GHX business case

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 off contract also lack an electronic method to validate correct pricing.

Whilst 5 of the 6 sites operate on independent ARMED ERP installations and Dryden uses Great Plains the rent IT configuration limitations does not provide a comprehensive and all inclusive view for NCSC to maximize their EDI capabilities, validate pricing, unit of measure, SKIS or back order issues in real-time. This situation also does not allow NCSC 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 staff lacks visibility to problems when they occur, thus reducing efficiency and increasing costs.

The proposed system by GHZ will validate contract pricing to ensure NCSC 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 NCSC, it is estimated that the cost savings opportunity room 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 off-contract spend that should be on contract, moving to new L HINT wide agreements where possible and streamlining AP. Additional savings of up to $687,748 could be realized in a 2nd phase if NCSC 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 GHZ will provide a procure- o-pay process that will offer the following benefits: 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 NCSC with visibility to all medical/surgical spend through GHZ Provide the capability to coordinate spending with other Coo’s if desired Quick solution implementation (approve. Months) so savings occur sooner Continued representation in the national SO advisory council, which is designed to further drive out costs by better aligning the work effort for the SO/Suppliers/GPO Allow NCSC to add additional mood less in the future (Item Master Maintenance, Enhanced Reporting) GHZ is recommended since it has the only end-to-end solution in the healthcare industry that addresses all key areas of our supply chain.

GHZ also has extensive experience and a proven track record in Canada that will provide a progressive approach to creating value and efficiency through the combination of solutions that, when joined together, will address NCSC needs. Further, GHZ has implemented the same solutions suggested for NCSC in Saskatchewan for the entire province and Champlain Health Supply Services, both of which use the two MIS/ERP companies deployed in the NCSC (Armed and Great Plains Dynamic/Calm), as well as With two Medium sites namely PROcure (Armed) and Mohawk.

These successful projects with proven savings targets will help ensure that NCSC will be able to obtain their objectives with respect to operational and hard dollar savings. 4 As defined in the scope of this project, NCSC is comprised of 6 hospitals in the North West LAIN which all run on separate MIS/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 efficiencies.

While the creation of NCSC is a good first step, Coos across Canada have not been able to achieve their desired outcomes until they were able to address the following gaps. Multiple POP 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 staff to interact with these modalities differently based on their and the supplier’s unique limitations.

D Multiple Systems: Multiple manual and electronic systems are required for tracking, Pop’s, Pop’s, backorder, invoices and deliveries. C] Correct Contract Price: same item may be on multiple contracts at different prices (I. E. Purchasing GPO items from a more expensive local contract). 0 Contract Maintenance: contracts are maintained manually, thus making It difficult to update agreements or research items on a timely basis. There is no automated process to update contracts in the current system.

Contract Compliance: though 73% of items are on contract, rogue off contract spending goes occur, but due to the limitations of the current system cannot be tracked. D APP Verification: time required to determine if the invoice description, unit of measure, price or part number is correct to ensure invoice matches POP. CLC Early Payment Discounts: the current system receives 19% of invoices electronically. This means that the remaining 81 % have to be scanned, which reduces NCSC ability to increase early payment discounts, on the remaining invoices if desired.

The result is a multiple system process in which NCSC cannot maximize the value and efficiencies of their ERP to capture all procurement activities within one system. Further, the current configuration does not allow NCSC to identify hard dollar savings on existing contracts, nor highlight opportunities to bring non contract goods onto agreements to further reduces costs. 5 NCSC, like other Shared Services Organizations is looking to reduce the cost of healthcare delivery while maintaining or increasing service quality.

Current healthcare annual increases to hospitals in the 201 2 fiscal year are 1. 5% (201 2 Ontario Budget), which is below the Ontario overall inflation rate of 1. 7% (Ministry of Finance Canada) The result is increased pressure on the hospitals o reduce costs and/or services to meet the increasing gap in their budgets. These pressures will only increase over time as the current population ages and therefore requires more care. Through automation, a hospital can typically reduce the time and cost associated with manual transactions by 40% to 60%1.

It is estimated that hospitals overpay by 2% to 7%, for contracted supplies, which based on data provided by NCSC would mean savings of up to$l if all GHZ solutions were deployed. However, based on funding limitations of NCSC, the scope of this opportunity has changed in order to maximize the savings opportunities identified within the 6 NCSC sites. It is conservatively estimated that savings would be $495,989 if current contracts and AP automation are utilized correctly.

These savings occur because hospitals typically have multiple contracts with multiple prices for the same item, permitting buyers and suppliers to conduct business at less than optimal prices. This does not include additional savings of $687,748 that could be realized through the utilization of the Item Master Maintenance tool which was originally part of the REF. 3 Also, 60% of supply costs in prominent hospital sites stem from Physician Preference Items (PIP)4 since they tend to increase in cost by 17%, compared to 3% for standard items; streamlining these could provide even greater savings.