New England Society for Healthcare Materials Management Ken

New England Society for Healthcare Materials Management Ken Peterson, Vice President System Logistics Management Aurora Health Care April 16, 2004

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Committed to Finding a Better Way Making Health Care a Competitive Advantage for Wisconsin Companies and Citizens 3

Using Web Based Technology & the Internet as a Driver Agenda Aurora at a Glance Focus on Operating Margin Materials Goals to Support Aurora Strategy Aurora’s Use of the Web & Internet Improvements & Successes Lessons Learned 4

Aurora Health Care at a glance Largest community owned, not for profit, integrated network in Wisconsin Largest private employer in State of Wisconsin: Employees: 27, 162 Hospitals: 13 Acute Care and 1 Psych hospital Clinics: 113 Retail Pharmacies: 143 Revenue: $2. 4 billion Supply Expense: $571 MM Total Certified Beds: 2, 598 Adult Inpatient Days: 430, 973 5

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The Three Part Commitment To the People of Eastern Wisconsin • Whatever the national benchmarks are for price increases for 2003 through 2005, Aurora Health Care will be below • Aurora Health Care will initiate actions to moderate total community health costs while demonstrating improved community health • Aurora Health Care will be accountable to the community and transparent in its success in meeting its commitments 7

Focus on Improving Operating Margin Moderate Total Community Health Costs Maintain Growth to meet needs of Community Replace Aging Capital Support New Technology (Speed/Cost of Change from an IS as well as from a Clinical stand point) 8

Effectively make use of Web-enabled technology and the Internet Increase/Enhance Customer Service(s) 1. Web Based Requisitioning Tool Reduce Costs/Improve Productivity 1. Transmitting Transactions via Internet 2. Automating the Capital Process 1. Contract Management Program (Premier’s e-Sourcing Program) • See and Identify Opportunities to Reduce Costs 9

Web Based Technology & the Internet Increase/Enhance Customer Service(s) 1. Web Based Requisitioning Tool 4 Automated Single User Interface for procurement Vs use of multiple (proprietary) platforms (Aurora’s tool is IREQ -Intranet Requisitioning) (Global Healthcare Exchange (GHX)’s tool is “Catalyst” ) 4 Centralized all transactions through MMIS • Means to support Outlying Users • From 200 Users to 2700 Users (Began Implementation 2001) 4 Lock Down/Approval features to assist departments’ control costs 10

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Web Based Technology & the Internet Improve Productivity 1. Processing Transactions via the Internet: Aurora: Using XML (Extensible Markup Language) to process the 3 major ordering sets over the Internet via GHX to suppliers or direct to Cardinal Health --(PO (850), Confirmation (855), Invoice (810) (Began Implementation Oct 2001) 4 Consolidates transactions through single intermediary vs. using numerous EDI systems 4 Facilitates accurate transmission of electronic purchase transactions by comparing data (catalog format: description, units of measure) that provider transmits with supplier data and flags discrepancies) (GHX “Content Intelligence) GHX… more than an Internet Intermediary! 12

Web Based Technology & the Internet 2. Automating the Capital Process 4 Web Based Capital Approval Tool (completed and fully deployed) • Increase the processing speed for submission/approval • Improve accuracy of data & capturing full project costs • Track processing times and data for bundling 4 Web Based Capital Request Tool (under development -- estimated completion Fall 2004) 4 Quote/RFP Tool (GHX) (working development with GHX) 4 Web Based Transactions via Internet (GHX) (working development with GHX & shopping for supplier to pilot program) 13

Authorization For Expenditure Request 14

Web Based Technology & the Internet Reduce Costs & Improve Productivity 1. Contract Management Program (Premier’s e-Sourcing Program) 4 Initiate Rapid Contract Implementation and Establish Accurate Pricing • Act as central repository for all contracts • Ensure accurate and timely contract pricing from day 1 • Contract/Pricing Activation on line with Suppliers & Distributors (Active) 4 Facilitates Accurate Data Transmission • Transmission of accurate nomenclature and pricing from Premier Contract File to users’ MMIS via GHX (Under Development) • Pricing Confirmation via GHX during confirmation and invoicing (Under Development) 4 Reduce Healthcare Costs by Increasing Visibility/Availability of Data • Enabling higher levels of contract compliance: Analytics: Contract Utilization- By Supplier, by Contract, by Product, by facility, by department… (Under Development) 4 Verify Purchase/Contract Volumes: Rebate Calculator (Under Development) 15

Lessons Learned 1. Establish a Vision: • Why/what benefit am I trying to accomplish • Involve your IS Dept Early • Involve users as part of development process 3. Automation Requires/Be Prepared for Process Change: • Change for Customers • Change for your Staff & other Departments • Change for Suppliers 2. Establish Current State Basis for Benchmark/Metrics Early • Capability to prove value of Systems and Processes • Credit for increases in productivity 4. Be Prepared to Commit Your Time and Resources • Hold your staff, suppliers & intermediary accountable to meet agreed upon expectations • Participate in User Groups 17

Improvements/Successes Purchasing Transactions via Web Based Technology & Internet 1. Intra/Internet Requisitioning Tool (IREQ): Productivity Gains 4 From Manual to Web Based: (Estimated) • From 200 to 2700 users connected to MMIS • Buyers: 17 Min per PO processed = 54, 085 hr/yr equates to 26 FTE’s Savings • Users: 19 Min per Req processed = 66, 262 hr/yr equates to 31. 8 FTE’s Savings 4 From FY 2000 to FY 2003 Expanded Central Purchasing Function with minimal staff increase FY 2000 - 3 Hospitals FY 2000 - 0 Clinics FY 2003 - 14 Hospitals FY 2003 - 42 Clinics 2. Productivity gains for Users and Staff increase as Aurora uses more Web Technology & continues to connect with more suppliers via GHX 4 Connected with 25 Suppliers on 850/855’s through GHX or direct with Distributor-Cardinal Health & Live with 3 Suppliers on 810’s and growing: (Volume = 43, 750 PO’s/yr = $50 MM/yr) 4 Reduction of pricing errors (Reduced 50% of open invoices w/Cardinal Health from $1. 7 M in Mar 02 to $26 K today -- Continuous Pricing Verification) 3. Productivity gains with Automated Capital Request Process 4 Decrease processing (approval/coordination/negotiations/order from 11 weeks to 7 weeks) 18

Improve Order Efficiency Purchasing Staffing Levels 19

Cost to Implement Aurora’s Web. Based Requisitioning Tool Hardware $ 60, 000 Software $147, 000 Consulting $400, 000 Staff Time $ 30, 000 1 FTE Full-Time Trainer Note: The hardware and software were purchased for this project but were then the foundation for all Webbased projects that followed. 20

Web Based Technology & the Internet Questions? ? 21