Case Study

How Mercy Health Saved $2.4 Million in Lab Supply Chain Expenses

Key takeaways

Results:

$2.4 million in lab supply chain and strategic sourcing costs within one year

  • 40+ Hospitals
  • 5,000+ Staffed Beds

Project Background:

In 2022, Mercy Health utilized its existing relationship with our team to focus on strategic sourcing and supply chain. Mercy Health, based in St. Louis, MO, has provided quality healthcare for over 150 years with locations in MO, OK, and AR. Today, it continues to provide nationally recognized care, with awards including being named one of the top five large U.S. health systems from 2016 to 2019 by IBM Watson Health, recognized in 2018 as “Most Wired” healthcare organization by the American Hospital Association – the fifteenth time since 1999, and identified as a top American employer by Forbes magazine, ranking 108 among 500 employers in the U.S. and spanning 25 industries, to name a few.

Mercy had held a long relationship with hc1, beginning in 2016 and including services for lab operations and patient blood management as well. Mercy saw numerous successes through this engagement and looked to our team for support with supply chain and strategic sourcing.

Organizational Change

When Mercy renewed its focus on supply chain, the organization was in the midst of massive change. Outreach lab services were recently acquired by Quest Diagnostics and several leadership changes had occurred. In addition, the health system had switched its GPO to HealthTrust (HPG) and needed support with reviewing its new opportunities.

Mercy’s lab leaders were working through this process with direction from Matt Livengood, FACHE, Chief Lab Officer at Mercy. However, Matt still felt that a partner with additional subject matter expertise would be helpful in guiding Mercy.  Mercy had a strong relationship with our team and knew we could successfully support these efforts.

Our Approach

The first step is to complete a thorough diagnostic of the current landscape of your organization.

This includes the following:

  1.  Assessing Mercy’s current spend
  2.  Identifying opportunities
  3.  Creating a long-term strategic sourcing roadmap
  4.  Immediately addressing urgent expiring contracts or possible vendor consolidation.

hc1’s market intelligence provides valuable insights into pricing and other market trends that can help organizations, like Mercy, make informed decisions about purchasing and pricing. As part of this process for Mercy, hc1 reviewed the current data, identified alternatives, negotiated with current suppliers, and developed a new purchasing strategy to include market intelligence data in line with Mercy’s goals and priorities. In addition, hc1 continues to monitor the market as part of an ongoing process, so that Mercy can continue to adjust as needed to ensure the health system is receiving the best possible value.

The [team] has provided specific lab expertise to Mercy to align and advance our vendor contracts across our enterprise that has resulted in millions of dollars of cost savings over our multi-year engagement with them.

They have experience in the lab market space and its complexities to successfully negotiate on our behalf or through consultation to achieve multiple levels of value in our partnerships with lab vendors that goes beyond traditional reagent and consumable supply costs.

We have also been able to partner with them to navigate through the lab supply chain challenges with sourcing and procurement of products in short supply or on backorder.

Matt Livengood, FACHE Chief Laboratory Officer, Mercy Health

Addressing Current Contracts

hc1 started with Mercy’s current contracts that were coming up for possible renewal. hc1 provided intelligence and insight, giving Mercy leadership additional leverage to add to the negotiations. In key negotiations it is important to have access to good market analysis to ensure that the organization can leverage the best possible value according to relevant market data and trends.

In addition, hc1 reviewed all vendors that were not on contract with the GPO. During this review, hc1 learned that one vendor held a contract that was at Mercy’s disadvantage if it shifted directly to a GPO agreement. hc1, understanding Mercy’s volume leverage and long-term partnership with the vendor, negotiated the contract to a more beneficial situation for both parties.

Blood bank automation was also evaluated. Blood bank automation refers to the use of technology and software to automate the processes involved in blood banking, including blood collection, processing, testing, and distribution. Benefits of blood bank automation include improved efficiency, which streamlines the blood banking process and reduces the amount of time and resources required to complete each step. It also enhances safety, creates better patient care, and reduces costs.

Final Results:

Mercy’s success in saving $2.4 million in lab supply chain and strategic sourcing costs within one year is significant and demonstrates a commitment to effective cost management.

The savings achieved was well above the initial partnership cost savings goal, and Mercy’s partnership with hc1 played a crucial role in achieving the incremental savings.

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Our team delivers unparalleled value in the industry by supplementing your lab and supply chain resources through optimizing laboratory contracts to maximize cost savings and accelerate efficiency – 100% risk free.

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