Caresfield is proud to supply disposable tourniquets to Capstone Health Alliance members. We recently spoke with Capstone CEO Tim Bugg to discuss the history of the organization, how they support members and lessons learned from the pandemic.
You helped form Capstone back in 2000. Did you ever expect to expand to 23 states?
No, we never thought we would expand into 23 states. We started the program with the vision of just helping the 16 hospitals in the 16 counties in Western North Carolina.
Myself and Mark Landau started the program in 2000 in our spare time. I had the courtesy of running the WNC Health Network as their executive director. I had the power to put this program in place. For the first two to three years as volunteer work we were falling into about one to three million in savings.
“It’s not that our supply is necessarily broken. Our supply chain was set up and built exactly how it operated and that was not ideal during a pandemic”
Tim Bugg, Capstone Health Alliance
In 2003 a lot of hospitals across the state showed interest in being part of the network. We expanded our membership in 2004, and picked up about 10-15 new members in about two years from North Carolina, South Carolina and Virgina. By 2007 we were in about eight states and I came over full time. By 2013 we were still in the eight states but we expanded our membership to about 80 health systems and started really jeopardizing WNC Health Networks’ 501(c)(3) status because of the revenue that was coming in.
Forging a New Path
It was time to break our program out into its own company. I was the senior vice president of operations at that time. I became the first CEO of Capstone Health Alliance in 2013. From 2013 until 2021 we have really grown. Today we’re about 300 hospitals in 23 states, with $11 billion in total supply spend going through our members. About 40,000 beds, and 140 or so health systems are a part of Capstone. We are the largest non-owned regional GPO in the country. That’s fantastic.
What was the experience like? It was almost surreal. You don’t expect something like that to happen. I won’t say that we stumbled on it, we had a vision to reduce health care cost. That’s still our vision today. That’s not just inside the hospital, that’s across all areas of health care. It’s been great to be able to ride that train, to bring that vision to reality and to do it for so many hospitals. In this past year, we’ve just topped $55 million in savings and value back to our membership.
Data suggests that many purchasing directors are engaging with new suppliers because of the pandemic. Do you see these as long-term relationships, or do you think many relationships will return to pre-pandemic status at some point?
I think the gray market opened a lot of eyes. There are definitely some smaller suppliers that will survive after the pandemic because they have shown the ability to supply our members. I think the big guys will rebound. They took some bumps, obviously, as all suppliers and distributors did. A lot of the challenges were because we made the supply chain the way we made it. We’re kind of victims of our own circumstances.
It’s not that our supply is necessarily broken. Our supply chain was set up and built exactly how it operated and that was not ideal during a pandemic. That being said, I think you’ll see more resiliency coming out from dual suppliers and not having all of our eggs in one basket with one supplier.
Beyond the increased negotiating power that saved your members $55 million last year, what tools does Capstone give members to stabilize their supply chain?
First, we have a full analytics department. We do a ton of different analytics for members, from cost savings to product conversions and a variety of other things. That’s number one. We always want to be an extension of our members’ supply chain department, not just a supplier or a vendor that comes in once a month. We work with our members on a daily basis. That’s the first thing.
Number two, we do a lot of their price activation work. For most of out members, they don’t even have to activate their contracts, we take care of that for them and calculate their savings.
Educational Programs
Capstone also has a major focus on education. We have three platforms. The Capstone Learning Academy is 15-20 minute classrooms that allows a member to go in and learn different things. Some of our lessons include:
- What is a GPO
- How Does Distribution Work
- What is the State of Health Care Today
We modeled it after the old McDonalds model from the 80s. In those days, when you worked at McDonalds they would set you down in front of a TV and you’d watch five or six videos to break down how McDonalds works.
By talking to our member directors and VPs, we found that they were having a hard time getting new people into health care up to speed on the industry. We wanted to create modules to help. Now we’re expanding it to pharmacy, lab and some supplier modules. The supplier modules teach you how to do business with GPOs, what’s expected and how to engage with Premier.
In addition, there is our Capstone Leadership Institute. That’s an application program where we take 15-25 students a year. This program prepares mid-level supply chain leaders to become next-level leaders. We go through a lot of things inside and outside the supply chain. It’s a nine-month curriculum with one course each month. There is a test after each course, there is also a midterm paper and a final project. The curriculum is overseen by a council of our education members. When someone completes the program we graduate them, so there is a lot of pomp and circumstance to it. We are on our third class now.
Finally, there is our training track which is monthly courses in each one of our areas: supply chain, lab and pharmacy. That allows suppliers to bring their education offerings to our membership one time per month. We have really good attendance on these, anywhere from 40-100 people on each one. That’s a great opportunity for our suppliers to get in front of our members and for members to learn from our suppliers. It’s a good two-way track.
What lessons have you learned during the pandemic?
The biggest lesson I’ve learned is that nothing is for sure. We’ve been through pandemics before: N1H1, bird flu and Ebola, but none of them reached the level that we have today. We’ve learned that our supply chain is fragile. We made it that way. Things like just in time inventory may or may not stick around.
Putting all our eggs in one basket with both pharmaceuticals and supply chain products like PPE is dangerous. I think you’ll see a lot more nearshore manufacturing, a lot more onshore manufacturing and a lot more multi-source awards. Having backup and resilient processes in place will help build a more dynamic supply chain than we have ever had before.
What opportunities do you see for members in the next five years?
Change. We’ve got to be open to change. One of my favorite sayings is “Don’t be afraid to change the game.” There’s some really good advice at the end of the movie Moneyball. Brad Pitt’s character is talking to his assistant about how he wants to change the game. Then there is a scene with the owner of the Boston Red Sox, talking about how everyone who’s not following suit is a dinosaur.
I think that’s what we’ve got to be open to. Healthcare’s always been several years behind manufacturing’s supply chains. We’re providing patient care, not building refrigerators, so it’s a little bit different. I think there are lessons we can learn around redundancy and resiliency, and I think you’ll see some of that come through. My hope is that the old guys like me get out of the way and the young people come in and bring in these new ideas and processes. Whether it’s AI, any other kind of intelligence, robotics, or whatever it may be to help us become a better supply chain in the future, and using what we’ve learned from COVID-19.
Tim Bugg is the President AND CEO of Capstone Health Alliance and one of the pioneers that began the program back in 2000. Leading the organization on its journey to bring the former group purchasing program of the WNC Health Network to new heights with greater value to its entire membership, Tim has full corporate oversight of both Capstone Health Alliance and Capstone Solutions Inc.
