Taking The Supply Chain Pulse
St. Onge’s Healthcare Hall of Famer and industry icon, Fred Crans, chats with leaders from all areas of healthcare to discuss the issues of today's- threats, challenges and emerging trends and technologies in a lighthearted and engaging manner.
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Taking The Supply Chain Pulse
Part 2: Strategic sourcing and Innovation in Healthcare Supply Chains
This is Joe with St Onge Company, welcoming you back to Taking the Supply Chain Pulse for part two of our discussion with George Godfrey. George is the Chief Supply Chain Officer and the Corporate Vice President of Financial Shared Services at Baptist Health of South Florida. Last week, george discussed contingency planning as well as the integration of technology and automation to address supply chain disruptions. As we continue the conversation, he'll share with us the impact these techniques have had. Let's listen.
Speaker 2:Please tell us what CRM stands for. Let me tell you why I say that because I was a supply chain leader for 30-some years and I didn't ever hear the term CRM until I went into sales, and so I would guess that there may be folks out there listening to this that don't know what CRM stands for. So tell us about it.
Speaker 3:Well, unfortunately, salesforce messed this up. So Salesforce came out with customer relationship management and their name Salesforce. It should have been supply force and it should have been supplier relationship management, and their name Salesforce. It should have been supply force and it should have been supplier relationship management. So what we're doing is taking a technology that was designed for people in sales and we're applying it the opposite way for people that are in supply chain, and basically the technology allows for automated communication and deployment of communication. And so let me walk through the match exception application. We now have a match exception.
Speaker 3:Every day the ERP system runs. If we have any match exceptions, it says create a case. When it creates the case, it also runs it through a special diagnosis and we use ERP data to understand why did this match exception occur? There was a missing delivery? Did they short ship? Did they use the wrong PO? Is it duplicate PO? And what we do? We put it in 15 different reason codes based upon data that's available to us in the ERP. Upon those reason codes, we now have a call to action for each reason code, who needs to do what? And so the computer puts it in reason code number six and says oh, fred, you messed up. You sent us a duplicate invoice and it sends you an email, fred, that gives you all the data associated with the invoice. That's a match exception. It tells you how we diagnose it. It gives you what action buttons in that email it says would you like to issue a credit memo? Would you like us to remove the invoice? Would you like to dispute it? It gives you different action buttons that you select and you send it back to us. The beauty of this is a resource that Baptist has never touched it. So we have a match exception.
Speaker 3:The computer auto generates a case, auto diagnosis, auto sends you the call to action. It monitors the call to action. So if you don't respond, it escalates. It sends you in the follow up. Then we get the call to action back and the match exceptions are resolved. Now we did it in a bidirectional communication platform, meaning that we're not using robots to do this. Just in case, fred, you need to communicate and say, george, no, I need further information, or no, it wasn't a duplicate invoice, I shipped you two shipments or something to that effect. So we wanted the ability to do bi-directional communication.
Speaker 3:But the important part is now we have clarity on what I call a working process.
Speaker 3:If you're managing this invoice match exception application task outside of a system, you really don't have visibility of who's sending emails to whom, how long they've been pending, you know, are you using templates for the call to actions? You don't have the visibility to understand what suppliers are not being responsive, what departments are not being responsive, and so you're unable to take action. And I find, in all cases, management is really good at taking action when they have knowledge. You know, you give me knowledge. It's easy for me to make the right decisions.
Speaker 3:When you don't have that knowledge, you really can't make a corrective action. It's been a game changer for us. Our invoice match exception resolution time is now under nine days for the whole system. Industry average is probably about 65 days, and so being able to resolve these issues in an automated process and having our resources now instead of chasing down invoice issues, these resources have now pivoted and they're now working on the 75 back orders that I have for surgical cases much more strategic, much more important to our organization than handling match exceptions. It's just. It's just been a game changer than handling match exceptions.
Speaker 2:It's just been a game changer. So you said you had like 1,200 back orders on a given day. How many unresolved invoices would you generally have?
Speaker 3:Prior to this technology, we would have 7,000 to 12,000. It would vary. It would vary If we were good at it and get down to seven thousand. Then we take our eye off the ball and get up to twelve thousand, get some credit holds. Now we we never are above 900, um, you know, and we're running about 45 to 50 000000 POs a month, and so it's just, it's night and day different. And then the age of the eight or 900 that we have are, you know, by average they're all being resolved within nine days.
