Ahrmm 2009 - Upmc Prodigo Panel Discussion

Extend Your ERP – Lessons from a $8B IDN

Opening Remarks Jack Colletti CEO, Prodigo Solutions, LLC

Prodigo Solutions is focused on driving savings in the healthcare supply chain. Launched by healthcare supply chain professionals, the company's suite of solutions and services drive compliance, automation, data quality and user adoption.

Typical Environment Internet

Supplier Connections

~85% of Transactions

Item Master

~15% of Transactions

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Background Bob Pavlik Director, Non-Clinical Sourcing

UPMC Profile • Leading integrated health care system in Pennsylvania; one of the largest and most diverse in the nation • 48,000 employees; second largest employer in Pennsylvania • Hospital – 20 tertiary, community, and specialty hospitals • Physician – more than 4,000 physicians with privileges at UPMC hospitals including about 2,300 employed • Community Provider Services – extensive network of rehabilitation, home care and senior services • Insurance – products covering commercial, Medicare and Medicaid segments, EAP, Behavioral Health (1.3 million covered lives in Health Plan)

How we stack up?

Supply Chain Profile •Centralized Operation •$1.8 billion in spend •Process 4000+ Purchase requisitions per week

•Process 70,000+ invoices per month •Receive 1.1 million+ packages per year through a central distribution center •Manage over 600 point of consumption material carts

•Manage 30+ value analysis teams

Key Systems

Non-Clinical Team Spend Overview Overall Team Spend Corporate Admin Services Information Technology Facitilities, Construction, & Dietery

Spend $452,622,000 $206,000,000 $362,789,000 $1,021,411,000

Non-Clinical Sourcing Team Transformation • Sourcing organization that is driven by internal customer’s business goals and objectives – Commodity Council approach – cross functional teams, executive sponsorship, etc..

• Utilizes a structured sourcing methodology • Integrated organization from vendor selection through order placement – Stronger sense of ownership when implementing contract • Better accuracy will reduced match exceptions and returns

– Can be more proactive with career management • Clear path from Sourcing Specialist to Commodity Manager

– Can be more creative with regards to resource management • Split time between sourcing and order placement, etc.

• Leverage technology to reduce transactional work – True North = 100% lights out – Use efficiency gains to off set workforce reductions – Move tactical FTEs to sourcing

18 Month Staff Impact

Jan-08 Jul-09 Increase/Decrease

Sourcing 8.5 9

Operations 13.5 10

Total 22 19

6%

-26%

-14%

Technology Impact

Vendor Intercontinental Subscription Service Software House Airgas Worldwide Technologies Grainger WorkflowOne Jeter BatteriesPlus Franklin Interiors Corporate Express

Go-live Date Jan 9 2009 May 9 2008 Mar 7 2008 Feb 26 2008 Feb 19 2008 Oct 17 2007 Sep 13 2007 Oct 9 2007 Oct 10 2007 May 30 2007

Total eligilble Lines 145 1,067 554 5,385 6,537 45,209 4,951 382 2,674 331,362 398,266

Next opportunities: •Dietary (Sysco & GFS)

eMarket Lines # % 145 100% 255 24% 435 79% 2,438 45% 5,621 86% 44,043 97% 3,859 78% 197 52% 435 16% 326,993 99%

Lights out lines # % 143 99% 0 0% 0 0% 678 13% 5,055 77% 43,624 96% 660 13% 127 33% 118 4% 311,076 94%

384,421

361,481

97%

91%

Current Run Rate 99% 0% 0% 32% 77% 96% 84% 53% 13% 97%

Workflow One

Category

Recap

Overview

Inventory Products

1,323 items

Inventory Value = $ 975,363

Print On Demand

3,010 items

Coordinate Options in UPMC Print Shop

OMS Program

47 Suppliers

2008 Annual Activity Value = $ 2,723,378

Stationery Program

8,167 Orders

2008 Annual Activity Value = $ 629,495

Promotional Products

428 Orders

2008 Annual Activity Value = $ 498,617

ePro Orders

81% Usage

2008 Annual Requisitions = 13,360

Requisitions via ePro accounted for 81% of activity (96% lights out) Reduced work load from 2 FTEs to .5 FTEs

Match Exception Improvement

Staples / Corporate Express

Month Metrics Total Purchases Total Returns & Credits Total Net Purchases Avg Order Size Avg Lines Per Order % CEB of Net Purch. % Electronic of Net Purch. % MWBE of Net Purch. % CEXP Catalog Fill % Total Returns/Credits # of Orders Placed # of Order Lines

Oct 2008

Nov 2008

Dec 2008

Oct 2009

Nov 2009

$1,155,305.61 $48,627.01

$938,648.63 $109,941.01

$997,605.77 $47,976.72

$833,603.39 $17,405.62

$801,576.67 $17,248.61

$824,456.72 $16,418.60

$1,106,678.60

$828,707.62

$949,629.05

$816,197.76

$784,328.05

$808,038.13

$154.71 3.53 38.59% 89.34% 14.34% 93.01% 4.21% 7,428 26,220

$155.76 3.58 38.44% 91.63% 14.17% 92.87% 11.71% 5,563 19,941

$160.61 3.51 37.09% 93.35% 14.41% 93.80% 4.81% 6,153 21,583

$156.65 3.44 18.47% 97.41% 18.67% 86.22% 2.09% 5,292 18,191

$149.45 3.42 19.57% 97.45% 21.33% 86.93% 2.15% 5,343 18,277

$149.46 3.45 18.82% 97.05% 20.00% 85.78% 1.99% 5,491 18,965

 Requisitions via ePro accounted for 97% of activity (97% lights out). Reduced work load from 1 FTEs to .25 FTEs Match Exception Improvement Better catalog control Increased MWDBE business (improved business compliance and improved reporting)

