HonorHealth Overview

May 2016

Tony Benedict, Vice President,

Procurement & Supply Chain

Agenda

• Merger of Two Systems – HonorHealth

• Transforming the Supply Chain Organization

• ERP Consolidation & Process Standardization

• Supply Chain Organization

• The Tectonic Shift – Value Based Payment Models

• The Triple Aim

• The New Supplier Mindset

• The Blue Box

2

Merger of Two Systems – October 2013

• John C. Lincoln

– Two hospitals

– ACO (Primary Care)

– Medical Group

– Foundation

• Scottsdale Healthcare

– Three hospitals

– ACO (Primary Care/Specialty)

– Medical Group

– Foundation

– Captive

Where Do You Start in Mergers?

• People – 90 – 180 days

• Processes – 18-24 months

• Systems – 18 – 24 months

• Culture – several years

4

HonorHealth Today

• Five Hospitals

• Future: ACO (Primary Care/Specialty)

• Foundation

• Captive

• Medical Group (~150 physicians)

HonorHealth Today

A

A

NortheastNorthwest

Southwest Southeast

Ambulatory Center

Primary Care site

HonorHealth Assets

Acute Care Campus

A

Primary Service Area (PSA)

Supply Chain Transformation Roadmap

7

HONORHEALTH SUPPLY CHAIN TRANSFORMATION PROJECT PLAN (HIGH LEVEL)2014 2015 2016

Milestone/Activity Dec Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

Supply Chain Process/Policy Standardization (Network)

Item Master Creation/ManagementNew Product Request

Procure to PayRequisitioning/Order Approval

Inventory Management & ReplenishmentReceiving/Distribution

Contract Review/ApprovalVendor Management

P-Card

OR Inventory Reduction

GPO Conversion

GPO Savings Realization (Guarantee)

Pharmacy Distribution Implementation

Med/Surg Distribution Implementation

Lab Distribution Implementation

Official Merger (Legal)

HonorHealth Brand Name Announcement

ERP Decision

ERP Item Master Cleanup/Conversion (SHC/JCL)

ERP Aperek Design/Configure/Validate Phase 1

ERP Aperek Phase 1 Training

ERP Aperek Phase 1 Go Live

GPO Support/GHX EDI Consolidation

ERP Aperek Sourcing/Contracting Phase 2

ERP Aperek Sourcing/Contracting Phase 2 Training

ERP Aperek Sourcing/Contracting Phase 2 Go Live

ERP Consolidation

Peoplesoft

McKesson

Aperek

• TWO item masters (adds/deletes)

• TWO processes for: Purchasing, receiving, distribution, inventory management, new product adds

• TWO GHX boxes

• NO mechanism for monitoring contract compliance

• ONE item master (adds/deletes)

• ONE SET OF NETWORKPROCESSES for: Purchasing, receiving, distribution, inventory management, new product adds

• ONE GHX Box

• SINGLE mechanism for monitoring contract compliance

GHX

GHX

SUPPLIERS

SUPPLIERS

GHX

CURRENT STATE FUTURE STATE (JAN ‘16)

8

A Set of Single Network One Set of Processes…………..

• “One Facility, 5 Locations”

• Network Volume is leveraged for ONE contract and ONE price

• A Network driven approach focused on cost reductions and operational (PROCESS) efficiencies in (see arrows)

Project Execution

InventoryMgmt

ProjectExecution

InventoryMgmt

ProjectExecution

InventoryMgmt

ProjectExecution

InventoryMgmt

ProjectExecution

InventoryMgmt

Inventory Management

Receiving/Distribution

Purchased Services

Osborn JCL NM TPKShea JCL DV

Project/Value Management

Contract Management

Purchasing

9

OR CoordinatorOsb – Betsy TollesonGB – Dennis Homonai

Osb CSPD – OPEN

SupervisorErica Poleet

Receiving Coordinator

Shaun Wardle

Suzi CollinsOsborn

Dir. Supply Chain1040-5490 (20)

Tony BenedictVice President, Procurement &

Supply Chain5000-8100

OR CoordinatorOPEN

SupervisorCherie Morey

Inventory Coordinators

Mia DuvalDanny Nelson

Patty PriorJCL Medical

Dir. Supply Chain1010-549010 (19)

OR Coordinator Amy Merelli

CSPD – Dave Herron

OR CoordinatorAlisha Hanson

Garry ChaseShea

Dir. Supply Chain1030-5490 (19.4)

OR Coordinator OP - Brian TodeschiIP – Cynthia Lederer

SupervisorMarty Quihuis

ReceiverJames Brown

Jesse MaganaDeer Valley Medical

Dir. Supply Chain (12.5)

