II.5 DEVELOPING STANDARDS FOR SUPPLY CHAIN MANAGEMENT PRODUCT INFORMATION - Achieving the Goal - Establishing A Product

2. II.5 DEVELOPING STANDARDS FOR SUPPLY CHAIN MANAGEMENT PRODUCT INFORMATION - Achieving the Goal -Establishing A Product Utility For the Healthcare Industry

3. DEVELOPING STANDARDS FOR SUPPLY CHAIN MANAGEMENT PRODUCT INFORMATION Hugh Blythe, CMRP Assistant Manager, Surgical Services Carolinas Medical Center Charlotte, North Carolina David Boyce, CMRP Senior Director, Operations Materials Resource Management Carolinas HealthCare System, Charlotte, North Carolina Richard A. Perrin, MBA, HFMA President, AdvanTech, Inc. Annapolis, Maryland Chairperson, HIMSS Supply Chain Management SIG

4. Agenda Key Trends Business Challenges/Pain Points Understanding the Problem The Answer ~ Our Process, Findings & Solution Key Capabilities & Business Value ROI/ Business Case Customer Success Story ~ Results To Date Next Steps

5. Objectives Understanding of current status of Product Data Utility (PDU) standardization efforts for the healthcare industry Understanding the business challenges, costs and benefits to provider organzations from use of PDU standards Understanding of the issues/steps/methods necessary to garner benefits from use of PDU standards for provider organizations (hospitals) Provide insights into impacts & benefits on e-commerce activities from use of PDU standards

6. PDU Organizing Committee Product Data Utility Organizing Committee Vision, Mission, Objectives - Develop Standards for Sharing Supply Chain Management Product Information Organizing Committee Structure Accomplishments To Date PDU Committee Hospitals/IDNs Professional Associations (AHRMM/HIMSS/HIDA/HDMA) Manufacturers & Distributors Group Purchasing Organizations E-Commerce Exchanges (GHX/NEOF/Others) E-Commerce Content Providers/Portals (e.g., HCEC/GHX/GS1)

7. Key Trends Healthcare Specific Data Requirements Data Synchronization � Fragmented Systems Shrinking Reimbursement & Declining Provider Margins Accurate Information Required for Informed Business Decisions Linkages of Clinical & Financial Information Systems Scheduling, Patient Safety & Quality of Care EHR, CPOE, eMar & Bedside Care Activities Need for Increased Efficiency Driving Process Automation & E-commerce Supply Chain/Resource Management Asset Visibility Both In-Transit & Inventories Customer Support Clinical Value Analysis & Reduced Inventories Healthcare specific data requirements � different from industry in general. Focus on key industry trends � Healthcare specific data requirements � different from industry in general. Focus on key industry trends �

8. Business Challenges/Pain Points Develop Standards for Data Elements Including � Manufacturer Packaging Units of Measure Quantities Enable Trade (BusiNess) Partners to Accurately Price (Contract), Buy & Sell Products

9. Business Pairs Manufacturer - Distributor Manufacturer � GPO GPO � Provider Distributor � Provider Manufacturer � Provider Distributor � GPO

10. Business Challenges/Pain PointsGPO - Providers Inaccurate Data in Provider Data Master/Product Item Information New GPO Contract Activation Delays for Data Loading/Synchronization Contract/Purchasing Pricing Discrepancies Inaccurate Purchasing & Customer Volume Reports Synchronization between buyer and seller product data reduces order errors 70 -- 80% of all product transaction errors directly relate to inaccurate product information (Healthcare e-Business Collaborative) One major supplier notes that 10 � 90% of purchase orders received from hospitals require corrections Time delays activating new contracts - Source Update allows member hospitals to preview, filter and schedule contract updates from Premier�s eSource Pricing discrepancies � Hospitals are notified of pricing discrepancies between PO, POA, invoice and contracted price held in Source Update Inaccurate Purchasing Volume Reports � More accurate product data provides greater visibility into volume purchasing Synchronization between buyer and seller product data reduces order errors 70 -- 80% of all product transaction errors directly relate to inaccurate product information (Healthcare e-Business Collaborative) One major supplier notes that 10 � 90% of purchase orders received from hospitals require corrections Time delays activating new contracts - Source Update allows member hospitals to preview, filter and schedule contract updates from Premier�s eSource Pricing discrepancies � Hospitals are notified of pricing discrepancies between PO, POA, invoice and contracted price held in Source Update Inaccurate Purchasing Volume Reports � More accurate product data provides greater visibility into volume purchasing

