ECRI AHRMM PPI Surveys when available

◦ Reimbursement DRG benchmarks Third party reimbursement

◦ Clinical evidence SHC uses GPO data for external benchmarking plus the MIDAS

system for internal clinical data

Panel Question

In your contracting process do you utilize a value analysis process and evidence based / peer reviewed data? ◦ Yes, value-analysis process◦ Clinical data requested as available◦ Level of clinical involvement◦ Evidence based / peer reviewed data

Panel Question

Do your agreements include key contract clauses that address the following and if so what do they say?◦ Product exclusions

Statement No-Product exclusions◦ New technology

FDA 510k non-predicated device◦ Premium technology ◦ Wasted products

Vendor waste Surgeon waste

◦ Lost Instruments ◦ Consignment inventory

Expect vendors to provide

Panel Question

Are off contract vendors allowed to conduct business at your hospital?◦ No

Is there a lock-out period for non-participation?◦ Yes – 1, 2, or 3 years◦ Mandates that all vendors must comply with the

contract terms. If the vendor is unable to comply, there is a lock-out period established

Panel Question

How do you address billing on capped agreements?◦ Price points for all components or one price

Single price for hips, knee, partial Knees by type of procedure Spine capped components

Ala-carte Per level

Break cap price up through all components to meet construct price

◦ Vendor vs. Hospital Charge Sheets Hospital

Panel Question

How have you addressed surgeon resistance to contracting physician preference items?◦ Put the pressure back to the vendor◦ SHC seeks to obtain physician input and support

prior to the implementation of capped programs. When surgeon resistance is established, SHC attempts to work collaboratively with the surgeon, service line leader, and chief medical officer.

Panel Question

Which items are considered outside of your cap?◦ Custom Cutting Blocks◦ Sawblades◦ Cement◦ Products or items that fall outside the caps are

dealt with by a small task force which includes the service line leader, service line medical director, and chief medical officer if necessary.

Panel Question

Once the contract is in place what do you do to ensure you are receiving the contracted price?◦ As soon as case is done◦ Purchase/invoice processing◦ Monthly audit reports◦ Manual

Panel Question

Thank you!