Back To The Future - sig.org · PDF fileAnthem and Cigna Merger Blocked ... •Leverage the...
Transcript of Back To The Future - sig.org · PDF fileAnthem and Cigna Merger Blocked ... •Leverage the...
Bridging Procurement Organizations
After a Merger or Acquisition
Back To The Future:
GuideWell
Dawn Ozanne-TolmanSr. Director, Procurement
sig.org/summit
BACK TO THE FUTUREBridging Procurement Organizations
after an Acquisition
Our Evolving Enterprise Structure
Health Plan
3
Information We Believe May Help You
What to do within the first year after a M&A
How to align procurement practices, contract and impacted staff
How to manage contracts/ negotiations for the same services
How to track and report success
Avoid our mistakes4
5
How many M&A related entities have impacted your
organization in the last 5 years?
A 0
B 1 or 2 entities
C 3 -5 entities
C 6 or more entities
Since 2010 the number of hospital and health system
mergers increased by 55%.1
Aetna acquired Coventry
GE Healthcare buys
Camden Group
LabCorp acquires Providence and CHI
Apple acquired Gliimpse
Asics acquires Fitness Keeper $85M
Aetna and Humana Merger Blocked
HCSC acquires Lovelace
Nokia acquired health device makerWithings for $191M
Anthem and Cigna Merger Blocked
McKesson will acquire CoverMyMeds
1 Medical Office News - http://medicalofficenews.com/2017/01/health-system-ma-55-since-2010/ 6
Understanding Where We Started
7
What To Do Within The First Year
OPERATIONAL
READINESS
PHASE 1
GET DATA
CLOSED LOOP
COMPLIANCE
DAY 1
READINESS
PHASE 2
PEOPLE AND PROCESS
ITSM
EXCELLENCE
PHASE 3
CONTRACTS
SERVICE
TRANSFORMATION
PHASE 4
INTEGRATION
• Compare Spend
Categories
• Review same or
similar vendors
• Top Areas of Spend
• Compare highest
spend and vendors
• Procurement roles
and/ or people
involved in
procurement
• Knowledge levels of
current staff
• Pay ranges/benefits
of current staff
• Environment/culture
• Gather written policies
or procedures if
available
• Review procurement
templates (POs,
requisitions, RFx)
• Approval levels
• Review Intranet or
instruction sites for
Procurement team
• Use of std contracts
or vendor paper
• Review upcoming
renewals and
termination w/o
cause options
• Determine if
contracts have
minimums,
exclusivity
• Negotiate consolidated
contracts
• Set up RFx schedule
• Migrate to single ERP or
integrate procurement
data between systems
• Determine a game plan
for future acquisitions
• Develop audit and
reporting plan
1-90
Nov- Jan
1-180
Jan - Jun
6-24M
Jan -Jul
90-270
Jul-Dec
8
Initial Data Observations
Line level purchase details was difficult to match
Primary commodities were different than our current procured commodities, but aligned between acquired entities
Don’t assume less sophisticated procurement models don’t achieve great savings
Contract Management systems/ repositories are important
Linking procurement to inventory and asset tracking systems are important
9
People and Process: GuideWell Health Affiliates
1,000+ employees
70,000+ customers
Procurement Staff: None
Procurement Data: Established ERP system
Procurement Process & Policies: Limited policies and paper based approvals
Contract Process: CEO/Officer reviews with Legal
Spend Management: Managed by budget owners
700+ employees
3,000+ customers
Procurement Staff: 2 Employees
Procurement Data: Paper based records
Procurement Process & Policies: No policies and paper based approvals
Contract Process: None
Spend Management: Managed by finance committee w/o analytics
2 employees (outsourced)
34,000+ customers
Procurement Staff: None
Procurement Data: Practice Mgt System
Procurement Process & Policies: Limited policies and email/paper approvals
Contract Process: Limited high dollar transactions are shared with Legal
Spend Management: 1 employee reviews all costs each month (approx 100 pages)
10
Relationships Are Key
Leaders
• Listen to their goals and present ways you can help
• Discuss overlapping vendors and spend categories
• Provide early estimates of savings (but don’t overestimate/ overpromise)
• Be visible if possible
• Determine which master to serve
Procurement Staff
• Get to know and learn from them
• Share ideas (but don’t scare them off)
• If absorbing carefully manage the transition
• Get to know their culture/environment
• Praise what you can
• Knowledge
• Efficiency
End Users
• Understand the nature of their business and order needs
• Determine their current understanding of the procurement process
• Determine what data they need and/or expect
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Procurement Integrator
Sourcing
Team
Contracting
Team
Buyer
Team
Administration
(Vendor Maintenance, Supplier Diversity, Audits)
Clients
Procurement Organization 3 Years Ago
12
Category Teams
Clients
BPO
IT
Delivery
Mar/Comm
Prof Svcs
Our Procurement Organization Today
Business Focused Team
13
Procurement Organization considerations
for M&A support
Functional Model
• Strong expertise for specific procurement activity
• Limited knowledge of business to apply their expertise to
• Limited deep relationships with clients
Category Model
• Procurement staff understands industry
• Improved relationships with clients
• Level setting of staff knowledge and capabilities is difficult
Business Area Model
• Deep relationships with clients
• Procurement staff understands core industry of clients
• Level setting of staff knowledge and capabilities is difficult
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15
What is the current procurement model for your company?