TechsTom ValerioArt Guzman

Sherrie Wooden

TechsPat RossmanEmilia BeattyJame DowellArtees GreenKyle Dickens

Michelle DaleyJosh HudgensPierre WetleAlana Caron

SupervisorBrandon Pretlove

ReceiversEarl BrownDoug Gross

Jim CarterMed/Surg Buyer

Mark McClearyOR Buyer

Kelly CoxNetwork Director

Purchasing/Capital/IT5000-8110

Rick WilliamsOR Buyer

Sharon BurnesPhysician Network

Buyer

TechsMike Smith

Mark Salvini

Pedro Lopez

ReceiversLarry Smith

Debbie Bomar

Les SohadiLab/IT Buyer

TechsAbigail QualoAlex Villegas

Jerome HawkinsTim Wiley

Receiving SupervisorRalph Smith

SupervisorKen Beers

David FreyNetwork Director,

SC Operations/GPO Contracts Compliance

Dee WhittingtonNetwork Director

PMO/Performance Improvement/

Clinical Value Analysis5000-8130

Lynn Holland Contracts Manager

Lisa HareNetwork Director

ERP/SC Analytics5000-8130

Josh AndradeTPK

Mgr, Supply Chain1050-5490 (6)

Thuy HadvabClinical Manager

Jennifer NikolausClinical Manager

Heide Pries Charron

Clinical Manager

Lindsey WilliamsPerformance

Analyst

Alice Pope, CFO, SVP, HonorHealth

TechsDion BustamanteLarry Freeman

Techs Alfredo Villalpando

David HallDavid Klein Jim Preston Jim Stevens

Willie Bautista Michael Price

Alison ConwayERP Supply Chain Analytics - Analyst

Elaine YoungContract Manager

Jay WhitmoreContract Manager

Osborn (7)

System Biomed Mgr

Mark Yoder

1040-5385

Shea (7)

System Biomed Mgr

Mark Yoder

1030-5385

North Mounta in (4)

System Biomed Mgr

Shannon Alexander

1010-5385

Deer Valley (4)

System Biomed Mgr

Shannon Alexander

1020-5385

TPK (1)

System Biomed Mgr

Mark Yoder

1050-5385

Brian SchulerNetwork Director

BioMed5000-5385

Vicki EwingSupply Chain

Analyst

Trenton RamseySupply ChainData Analyst

Bill RemusNetwork Director

Purchased Services

5000-8115

Leah GloverSupply Chain

Analyst

Tracy StewartSupply Chain

Analyst

Renee UliassiNetwork Manager,

PS Operations

Angel Mejia

Med/Surg Buyer

Anthony RivasSupply Chain

Analyst

Ognjen KaurinBiomed/

Capital Buyer

Marsha AveryNetwork

Reprographics (7)5000-8140

Kathrine ChapmanFacilities / Purchased

Services

Sue GreenbergAdmin

Linda BirdAdmin

System Biomed

Manager

Specia lty Imaging(2)

John Styers

5000-5385

TechsJennifer Simon

Jim EugenesDan Dolan

Kathy ClouseLynda Steel

Andrea Herbranson

Rakesh RaoSupply Chain Data

Analyst

Johnnie MahanInventory Operations

Manager (JCL)

Aaron KamInventory Operations

Manager (DV/TPK)

Jolayne HallInventory Operations

Manager (Shea)

James OwenOR Implant Inventory Operations Network

Analyst (SHC)

Chris ArmstrongInventory Operations

Manager (Osborn)

Robert SandlinOR Implant Inventory Operations Network

Analyst

TechsDave MeadeMike ConnorDora JenningsBrianna Seleen

Eva TorresSophia CulverDavon BakerPriscilla Perez

MM SpecialistShundine Neel

ReceiverSusan Jimenez

Jordan Scott Contract Analyst

Alina Augustin Contract

Coordinator

Michael Mizel l

Pro ject Manager

5000-5385

(4) Temp/OpenBuyers

Denise BurnesContract Analyst

Daniel GarciaContract Analyst

CONTRACTING

Supply Chain Org Chart

BIOMED

SUPPLY CHAINOPERATIONS

PURCHASING

PURCH

SERVICES

ERP

VALUE

ANALYSIS

11

Tactical

Projects

Strategic

Projects

Project Driven Organization

• Projects identified by:

– Department heads – OR, ED, ICU, Surgery, Labs, etc.

