A UNSPSC® Success Story

University Health Care System
Augusta, Georgia

“My first day on the job, my boss told me to just pay attention to coronary stents and spinal implants. I
immediately discovered that I had no useable data upon which to base my actions. I was flying blind.”-- Mike Brown, Director of Purchasing, University Health Care System

New Insight to Spend

We didn’t have confidence in the numbers.” With

Like most large hospitals in the U.S., University

so many items in its item master, the hospital

Health Care System spends an enormous

needed a more complete and detailed

amount on patient supplies, over $45 million

classification system, yet they did not have theannually. And like most hospitals, its supply chain

resources or expertise available in house to do

costs are compounded by the administrative load

the job.

required to track and manage the purchase of somany items. The hospital has more than 15,000

Brown and his team partnered with a leading

individual products that are purchased on adata management provider that leverages theroutine basis.

UNSPSC, an open, global product taxonomy.
“The UNSPSC could serve all of our needs

University is the leading healthcare provider in abecause it was to the right level of detail. It was

22-county region, with 450 independent, private

free, you could download it from the Internet, andphysicians. These physicians are used to getting

our partners could do the coding so I wouldn’t

the supplies they prefer to use. Managing thishave to worry about recruiting clinicians to figure

dynamic -- physician preferences v. financial

out what code should be assigned where.

realities -- is an important part of the materials

Outsourcing the work to a trusted third party frees

management function.

up our time to focus on other critical priorities.”
Brown also believes it is important to choose a

Faced with improving the hospital’s supply chain

partner that has deep industry knowledge,

processes, Mike Brown, University’s director ofunderstands the challenges of the hospital,purchasing, explained, “I needed to understandpromotes the adoption of critical standards andwhat we were currently spending, and makehas delivered proven information technology andprojections for the future. The information in ourservices to address the complexities in thedata system was not organized or structured tohealthcare supply chain. For these reasons,provide insight into how we were spending

Brown selected Neoforma, Inc. to provide datamoney.”

management services.

One of the challenges for Brown and his team

UNSPSC Unveils Greater Cost Savings

was that the healthcare industry lacked standards

Launching into the classification project in Augustfor product descriptions and classifications.

2004, University mapped out a strategy for

University had put in place a home-grown supply

bringing structure to the hospital's supply item

codification system, yet it had limited capabilities

master file using UNSPSC categories. The

since it was based on a rudimentary three-digit

process would require Brown and his team toschema. “For example, coronary stents wereextract records for the 10,000 most-used active

lumped with peripheral stents, urinary stents, etc.

items. University leveraged the expertise of©2005 Neoforma, Inc.

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Neoforma’s staff and its proprietary technology tobrought a drug-eluting stent onto the market, weupdate its item master over the subsequent six

went up to 90% usage for all stent procedures."weeks.
With two models available, University was intent
A major challenge within the hospital setting ison negotiating a purchase agreement that would

bridging the gap between medical and financerein in the high prices. "In order to strengthen ourprofessionals. Since administrators often havebargaining position, we needed to get all ourless knowledge of the clinical uses of a product,

information together on exactly how many stents

questions frequently arise about exactly how

we'd been using, and which models," explained

specific items should be coded. “Starting thisBrown. "And to do that, we needed properly

project, we were able to get our commodity

classified product codes, which is where thecodes assigned so we could understand whereUNSPSC came in.”we were spending money, and from there wewere able to turn right around and show some

Bargaining Power

ROI. It was quick, targeted and effective."

As soon as the classification project wascompleted, Brown and his team were able to“We could now tie purchase orders back to theaccess and analyze the data they needed. First,commodity codes. As soon as a month wasthey had to review usage patterns withfinished, I could run reports to see what I was

physicians and hospital administration. With

spending by commodity and by vendor, and I

these stakeholders on board, and with accurate

could easily calculate market share.”spend data in hand, Brown was able to negotiate
a contract with one of the manufacturers.

A Medical Advancement Increases Spend"When drug-eluting stents came onto the market,"We absolutely enhanced our bargaining

our spending went through the roof," Brown said.

position," explained Brown. “We approached ourEarly in 2004, one leading medical device

supplier, and reviewed our program with them.

manufacturer had dramatically advanced

We had tracked a couple of months of data tocoronary disease treatment when it updated its

show market share, and put together anline of bare metal stents with new drug-coatedachievable program that met the needs of bothmodels. Overnight, demand for the new productthe hospital and the supplier. By agreeing to use

surged. (see figure 1)

this manufacturer's stents in a certain percentageof the procedures at the hospital, we got a 14%"Shortly after their introduction, ourreduction in price. It's an agreement that is

cardiovascular department was using the newsaving us $600,000 a year." (see figure 2)

drug-eluting stents in 45% of stent procedures,"remarked Brown. "When a second manufacturer©2005 Neoforma, Inc.