11. Business Challenges/Pain PointsGPO - Providers Data Synchronization for e-Commerce Healthcare Providers Need to Have Clean Product Data (Item Master Information) to Minimize Purchasing Errors Impact of inaccurate product data - Synchronization between buyer and seller product data reduces order errors 70 -- 80% of all product transaction errors directly relate to inaccurate product information (Healthcare e-Business Collaborative) One major supplier notes that 10 � 90% of purchase orders received from hospitals require corrections Time delays activating new contracts - Source Update allows member hospitals to preview, filter and schedule contract updates from Premier�s eSource Pricing discrepancies � Hospitals are notified of pricing discrepancies between PO, POA, invoice and contracted price held in Source Update Inaccurate Purchasing Volume Reports � More accurate product data provides greater visibility into volume purchasing Impact of inaccurate product data - Synchronization between buyer and seller product data reduces order errors 70 -- 80% of all product transaction errors directly relate to inaccurate product information (Healthcare e-Business Collaborative) One major supplier notes that 10 � 90% of purchase orders received from hospitals require corrections Time delays activating new contracts - Source Update allows member hospitals to preview, filter and schedule contract updates from Premier�s eSource Pricing discrepancies � Hospitals are notified of pricing discrepancies between PO, POA, invoice and contracted price held in Source Update Inaccurate Purchasing Volume Reports � More accurate product data provides greater visibility into volume purchasing

12. Business Challenges/Pain PointsGPO - Providers National & Local Relationships Provider Contracting Issues Contracted � Direct Sales Contracted � Distributor Sales Issues Encountered � Costs Contract Implementation Impacts Process to Resolve � Benefits Status of This Today�

13. Business Challenges/Pain PointsDistributors - Providers Providers Change to Different Prime Distributor Conversion Program Issues & Challenges Pain Points � Different Structure � 10 Digit to Alphanumeric Contracted � Direct Sales Not Contracted � Direct Sales Issues encountered � Costs Process to resolve � Benefits Lessons Learned Status Today

14. Business Challenges/Pain Points Manufacturers to Providers Contracted � Direct Sales Not Contracted � Direct Sales Companies Changed Names � Need to Update Multiple Databases Product Nomenclature Changes Some Items Through Distributor & Some Items Direct � Issues With Data Routing Packaging Issues � CS v. BX v. EZ

15. Carolinas HealthCare System

16. The Largest Healthcare System in the Carolinas, & Fourth Largest Public System in the Nation Ranks Fifth on Verispan�s Top 100 Highly Integrated Healthcare Network List Leases & Manages 15 Hospitals & Other Healthcare Related Operations More Than 4,300 Licensed Beds & Approximately 25,300 Employees Carolinas HealthCare Systems

17. Carolinas HealthCare Systems Carolinas Shared Services, A Regional Committed Volume GPO Affiliated With Novation Provides Contracting Services to 16 Participants Different MMIS Systems One Contract Price for All Participants Volume Reporting for RFP Contract Compliance Insuring Commitment Rebating & Fee Reporting

18. Carolinas HealthCare Systems Charlotte Operations � 4 acute, 1 specialty, 2 long term care facilities Central Procurement PO Lines/month Active SKU EDI % Invoice Errors Central JIT Distribution Stocked SKU Inventory$$ & Turns Fill Rate Cost Plus Transition & impact to local operations � Add EDI %ages PO Lines � metrics Operational component � central procurement � central distributionTransition & impact to local operations � Add EDI %ages PO Lines � metrics Operational component � central procurement � central distribution

