GHX Business CASE | Course Paper

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Contents

Executive Summary……………………………….………………………………….…………………….….….….….3

Project Overview……………….………………………………….………………………………….…………………3

Savings Continuum…………………………………………………………….………………………………….……4

Current Process………………..………………………………….…………………………………….…..….….…..5

Reason for Change………………….………………………………….………………………………….….….…...6

Risks…………….………………………………….…………………………………………………………………….…….8

Recommendations……………..………………………………….…………………………………….….…..….…..11

Solution Overview:……….………………………………….………………………………….…………………….11

Cost Analysis………………………………………………………….……………………………………….….…...13

Schedule 1……………………………………………………………………………………….……..….….….….…...14

Schedule 2 –Value Study: NSC Value Study Explanation……………………….…………………………...16

Schedule 3- Pricing by Product………….………………………………….………………………………………..17

Executive Summary

Project Overview

The following information has been provided to GHX to create a business case analysis

regarding procurement and Contract Price Management solutions. The Northwest

Supply Chain (NSC) is comprised of 13 hospitals who have a combined medical/surgical

spend of over $20M per year. For the purpose of this business case it has been

determined that the scope will be focused on the 6 largest hospitals as they will drive

the greatest value in terms of savings. Currently 19% of invoices are being processed

electronically. 73 % of goods are on contract; however, the challenge is that there is no

guarantee that these items have been purchased at the lowest price. The remaining

27% of goods that are purchased o> contract also lack an electronic method to validate

correct pricing. Whilst 5 of the 6 sites operate on independent ORMED ERP installations

and Dryden uses Great Plains the current IT conBguration limitations does not provide a

comprehensive and all inclusive view for NSC to maximize their EDI capabilities,

validate pricing, unit of measure, SKU or back order issues in real-time. This situation

also does not allow NSC to reduce manual processes when dealing with invoices, since

the vast majority is still being received in a paper format. The result is a system in

which sta> lacks visibility to problems when they occur, thus reducing eFciency and

increasing costs. The proposed system by GHX will validate contract pricing to ensure

NSC is paying the lowest and correct price on all agreements, as well as capture an

estimated 50-55% of all invoices electronically so they can be managed within their

systems, thus allowing AP to take advantage of early payment discounts and other

supplier incentives. Due to the manual nature of the current environment, the result is

an existing structure that does not provide visibility to hard dollar cost savings, the

ability to measure savings, or the opportunity to streamline operations. This, in-turn,

hinders contract compliance and ultimately actual, real savings.

Based on the information provided by NSC, it is estimated that the cost savings

opportunity from the proposed system is $495,989 per year, for all 6 sites. This would

be realized through contract compliance, ensuring the best pricing is captured,

identifying o>-contract spend that should be on contract, moving to new LHIN wide

agreements where possible and streamlining AP. Additional savings of up to $687,748

could be realized in a 2nd phase if NSC moved to an on-going Data Management and

cleansing tool, which would provide more in-depth product information that would

assist in identifying further contracting opportunities.

The recommended solution from GHX will provide a procure-to-pay process that will

o>er the following beneBts:

 Achieve savings of $495,989 per year

 Measure savings on an on-going basis (validate ROI on investment)

 Streamline processes at all 6 hospitals

 Provide NSC with visibility to all medical/surgical spend through GHX

 Provide the capability to coordinate spending with other SSO’s if desired

 Quick solution implementation (approx. 6months) so savings occur sooner

 Continued representation in the national SSO advisory council, which is

designed to

further drive out costs by better aligning the work e>ort for the

SSO/Suppliers/GPO

 Allow NSC to add additional modules in the future (Item Master Maintenance,

Enhanced

Reporting)

Savings Continuum

GHX is recommended since it has the only end-to-end solution in the healthcare

industry that addresses all key areas of our supply chain. GHX also has extensive

experience and a proven track record in Canada that will provide a progressive

approach to creating value and eFciency through the combination of solutions that,

when joined together, will address NSC’s needs.

Further, GHX has implemented the same solutions suggested for NSC in Saskatchewan

for the entire province and Champlain Health Supply Services, both of which use the

two MMIS/ERP companies deployed in the NSC (Ormed and Great Plains

Dynamic/CCIM), as well as with two Medbuy sites namely PROcure (Ormed) and

Mohawk. These successful projects with proven savings targets will help ensure that

NSC will be able to obtain their objectives with respect to operational and hard dollar

savings.

Current Process

As deBned in the scope of this project, NSC is comprised of 6 hospitals in the North

West LHIN which all run on separate MMIS/ERP installs. This is further complicated by

the fact that some sites lack EDI capabilities and currently use another GPO, all of

which will need to be coordinated in-order to drive eFciencies. While the creation of

NSC is a good Brst step, SSO’s across Canada have not been able to achieve their

desired outcomes until they were able to address the following gaps.

·Multiple PO Processes: as some suppliers have the ability to send documents

electronically via Electronic Data Interchange (EDI) and many smaller/medium

suppliers do not have EDI capabilities, procurement functions that include

processing orders electronically, by phone, fax, and email cause the procurement

sta> to interact with these modalities di>erently based on their and the

supplier’s unique limitations.

·Multiple Systems: Multiple manual and electronic systems are required for

tracking, PO’s, POA’s, backorders, invoices and deliveries.

·Correct Contract Price: same item may be on multiple contracts at di>erent

prices (i.e. Purchasing GPO items from a more expensive local contract).