Case Studies

North Mississippi Medical Center

SITUATION
North Mississippi Health Services is the premier provider of acute and post acute care in its region.  With six facilities and over 1400 beds it is a significant IDN, serving as the largest rural healthcare provider in the United States.  For the flagship facility (North Mississippi Medical Center), our firm assisted with a NLERP program that netted over $8 million in annual reductions, while collaborating on process and structure that was to significant to NMHS’ receipt of the national Baldridge Quality Management Award.

NMMC was recovering from several years of weak financial performance and engaged our firm to assist with both cost reduction and process improvement in vendor contracting and management.  Analysis showed extensive cost improvement opportunities existed in a variety of areas.  For selected physician preference lines it was demonstrated that vendor management would yield significant price reductions, with improvement potential indicated in other areas via vendor collaboration and medical staff alignment.

SOLUTIONS
After a series of medical staff and management sessions and extensive data analysis, vendor presentations and proposal solicitation was initiated.  For products requiring vendor management negotiations were conducted in iterative steps that ultimately resulted in a physician-led decision to reduce the number of vendors in use, securing a 55% reduction in net cost and further price reductions as product conversions were demonstrated.   

For products requiring vendor collaboration the medical staff also elected to reduce the number of vendors in use, selecting a strong primary vendor, with a vendor agreement defining a product selection process that improved vendor margins as hospital costs decreased through alignment of product selection incentives.  This involved a reversal of typical sales incentives for the vendor, with the salesperson incented to assist with the selection of less expensive products, rather than vice versa.  This particular facet of the process was specifically cited by the Baldridge examiners in their review of the hospital’s award application.

RESULTS
While extensive cost reduction was achieved in physician preference items, other areas were addressed as part of the engagement, including the following.

• Food & Nutritional Products
• Pharmaceuticals
• Surgery Custom Packs
• General Med-Surg Supplies
• Bone Allograft Products
• Laboratory Products
  

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