19. Data Issues at CHS Actionable Volume & Compliance Classification Descriptive Spending Accurate Electronic Procurement Efficiency PUOM Price to the Third Catalog � to Dash or Not to Dash Need actionable data for bidding and compliance � Accuracy for EDI transactions Need actionable data for bidding and compliance � Accuracy for EDI transactions

20. Data Issues at CHS - Costs Poor Historical Spend Picture = Less Than Best Price Unproven Contract Commitment = Higher Price Contract Renewals Inability to Prove Market Share = Loss of Tier Eligibility Price Parity Among Participants = Overspending Rework � EDI Rejected EDI Lines = Cancellation of PO EDI 7 Times More Efficient Than Call in Until Mismatch $50/PO to Correct Discrepancies 20% AP, Materials Time Is Involved With Rework Loss of Prompt Pay Discounts Poor historical spend picture � �less than accurate picture � Had to rely on the vendors information Loss of tier pricing Rework with EDI Poor historical spend picture � �less than accurate picture � Had to rely on the vendors information Loss of tier pricing Rework with EDI

21. Solution � Carolinas HealthCare Established 5 FTE Information Management Team Central Item Master Control Ad Hoc Reporting Contract with Third Party for Data Cleansing Establish Data Warehouse for Purchase History

22. Carolinas HealthCare Costs IDN internal costs without the PDU. What CHS has spent to date to get to actionable data.IDN internal costs without the PDU. What CHS has spent to date to get to actionable data.

23. Carolinas HealthCare Benefits IDN internal costs without the PDU. What CHS has spent to date to get to actionable data.IDN internal costs without the PDU. What CHS has spent to date to get to actionable data.

24. Understanding the Problem No Central Repository for Product Numbers & Product Description No Standard Nomenclature For Trade Partners Errors in Supply Chain Communications Waste Money What about HIBCC, UCC, GL1, EPCGlobal, ANSI, UNSPSC, etc.? What about HIBCC, UCC, GL1, EPCGlobal, ANSI, UNSPSC, etc.?

25. The Solution Establish Data Repository Industry Collaboration & Representation Funding Source of Truth

26. ROI / Business Case Lower Connectivity Costs 300-bed Hospital Reports Saving More Than $100,000 in Costs to Connect to 43 Suppliers Reduced Purchase Order Errors Average 25% Fewer Purchase Order Errors Average 50% Reduction in Discrepancies Between PO, Shipping Receipt and Invoices Faster Processing Times Average 50�90% Reduction in Order Processing Time Improved Productivity One IDN Reported Tripling PO Volume With Less Than a 50% Increase in Buyer Staff Electronic Invoices Reduce Need for Manual Re-keying

27. Customer Success Stories DoD � Owens & Minor Becton Dickenson Others GPOs Premier VHA/Novation Local GPOs & Self-Directed Providers

28. Carolinas HealthCare Results To Date IDN internal costs without the PDU. What CHS has spent to date to get to actionable data.IDN internal costs without the PDU. What CHS has spent to date to get to actionable data.

29. Benefits Achieve Benefits From Use of Universal Product Numbers. Healthcare Industry Savings Potential From Using Standardized Product Data Is Estimated to Be Billions of Dollars Annually. Benefits From Common Standards Usage Have Been Proven Previously in Other Industries. Achieve Enhanced Error Free SCM Transaction Processing in Support of Healthcare Needs.

30. Next Steps Alternative Approaches GS1 ~ GDSN HCEC ~ PIM GHX ~ AllSource + Standards Organizations ANSI/ISO ~ EDI & HL7 HIBCC ~ HIN & LIC GS1 ~ GTIN & UNSPSC

31. Business Challenges/Pain PointsDistributors to Providers GLN Standards Use GPO Membership Roster Sales & Billing Issues Contract Activation Notification Performance Tracking Accurate & Timely Reporting

32. Q & A - Discussion