Question

Arnold Palmer Hospital's Supply Chain Arnold Palmer Hospital, one of the nation's top hospitals dedi- cated to serving women and children, is a large business with over 2,000 employees working in a 431-bed facility totaling 676,000 square feet in Orlando, Florida. Like many other hospitals, and other companies, Arnold Palmer Hospital had been a long-time member of a large buying group, one servicing 900 members. But the group did have a few limitations. For example, it might change suppliers for a particular product every year (based on a new lower-cost bidder) or stock only a product that was not familiar to the physicians at Arnold Palmer Hospital. The buying group was also not able to negotiate contracts with local manu- facturers to secure the best pricing. So in 2003, Arnold Palmer Hospital, together with seven other partner hospitals in central Florida, formed its own much smaller, but still powerful (with $200 million in annual purchases) Healtheare Purchasing Alliance (HPA) corporation. The new alli- ance saved the HPA members $7 million in its first year with two main changes. First, it was structured and staffed to ensure that the bulk of the savings associated with its contracting efforts went to its eight members. Second, it struck even better deals with ven- dors by guaranteeing a committed volume and signing not 1-year deals but 3- to 5-year contracts. "Even with a new internal cost of $400,000 to run HPA, the savings and ability to contract for what our member hospitals really want makes the deal a winner," says George DeLong, head of HPA. Effective supply chain management in manufacturing often focuses on development of new product innovations and efficiency through buyer-vendor collaboration. However, the approach in a service industry has a slightly different emphasis. At Arnold Palmer Hospital, supply chain opportunities often manifest them- selves through the Medical Economic Outcomes Committee. This committee (and its subcommittees) consists of users (including the medical and nursing staff) who evaluate purchase options withu goal of better mdicine while achieving economic targets. For instance, the hecart pacemaker negotiation by the cardiology sub- committee allowed for the standardization to two manufacturers with annual savings of S2 million for just this one product. Amold Paloner Hospital is also able to develop custom prod- ucts that require collaboration down to the third tier of the sup- ply chain. This is the case with custom packs that are used in the operating room. The custom packs are delivered by a distributor, Mekesson General Medical, but assembled by a pack compuny that uses materials the hospital wanted purchased from specific manufacturers. The HPA allows Arneld Palmer Hospital to be ereative in this way, With major cost savings, standardization, blanket purchase orders, long-term contracts, and more control of product development, the benefits to the hospital are substantial. Discussion Questions 1. How does this supply chain dilfer from that in a munufacturing firmi 1. What are the constraints on making decisions haved on ccu- nomies alone at Amold Palmer Hospital 3. What nole do doctors and nurses play in supply chain deci- sions in a hospitil How is this participution handled at Arnold Palmer Hospital 4. Doctor Smith just returned from the Annal Physician's Orthopedic Conference, where she saw a new hip joint replacement demoastrated. She decides she wants to start using the replacement joint at Arnold Palmer Hospital. What process will Dr. Smith have to go through at the hospital to introduce this new product into the supply chain for future surgical use *You may wish to view the viden stat aimpanies this ase before awering thesr questions

Answer 1

5013-11.2VC-3DQ AID: 1825 | 26/07/2013

RID: 3222 | 02/08/2013

APH supply chain case analysis

APH is one of the top hospitals in the city F. The hospital has a large buying group of 900 members but the group do not have a few limitations where hospital buying group could not able to negotiate with few vendors for some issues, HPA was formed with alliance of 7 others hospitals in city. First year HPA members saved $7 million for the members through two ways

• It was structured and staffed to assure at the bulk of savings associated with its contracting effort distributed to all the members

• It made better deals with vendors by guaranteeing a committed volume for 3 to 5 years.

• In the case of APH the process is the negotiate the vendors from the medical economic outcomes committee

APH hospital is able to develop new products for their operational purposes with the collaboration of the third tier distributors. HPA allows APH to be creative in this way by generating savings, standardization, long term contacts and more control of product development.

Justification:

Role of doctors and nurses in supply chain decisions:

• Doctors and nurses are key members in the medical economic outcomes committees where they are involved in the all the buying process of the equipments and other related products.

• Doctors and nurses can be viewed as the members of the decision-making Medical Economic Outcomes Committee, with a disproportionate voice in the decision.

• For example, the purchase of heart pacemaker in the cardiology department, the negotiations process saved $2million.