Speaker 2:George, I didn't ask you how many physician preference cards you had in your system. I asked you how many.
Speaker 3:I mean that's amazing, it's staggering, it's amazing. Yeah, we've now partnered with Salesforce. We partnered with Salesforce five years ago when we started developing this and they quickly they're in the sales organization. They quickly said, hey, the way that Baptist is managing invoice match exceptions is probably the same way. You know anyone's doing it in Texas or California or wherever. You know how do we partner with you, baptist, to be able to bring these applications to market?
Speaker 3:So we started having their programmers fortify the system, knowing that they wanted to take it and commercialize it, and so we did that, and then we certainly have debugged the system, then the beta test, and now they're out on a national basis promoting it under the product name Health Chain, and what we're seeing is there's systems that have twenty five thousand match exceptions and you know, staggering numbers and and there's not not an automated way of dealing with it, in that this technology gives those systems the the ability to automate it and to have it under control the ability to automate it and to have it under control and, more importantly, that visibility standpoint of truly understanding what's going on, because there's hundreds of millions of dollars happening within that match exception and there's high potential for leakage.
Speaker 3:And when you ask me about financial pressures, we can't afford to be paying the wrong price for something. We can't afford to be paying less price just because we're slow on updating our item master in some cases and things like that. We have to move quickly and if we are paying a list price, don't do it twice and attack those problems. Very, very rapidly.
Speaker 2:Yeah, and one of the things that you know occurs to me, as you're saying, all this is one of the problems we've always had in health care is matching expenses to activity, and if you have 12,000 unresolved invoices out there, then they haven't been expensed correctly because they haven't been resolved. So you can't say, well, I did 300 procedures last year or last month and my expenses were X. Then the cost per procedure is easy. You can't, because you never have relevant and timely data. And if you're down to nine days now which is really amazing, which is really amazing then that's giving you information that you can use to run your enterprise much better. Is that fair to say?
Speaker 3:That is. And what's also interesting and we've learned this during this multi-year journey is a lot of providers were trying to fix the problem on the front end, which makes sense hey, if I don't have the match exceptions, then I don't have to deal with it. And this concept of the perfect order or concept of GHX acknowledgements being able to manage them in a timely fashion to prevent match exceptions. I can tell you it doesn't work. Last year year we're on the lowest match percent of match exceptions. We still have thirty four thousand match exceptions.
Speaker 3:And what we find is suppliers they get, they get out of whack, it doesn't matter. You could have a contract and all of a sudden, and they're billing properly and all of a sudden something happens in their system and you start generating match exceptions that that was caused by some human updating some file and things like that. So match exceptions occur regardless of what you do on the front end, Putting an automated system on the back end to address it versus trying to fight the problem at the front end and the back end. We found it to be far more efficient just to put it back in and resolve it in a very fast manner Because, by definition, a match exception, someone's right, someone's wrong and driving to a decision of who's right, who's wrong in a rapid time frame equates to less problems. It equates to just a much more efficient way of dealing with it, just a much more efficient way of dealing with it?
Speaker 2:Yeah, and what job description is the person in your supply chain that deals with these? Is it a?
Speaker 3:buyer we don't have any?
Speaker 3:Yeah, we don't have. It's neat, we don't have anyone dedicated to match exceptions at all. We used to be heavily influenced by the buyers. We now all price exceptions now go to contract administrators because it's hey, is your contract right, yes or no? And if it's right, we want the contract administrator to know that the supplier is charging the wrong price and so that's part of supplier management and that has not been a burden at all, shifting that away from the buyer because the buyer is really not responsible for that contract price at. The buyers touch if there's questions and things like that, they're touching those. But their jobs have really pivoted. They probably 99 percent invoice match exceptions five years ago and they might be 2 percent match exceptions now and we're focused on negotiating better pricing and expediting items that are hard to get hard to get.
Speaker 2:So, in effect, you've accomplished the same things via software as in other areas, such as moving product, can be accomplished by robotics, and that is, you have lifted the load off folks who have a task so that they can become more effective and efficient. As something else, that is at least equally and maybe when you're down to do I need something for surgery tomorrow more important than resolving the issue whether it was $1.89 and they charged me $1.92 for something.
