Deep in the heart of Bayou Country, about 60 miles south of New Orleans, a progressively minded materials management department at a mid-sized community hospital is bucking conventional thinking, solidifying a sense of community and pride within its ranks and steadily building credibility about its resourcefulness throughout the organization.

Reaching out to help various clinical and administrative areas become more fiscally sound and tackling tough projects with aplomb, the 22 staff members of Terrebonne General Medical Center (Houma, LA) clearly demonstrate why they reflect the profession’s future course. For these reasons and their underlying philosophy they earned the title of 2004 Materials Management Department of the Year by Healthcare Purchasing News, outshining a number of worthy larger hospitals and integrated delivery networks (IDNs).

The overall strategic attitude and direction, and tactical decisions of the materials management department at the 314-bed Terrebonne General, which celebrates its 50th year of service in 2004, embodies the type of operation other organizations should strive to emulate.

From the onset, the department’s goal to provide value to the organization by “stream-lining processes via innovation and offering expertise in the area of cost control while maintaining a high level of quality services and products,” may seem like lofty ambitions and meaningless hype. However, that’s not the case. If anything, it’s actually a marketing-polished synopsis of their accomplishments-to-date and ongoing activities.

Among the success stories in the portfolio of Terrebonne General’s materials management department are its efforts to automate processes, integrate its expertise throughout the organization, preserve the organization’s financial integrity and improve its departmental culture.

Online connections

Historically, the way Terrebonne General’s materials management department conducted business with suppliers resembled the three ways most hospitals did it–via telephone, fax or electronic data interchange (EDI). While they found EDI to be the “most efficient and timely method for placing orders” they did run into some speed bumps along the way. They included tenuous procedures to establish and maintain EDI relationships with vendors, as well as the occasionally temperamental nature of the equipment needed for successful connectivity. Hence, the department was limited to conducting EDI with three primary vendors.

Two years ago, however, Terrebonne General hooked into online electronic commerce capabilities with an outfit that became part of the Global Healthcare Exchange (GHX). The department relied on GHX to handle the electronic connection issues and to provide access to a larger pool of participating vendors. Today, Terrebonne General conducts more business electronically with 47 vendors (and still growing), representing 24% of purchase orders (tripling previous activity), 55% of P.O. lines (more than doubling previous activity) and 15% of invoices (representing a new activity for them).

While critics may contend that this is nothing more than Internet-based and online-enabled EDI, Terrebonne General’s materials management department doesn’t blink because it has access to advanced electronic order management tools that is changing the way it conducts its business. Those tools include automated order confirmations via e-mail, automated order discrepancy e-mails about packaging, pricing and other necessary details, order tracking and contract verification via order confirmation.

Prior to its online foray, 90 percent of staff time was allocated to clerical duties. Currently, time spent dealing with order processing has dropped to 65 percent (and still falling) and that has enabled the department to increase its focus on strategic supply and contract management issues, according to Kary LeBlanc, director of materials management, who joined the facility in 1999. Those issues were cost containment initiatives that involved strategic sourcing decisions. For one product line, the department reduced annual costs in excess of $34,000 by using the “most optimum purchasing channel,” LeBlanc noted.

“By using GHX, we’re able to more easily direct purchases where we find they’re more cost effective for us,” he told HPN. “In some cases, that means moving to a manufacturer-direct distribution program from using a distributor. For example, we redirected $700,000 of supplies from one vendor to another by using GHX for savings. We’re trying to be very selective in picking and choosing the companies we work with this way. It’s a touchy and delicate balance we have to maintain. If I pull too much from one distributor it may affect service levels for other orders I receive from them. We look at what makes the most sense for us.”

For Terrebonne General, strategic sourcing means leveraging business with various business partners to reduce costs. “You have to align yourself with the right vendor to get the right product,” LeBlanc said. “You source products appropriately through the most optimal channel of distribution–whether that’s through a distributor, manufacturer or another third-party. It’s optimizing the way you get products through the supply chain.” Departmental efforts to use electronic ordering and invoicing also helped accounts payable to reorganize its processes and reduce the number of full-time equivalents (FTEs) by one AP clerk through attrition, according to LeBlanc.