Healthcare Matters

Despite being one of the largest IDNs in the nation, UPMC (formerly the University of Pittsburgh Medical Center) is openly hostile to conventional wisdom and committed to blazing its own trail. That’s how they roll –even by their own admission. So it’s not surprising, but somewhat controversial, that UPMC received the 2012 Award for Healthcare Supply Chain Innovation from the Association for Healthcare Resource and Materials Management (AHRMM). The award was announced yesterday at the opening session of the group’s 50th annual conference in San Antonio.

“In an increasingly complex health care environment in which health systems are continually expected to do more with less, our supply chain team has embraced changes that provide an efficient, user-friendly electronic procurement system,” said Chief Supply Chain Officer James Szilagy. What Mr. Szilagy is referring to is a virtual marketplace that his team has created that allows those requesting supplies to enjoy a consumer-like online shopping experience for millions of items from more than 12,000 suppliers. The suppliers are connected through its own electronic data interchange solution. “Our supply chain team has not been afraid to challenge the conventional wisdom and to adapt tools that have helped other industries improve their efficiency and customer satisfaction,” said Mr. Szilagy. “As a result, we have achieved significant savings that help to fund the world-class patient care and research for which UPMC is world-renowned.” Prodigo Solutions, a wholly owned subsidiary of UPMC, was created to market this e-procurement technology to other, non-competitive health care providers.

When asked about its electronic data interchange, UPMC refers to is as “replacing a more costly and less user-friendly platform than now dominates the health care industry.” It also describes its solution as “freeing buyers to spend more time on strategic sourcing activities.” In classic UPMC style, both comments are direct shots at GHX. Again, that’s how they roll.

The press announcement reported that UPMC’s supply chain innovations have resulted in more than $3.5 million in annualized savings to date –and that’s a curious number to me. It says that “all of its purchase order requisitions now originate via electronic procurement; that 80 percent of the health system’s $2 billion in supply spend is managed via this system; that contract compliance has improved by 40 percent; and that its electronic data interchange costs have dropped by 50 percent.” Transacting $1.6 billion through its eMarketplace is indeed impressive, but $3.5 million in savings against that number is not (perhaps a misprint?).

I’m challenging that savings number because it doesn’t make sense to me, but I won’t challenge AHRMM’s choice. UPMC’s culture is entrepreneurial, competitively aggressive and fully tuned to driving out expense. UPMC pushes the envelope with all of its vendors in ways that sometimes result in breakthroughs for everyone. The organization will spare no expense to prove a point.

You gotta hand it to them. It would rather reinvent the wheel (if it can’t buy the wheel on its terms) and spend millions to build a competitive business, than go along for any ride. That’s a formula steeped in its tradition that holds promise for lots of recognition and interesting outcomes –of all types and persuasions.

—Tom Finn