A Functional
B Category
C Business Focus
C Blend of the Above
Aligning Contracts and Suppliers
Contract Alignment
• Look for minimums and exclusivity
• Most Favored Nation clause
• Change of Control/Assignability
• Supercedes language
• Termination w/o Cause/Notice Periods
• Payment Terms
Consideration with Suppliers
• More volumes/consolidate contracts (look for the hungry acct rep)
• Negotiate with suppliers providing the same capabilities
• Get their perspective on improvements
• Discuss product standardization
16
People
• Determine KSAs needed for Enterprise Procurement and assess KSAs of all current staff
• Work with HR to develop appropriate new roles if needed and market rates
• Look at total staff needed based on expectations of combined leadership
Spend
• Set up shared contracts/fees and discounts for volumes/total spend
• Determine most effective suppliers for all entities (geography, delivery times, etc.)
• Product/formulary standardization
• Align standard terms (payment, contract/PO terms)
Reporting
• Leverage assets/inventory where possible
• Develop ongoing reports per spend category including upcoming opportunities and desired outcomes
• Develop compliance reports
• Develop shared vendor scorecards
Process
• Leverage the same ERP or ordering and contract mgt systems if possible
• Establish enterprise procurement policy and procedures
• Determine low value work and processes
Preparation and Guiding Principles for
Procurement Bridging
17
Developing the Initial Plan
People
• Determine if and how procurement staff can be merged or aligned
• Determine salary and benefits between staff before they do
• Look at total staff needed based on expectations of combined leadership
Spend
• Determine overlapping spend and start determining estimated savings
• Determine top vendors and categories and begin vendor rationalization
• Determine major new purchases and upcoming renewals for next 6-18 months
Reporting
• Develop high level reporting based on savings
• Develop a shared “playbook” and agree upon priorities
Process
• Determine which processes are non-compliant, costly and/or don’t provide necessary data
• Determine systems of record for contracts and spend
• Determine efficiencies in process logistics (receiving, ordering, PO creation, etc.)
18
Areas Of Focus
o Standardize and automate requisitioning, purchasing, receiving and AP processes
o Develop budgeting process and cost ctr mgr tracking of actuals
o Track and then improve usage of inventory and minimize waste
o Improve the cost and performance of maintaining medical equipment
o Improve the tracking and reporting of assets (i.e. property taxes, capital expenditure planning,
etc.)
Supply Chain Areas of Focus
The DCMG Supply Chain Management processes are manual and data needed
for reporting, planning and inventory management (i.e. forecasting, capital
expenditures, waste prevention, budget management) is very difficult to obtain.
The following suggested Areas of Focus have been identified to mitigate risk,
improve reporting and utilization of staff and inventory/equipment.
19
Scope of work for Supply Chain Improvement
Implement Policies and Procedures–
A.1 Supply Chain 1. Draft Supply Chain policy and Requisitioning SOP
2. Determine updates needed for clarity with cost center mgrs
3. Introduce policy/SOP during training to cost center managers on ePro
1st draft to be shared
on 5/12
A.2 Supplier
Contracting
1. Determine if DCMG will follow the same contracting approvals as GW
2. Draft Policy
3. Review with team and specifically with anyone allowed to execute contracts
and their administrative staff
A.3 Expenses 1. Determine expense process and if any updates are needed beyond system
adjustments
2. Determine owner and determine starting point for drafting policy
3. Draft policy and seek approvals
Implement System Changes – Improve tracking of purchases and financial controls of supplier spend
B.1 System Security
updates
1. Determine ways to manage security authentications (Citrix)
2. Test system for requisitioning, G/L and invoice processing
Completed 9/12/16
B.2 Cost Center
Managers set-up
1. Pull spend and sort for review by each cost center lead
2. Determine owners for each cost center
3. Work with GW Finance to add each cost center mgr to ERP
4. Test Hierarchy in Requisitions
Barb working to
finalize
B.3 HR Hierarchy set-
up
1. Determine if HR hierarchy matches expectations of financial approval
hierarchies
2. Update HR Hierarchy in ERP
3. Test Hierarchy in Requisitions
Continued….. 20
Scope of work for Supply Chain Improvement cont.
Implement ePro con’t– Improve tracking of purchases and financial controls of supplier spend
B.4 Set up Stock
Products
1. Gather current lists of stock items
2. Update stock items based on current bids (Pharmacy)
3. Enter Stock items into ERP
B.5 Set up Punch-Outs 1. Office Depot
2. McKesson
B.6 Pilot 1. Determine pilot testers
B.7 Roll-Out and
Training
Receiving Improvements
D.1 Largo 1. Performed site visit
2. Meeting to discuss current and future workflow on 1/17/17
D.2 Countryside 1. Performed site visit
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Don’t share your plan until you know their entire procurement process
Understand the Enterprise plan for the merger/acquisition
Get a seat with the investment team to start gathering information early
Integrator roles between corporate and affiliates are extremely helpful
Don’t assume less sophisticated procurement models don’t achieve great savings
Avoid our Mistakes
22
WANT TO SHARE BEST PRACTICES?
Dawn Ozanne-Tolman
GuideWell/Florida Blue
Sr. Director, Procurement
904-905-0676
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Back To The Future: Bridging Procurement Organizations
After a Merger or Acquisition
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Dawn Ozanne-Tolman
GuideWell/Florida Blue
Sr. Director, Procurement
904-905-0676