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Dec 2009

Executing the Strategy Jeff Andersen Manager, Consulting Services

Supply Chain Profile Enterprise-wide Stakeholders • Sourcing – implement contracted savings & improve data quality • Accounts Payable – minimize Matching Exceptions • Purchasing – focus on value-added transactions only • Materials Management – reduce product returns

• CFO’s – ensure spend compliance • CEO’s – maximize user efficiency/redistribute resources • Business Unit Leadership – improve ease-of-use • Department Users – “we want content too!…”

Supply Chain Profile

Ingredients For Success •Platform •Supplier Ramp •User Experience •Leverage PeopleSoft ERP Investment •Low TCO

A Look Back…

2 Yrs. Ago

Internet

Supplier Connections

Ad-hoc

Special Requests

Item Master

~15% of Transactions

~85% of Transactions

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Content is King! UPMC Implemented in mid 2007…

2008/2009 = tremendous supplier ramp

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On the Horizon eMarketplace isn’t solely for external suppliers! Catering

Print Shop

Coming soon: Medical Media Services Telecom

Resources

Maintenance & Growth was/is inexpensive • Catalog Manager = 1 FTE • IT Resources (post-integration) = None • EDI Integration Manager = 0.5 FTE

Results

Compliance

Automation

Drive more spend under management with improved contract compliance and rapid enablement of key suppliers and punchout suppliers.

Reduce special requests and enable touchless (no buyer) purchasing, and improve overall connectivity with your supplier base.

Data Management Streamline item master management, and improve UNSPSC quality.

User Experience Realize extensive process savings and increased user adoption.

Success Story Solution Background UPMC had grown from $2b in revenues to over $7b in 10 years. Despite having a major ERP system in place, contract compliance was below 20%, special requests and maverick spending was rampant, and the growing user base and supplier base was compounding the issue.

Decision Points In early 2007, UPMC made the decision (after a thorough technology review) to implement eMarketplace technology as an enhancement to the existing PeopleSoft eProcurement module.

UPMC implemented the eMarketplace solution as a single connection from PeopleSoft ERP. The supply chain group then began a systematic onboarding of punchout suppliers and hosted supplier catalogs. Further, UPMC integrated the Item Master file (60k+items; 850 suppliers) into the eMarketplace.

Results 24 months post implementation: •UPMC is fully deployed at 20 locations (including Corporate) •Transaction level: 340,000 (past 12 months) •Compliance: 50% increase in contract compliance •Automation: 15% increase ; currently 40% of total purchase transactions are “touchless” (estimate $30 savings per transaction). •Process: 33% reduction in time spent on placing orders. Also, UPMC experienced a 40% reduction in time spent on item master management.

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Metrics Tell the Story: Leveraging Best Practice in Pursuit of “World Class” Increase “Lights Out” (automated transactions) to remove tactical FTE’s Every 5% Increase Represents a FTE Increase eMarkeplace transactions from 15% to 68%  Contract Compliance Benefit & FTE Impact

Results Results of Deployment • • •

Eliminated Paper Disbursement Requests Eliminated Paper Requisitions Eliminated 60% of faxed/phoned PO’s to supply base and working toward 100%

Hard Impact • • •

eVoucher eliminated 4 FTE’s in the AP Entry Group eProcurement/eMarketplace eliminated 6 FTE’s that comprised the SCM Pre-Key Group Allowed for the reduction or limited the need to hire 15.31 FTE’s and counting as eMarketplace and “Lights Out” programs expand………

Soft Impact • • •

Efficiencies gained with supply base Efficiency & effectiveness of remaining Procurement Operations staff Increased control through automation & interfaces: PO spend rogue (limit use of Card, Flat File Invoice & Blanket PO) spend

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What’s Next? UPMC is removing all paper based invoices. “According to a recent survey, the healthcare industry is at least 15 percent behind other industries when it comes to automation.” – Healthcare Finance News “Hospitals are about five years behind non-healthcare industries in terms of adoption of paperless invoice processing. Of the survey respondents, more than 70 percent of the hospitals received in excess of 80 percent of their invoices in paper format. As a result, they said resolving matching errors and exceptions were their most challenging tasks.” – PayStream Advisors, a Charlotte-based research and consulting firm

The Future: Accelerate Benefit Capture  Continue aggressive push to access supplier hosted (and local) content through single eMarketplace punchout  Incorporate services & internal purchases (telecom, print services) into eMarketplace  Add more direct connects through eMarketplace for “configurables” (furniture, clinical equipment, catering)  Leverage content and supplier enablement to drive back-end Procure-to-Pay automation (ERS, Assumed Receipt, ASN Receipt etc.) Lights Out  Perfect Order  Segment Supply Base and funnel toward appropriate automated flowpath – using the PeopleSoft SRM suite as the foundation

Q&A Session

Contact Information

Janette “J.P.” Perretta Director, Sales & Marketing

703.574.4479 (office) 412.445.8096 (cell) [email protected] www.prodigosolutions.com