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42203401 Coronary Stents

Commodity

Attribute2004 Total

Jan ’05

Feb ‘05

Mar ‘05

Apr ‘05

Coronary stents

Bare Metal

18.0%

10.6%

7.5%

7.5%

8.2%

Drug Eluting

81.9%

89.4%

92.5%

92.5%

91.8%

Total

100.0%

100.0%

100.0%

100.0%

100.0%

Figure 1: UNSPSC provided a quick analysis of stent use over time at University Health CareSystem. (©2005 University Health Care System)

Figure 2: UNSPSC improved University’s bargaining power, resulting in a savings of $600,000 ayear from one coronary stent manufacturer. (©2005 Neoforma, Inc.)
Looking at the hospital’s use of spinal implants also revealed opportunities for savings. Brown
relates, “The physicians were not accustomed to someone coming to them and telling them thatthey can only buy from one particular vendor and others are off limits. The physicians would notagree to any kind of sole source or dual source contract. We put together a chart and showed thephysicians what we were spending, and with what vendors (see figure 3). This chart really got thedepartment chair’s attention. After seeing the data, he agreed to work with us on implementing amore advantageous contract, and we were able to work with the supplier to better control costs.”
Through enhanced spend visibility brought by UNSPSC, Brown was able to document an avoided
cost increase of $75,000 per year.

©2005 Neoforma, Inc.

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Figure 3: Use of spinal implants on the rise year-after-year. UNSPSC provided the basis of thisinformation, which enabled the hospital to negotiate a significant discount from the supplier.
(© 2005 University Health Care System)
Significant benefits of UNSPSC include improved visibility into supply spending and greater ability
to manage spend, according to Brown. “My reports to the administration now contain month-tomonth spending levels, so there is a greater awareness of spending patterns and priorities at theexecutive level.”©2005 Neoforma, Inc.

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For More Information
To learn more about this UNSPSC Success Story, please contact Mike Brown, University’s Directorof Purchasing, mikeb@uh.org.

Reference Information:
1.

What is the UNSPSC®?
The UNSPSC® (United Nations Standard Products and Services Code®) is the result of amerger of the United Nations' Common Coding System (UNCCS) and Dun & Bradstreet'sStandard Product and Services Codes (SPSC). It was launched as an open standard inFebruary 1999. As an open, global standard, use of the code is free of licensing fees. TheUNSPSC allows companies to consistently classify the products and services they buy andsell. The UNSPSC is a hierarchical set of product categories.

Example:Hierarchy: Category Name (Code)

Segment: Medical Equipment, Accessories, and Supplies (42.00.00.00)
Family: Wound care products (42.21.00.00)
Class: Wound packing products (42.21.04.00)
Commodity: Packing strips for wound care (42.21.04.02)
2.

Why is the UNSPSC important?
The UNSPSC initiative is important in providing free and open standards that can be used
across many industries. It provides a standard set of guidelines and parameters whereby,
when utilized and managed properly, an organization can group like products. This can prove
useful for analysis, organizing, finding items, and ordering products.

3.

Who manages the standard?
GS1 US™, formerly the Uniform Code Council, Inc. ® (UCC®), leaders in facilitating efficientinternational business, has been selected by the United Nations Development Programme(UNDP) to serve as code manager of the United Nations Standard Products and Services
Code (UNSPSC).

©2005 Neoforma, Inc.

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About the Coalition for Healthcare eStandards, Inc.
The Coalition for Healthcare eStandards, Inc. (CHeS) is a collaborative oforganizations dedicated to promoting the adoption and use of open datastandards in the healthcare industry. Through the work of task forces, CHeS
makes recommendations to accelerate industry-wide adoption of comprehensive
data standards and encourages other industry representatives to participate in ecommerce standards work groups. For more information about The Coalition for
Healthcare eStandards, visit www.CHeStandards.org.

About GS1 US™
GS1 US, formerly the Uniform Code Council, Inc.® (UCC®), is a not-for-profit
organization dedicated to the adoption and implementation of standards-based,
global supply chain solutions. Under its auspices, GS1 US operates three wholly
owned subsidiaries, EPCglobal US™, RosettaNet, and UCCnet®. GS1 US
manages the United Nations Standard Products and Services Code® (UNSPSC®)
for the United Nations Development Programme. EPCglobal Inc is a joint ventureof GS1 Us and GS1 (formerly EAN International). GS1 US-based solutions,
including business processes, XML standards, EDI transaction sets, and the bar
code identification standards of the EAN.UCC System are currently used bymore than one million member companies worldwide. For more information about
GS1 US, please visit: www.gs1us.org. GS1 US is headquartered in
Lawrenceville, NJ USA.

©2005 Neoforma, Inc.

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