Why Should Health Systems Consider Insourcing Mail Order Delivery Key Capabilities

Situation 

A large health system in Cleveland Ohio was spending ~$2 million a year to deliver specialty, and home health medications to the patients they serve. Their primary carrier was Fed Ex, but they also leveraged other 3rd party couriers such as DHL, USPS, and others as emergency alternatives. The health system brought in PPM to assess their current state operations and evaluate the feasibility of insourcing their mail order delivery process. 

Assessing The Current State 

To gain a better understanding of their operations, we assessed the current state of the mail order delivery process within the organization and reviewed all aspects of the process (e.g., prescription verification, prescription labeling, fulfillment tracking, and medication delivery).   In assessing their operations, there were two opportunity areas available: 1.) Optimizing their technology systems and optimizing the delivery process.   

Technology Systems

Like many hospitals, this health system utilized a dispensing management system to manage their script verification and labeling. Further downstream, they utilized Ship Manager, a fulfillment supply chain management system that is proprietary to FedEx. Both systems lacked capabilities that would inhibit this health system from efficiently insourcing their mail order delivery process. 

  PPM leveraged their marked connections to find a singular management system that provided the capabilities needed, while decreasing the number of systems. 

Delivery Optimization

Like other health systems, this organization relied solely on 3rd party couriers to handle and deliver medications. However, there seemed to be a gap when it came to delivering the medications in a safe and timely manner, which was essentially out of their control.

To resolve this situation, PPM focused on data from the previous year and determined which days for each month in which the most deliveries were expected and adjusted FTEs accordingly. This left the assumption of a worst-case scenario day and the prevention of the need of a last-minute driver. PPM was able to optimize delivery routes using a third-party app and make recommendations on how many FTEs to hire.

PPM then evaluated how to insource their mail order delivery operations. This process involved brainstorming resources that would be needed before implementation. This included hiring an adequate number of drivers, purchasing vehicles, integrating technology systems, evaluating fuel costs, etc. This ultimately led to a cost-saving opportunity of $555K in year 1. Extrapolating out over 3 years, this would save the health system ~ $1.7M.

PPM was able to look at the current state of a large health system in the Midwest and provide recommendations to optimizing their technology systems and their delivery process. PPM was also able to provide long-term cost saving opportunities.

Figure 1: YoY Gain from Insourcing Mail Order Activities

*Note: There was a 0.5% increase in YoY costs to account for miscellaneous expenses such as oil changes, vehicle maintenance, and unforeseen additional expenses. Also, there was a 1% increase in revenue YoY to account for operational efficiencies, resulting in a net YoY increase of ~0.5%.

To learn more about this opportunity, please email us at:

premiermentors.inc@gmail.com