– DMM/MMs

– CNO’s

– CMO’s

– CEO’s

• Projects valued by:

– Finance Analysts

– VATs

– SC Dirs

• Projects prioritized by:

– Value

– Impact

– Time to implementation

• Project Implemented by:

– SC Dirs

– SCM/As

All Projects

Prioritization based

on Value, Impact

Assessment

Final Projects

(Roadmap by

Quarter)

Categorization

based on Impact

and Time Frame

GPO

Contract

VAT NON-VAT

New

Products

System

Projects

Capital

Projects

Special

Projects

Purch

Services

Strategic – > 2 < 4 monthsTactical – 1-2 months

PPI

Initiatives

12

Project Management Methodology

• 10% of Time

– Strategy

– SC Strategy

– GPO Strategy

– Project ID

– Project Prioritization

– Project Roadmap

StrategizeStrategy Plan Analyze/Design Implement Operate

40% of Time

Plan:

High Level Project Gantt

Stakeholder Engagement

Project Meetings

Project Management Plan

Project Templates

Analyze/Decide:

Current Environment

Current spend/value

Critical Success Factors

Physician/Clinician Assessment

Barriers to Success

Future Environment

Co-Management strategy

Savings realization plan

Critical Success Factors

Physician/Clinician buy-in

Project Plan timeline

50% of Time

Implement:

Implementation Plan

Financial impact

Savings realization schedule

Education Sessions

Savings scorecard

Audit Progress

Operate:

Sustaining Plan

Deployment Lessons Learned

Pass Down Template to stakeholders

Network Governance Structure

NursingVAT

(Core Products)

CV/IR/Imaging VAT

Laboratory VAT

Pharmacy VAT

PurchasedServices

VAT

Non Clinical VAT

Executive Operations (xOPs)Committee

HR, Marketing and Communications

Team

HonorHealthExecutive Sponsor

PremierExecutive Sponsor

Honor Health Supply Chain/Premier (PMO)

Project Teams

Peri-op VAT

Supplies/Operations/Service LinesTeam

(Execution)

Network Level New Technology Committee

• Directs Policy (Enterprise)

• Dollar Threshold

• Ops Leader resistance

• Politically Charged issues

• Process Changes

• Policy Enforcement

• Daily Decisions

• Medical Staff

• Project execution

• Initiative results

PLIC/MED EXEC

The Tectonic Shift – Industry Perspective

Employers

Banner

HonorHealth

Dignity

Tenet

Iasis

Insurers

Individuals

Exchanges

IDN ProvidersACOs/Hybrids Expect to see:

• ACO and/or Provider as Payor?

• Much narrower networks• A new consumerism

driving choice in IDN based on cost and quality (individuals will base decisions on out of pocket costs inclusive of coverage)

• Employer/consumer employing data driven decisions on using IDNs with low cost/high quality and ability to manage populations

• Employers that are self insured will bypass Insurers and go directly to IDNs in Phoenix

The move to value-based care is a major shift in Provider strategy and mindset

FROM TO

Physician-centered Patient-focused

Transactional, isolating Care-team managed

Sick-care Health & well-being

Fixed interactions and hours Convenient & 24/7

Patient turnover-volume Patient health-value

Unwarranted variation Evidence-based standard

“Fill the beds” mentality Triage to lowest cost site of care

Hospital gravitational pull Primary care-centered

Competitive Collaborative

Technology for Procedures Technology for Coordination

Traditional health systems are set up to optimize volume and FFS reimbursement

Today’s Focus Next Generation Requirements

Care integration and a holistic view of conditions and patients will be required to succeed in next generation models

15

Medicare FFS Payment Cuts Continue

16

Reform Landscape: Changes Coming Fast

CMS Payment Changes 2015-2018

Medicare's commitment towards quality-based payments grows.

Source: PwC Health Research Institute anal}'Sis, Centers f0< Medicare & Medicaid Services

18

Strategic Supply Chain: Driving Cost Savings

Commodity

Contracts

Physician

Preference

Strategy:

Benchmarking

Product

Standardization

Clinical

Product

Utilization

Data Analytics

Str

ate

gic

Su

pp

ly C

hain

Source: Yankee Alliance

What is the Triple Aim?

20

The move to value-based care is a major shift in Supplier strategy and mindset

FROM TO

Physician-focused Patient Outcome -focused

Transactional, siloed Care-team managed

Dollar Market Share Procedural Share

DRG Payments Risk Based, Bundled Payments

Sales Rep orientation Clinical Support orientation

Unwarranted, unplanned variation Evidence-based standard, reduced Variation

Upselling ancillaries Highest quality/outcome at lowest cost

Selling features Supporting outcomes with peer reviewed data

Competitive Collaborative

Selling New Technology for Procedures Proving the Technology Improves Outcomes

Traditional health systems are set up to optimize volume and FFS reimbursement

Today’s Focus Next Generation Requirements

Care integration and a holistic view of conditions and patients will be required to succeed in next generation models

21

The Blue Box (of Readmission)

22

HOME Primary Care

SpecialistACUTE (IP/OP)

POST-ACUTE(Rehab/SNF)

30 Days

90 Days

Preferred Not Preferred

Least Preferred

SalesRep

ClinicalRep

Nurep HHTech

NoRep?

QUESTIONS?

QUESTIONS?

23