Leading Practice: Streamline and Re-Define Supplier Relationships to Promote Risk Sharing, Add Value, and Reduce Costs in the Perioperative Function


AHRMM is offering a repository for leading and proven supply chain practices, case studies, and toolkits that are developed from a Cost, Quality, and Outcomes (CQO) perspective. The following CQO leading practice describes methods used to reduce costs, enhance patient care quality, and drive greater financial outcomes through blood product and service optimization, and was submitted by:

Fairview Health Services and Medtronic

PROBLEM SUMMARY: As supply chain professionals seek opportunities to add value to the continuum of care through the transition from a fee-for-service model to a risk-based model, they look to their suppliers to provide solutions focused on improving outcomes and lowering the total cost of patient care.

METHOD: The changing landscape of healthcare dictates supplier partnerships that can provide more than just lower prices; the change calls for increased transparency, data sharing, trust, and increased value-added services. This leading practice discusses strategies shared by both supply chain executives and suppliers that promote risk sharing, reduction in episode spend, and most importantly improved quality and safety outcomes.

  • Assess collaborative partnerships that are patient outcome focused and address regulatory compliance and reduce costs.
  • Identify solutions to address misaligned priorities to sustain valuable relationships.
  • Assess how value-added services, including analytics, enhanced recovery, and clinical and operational optimization, are leveraged to reduce costs and improve outcomes.
  • Understand the financial savings that can be achieved with risk sharing and develop strategies for introducing a risk-sharing mode.

MEANS: Collaboration between the hospital and vendor partner is executed in a three phase process, focusing on Clinical, Operational and Economic elements.

Phase I: Voice of the Data; Episode Based Performance Analytics (May 2015)
Phase II: Voice of Care Team; Root cause opportunity identification (Implemented August 2015)
Phase III: Voice of the Solution; Shared Saving, Implementation collaboration (ongoing)

The work is accomplished through a combined approach with a dedicated team of a Clinical Specialist, Data Analyst, and Project Management/LEAN expert partnering with each individual hospital’s staff.


  • Detailed, risk adjusted, population selection adjusted completed by the Medtronic team, providing both internal benchmarks (hospital comparisons) as well as external benchmarks (national and regional comparisons)
  • Access to Data in a web/cloud based environment, with dynamic drill down
  • Ongoing analytic reporting for sustainability

Management of Change – Steps to Sustainability

  • Clinical Performance Improvement
  • Optimal Recovery Pathway: Combination of,
  • Enhanced Recovery,
  • Perioperative Surgical Home, and
  • Fast Track, best practice
  • Multidisciplinary approach
  • Transfer of knowledge
  • Validation of opportunities
  • Perioperative Optimization
  • LEAN/Six Sigma
  • Operational Excellence
  • Communication of Results
  • Patient communication and awareness
  • Strategic growth

As reform pressures continue to mount, the healthcare industry is rapidly shifting from “pay for volume” to “pay for value” business models. In fact, CMS projects that by 2018, bundled payments will be applied to 50 percent of all diagnosis-related groups, while 90 percent of all remaining fee-for-service care will be tied to patient outcomes. Hospitals have successfully adopted a value-based approach to perioperative care – their highest area of spend. Each has implemented and sustained holistic performance improvement initiatives that are reducing costs by 15 percent or more. These organizations have overcome key obstacles and have achieved key successes – from initial implementation through to ongoing data analysis.

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