Speaker 2:So it's a unique understanding of the value that technology can bring. When you also understand and I think the key issue here, george and I'm not, you know, trying to butter you up here, but the key issue is understanding of the process, and you know it's people, process and technology and also being able to think. What was your undergraduate degree in Supply chain materials management? You're not an industrial engineer.
Speaker 2:Okay, I get in trouble for telling these guys that they think in a linear fashion and I didn't think you could have been an industrial engineer because I don't think they would have been able to get abstract enough to go, hey, although we do it, I will say at St Onge, we use our CRM to totally manage every project that's out there. Why? The same thing you did. You know all the elements of the process and you plug them in and everybody knows their responsibilities, they know the next step, they know what they're supposed to do. That was great. That was great thinking on your part. But it really took three sort of disparate things people, process and technology with a common understanding of how you could bring them together. And I wanted to bring this conversation out because I'm sure there are a lot of supply chain leaders out there that may be struggling with similar issues, and if they can think, hey, we already have these components here, how can we integrate them to get something done? Is that fair?
Speaker 3:Yeah, it is. You know, we took the same approach after we did that first application and applied it to contract renewals, and this is exactly the same thing. Okay, I need a call to action. I have a contract that's expiring 90 days from now. I create a case. I manage the communication of that contract renewal within the case.
Speaker 3:To your point, fred, so I have complete visibility. I have, last time I touched it, who didn't respond, who did respond? All the pricing, all the attachments, all the attachments all in one place and it becomes a system of truth for communication. You know, erp is a system of truth for transactions and then once you, once you leave, leave ERP and you go to Outlook, you lose any system of communications within Outlook. It's just emails that are not tied to something. So, yeah, it's very much. You can build upon it, you can leverage it. And when you're saying people, process and technology, now what Salesforce is trying to accomplish is making it easy with a plug-and-play application. That's saying you don't need to recreate the wheel. Here it is, if you want to automate your invoice match exceptions, to plug this system in and turn it on and it will start to deliver results. So pretty cool.
Speaker 2:Yeah, and another thing, george, and you know, this healthcare supply chain is falls in love with terms. They use them. They use them without understanding what they mean. Resiliency is, it is the big. The big term that everybody uses is, though, without understanding what they mean. Resiliency is the big term that everybody uses as though they know what it means.
Speaker 3:How do you define that?
Speaker 2:That's a whole other episode. I used to tell people if I had five people in a room defining it. We've had 12 definitions, but people, process and technology is a common. It just falls out of people's mouths. And what I wanted, what I'm so happy that you came on to talk about, is you. You use people, process and technology, and I would say that the key element to all that is an understanding of the process. That is an understanding of the process, uh, you know, I think that is that is, uh, the real thing. But you have actually brought that concept to life and I am I'm I'm thankful for you taking the time to talk with us.
Speaker 2:Um, I always have a uh, not even a soft spot. I find it hard to talk about baptist without, um, you know, getting emotional. You, you guys, are the best. The first place I worked after I got out of the military is Baptist Hospital in Miami. The place I work now, st Ange. You both share things. We both are among the best places to work in the country and that's not by accident, and I am so proud to have been associated from the start with an excellent company and also, where I am so proud to have been associated from the start with an excellent company and also where I am now. And you know, although, although you went to Florida State and I have to, I have to accept that they might have some good people too.
Speaker 3:You are. You are the best buddy. Building upon the culture and the foundation that you laid in the late 60s at Baptist has been fun. You know it didn't take us long to fix all the things he broke, but anyways, from a UM graduate, it's been a pleasure being part of your show and thanks for having me.
Speaker 2:Yeah, well, hey, we'll probably get back together, because there are some other topics I want to talk about and I'll just sort of put a teaser in here. One of the things is the role that you interact with what used to be called group purchasing organizations and now are, I guess, service organizations, how you interact with different folks and how you collaborate with suppliers in an integrated fashion as opposed to an adversarial fashion. I mean, these are things that I know you can bring some good insights to, and, george, you know, it's really been great to meet you. It makes me proud of my beginnings to know that that same level of excellence continues today, and we appreciate having you on the show. Thank you.
Speaker 1:If you missed Part 1 with George Gottfried, be sure to connect with us online, where you can find all of our episodes. While you're there, don't forget to like and subscribe to stay up to date with Fred as he guides us through the evolving healthcare industry. See you next time.
