How Erlanger Health System used strategic partnerships to enable growth

ERLANGER HEALTH SYSTEM’S EXPERIENCE highlights the opportunities that contract partners can create. Erlanger is a major institution in Chattanooga, Tennessee. It has over 900 beds across seven hospitals, including a level 1 trauma center, a children’s hospital, and two critical access hospitals. It serves more than 800,000 patients annually, while also participating in research and education as an affiliate of the University of Tennessee College of Medicine in Chattanooga.

In 2013, the system embarked on a major growth effort. Hospital leadership identified surgery as one strategic target. The initiative was led by Adam Royer, Assistant Vice President of Surgical Services, who had broad oversight over quality, strategy, finance, and operations for the health system’s 50 operating rooms. Royer’s team defined goals around cost, efficiency, and quality. They had seen steady progress over the past several years but saw opportunities for further improvement.

According to Royer, two issues stood out. First, the surgery department faced a dual challenge of maintaining existing capital equipment while simultaneously investing in the future. “It was difficult to balance funding for both strategic investment that keeps the organization competitive, and also investment to keep what we have running,” says Royer. “One of the errors healthcare organizations make is putting all their money into strategic planning or all into replacement capital. If you focus on one, you’re dying on the vine on the other.” Second, resources were getting pulled in multiple directions. For example, staff sometimes took responsibility for fulfilling needs in different surgical areas, which in turn affected workflow.

After extensive discussion, Erlanger’s leaders decided contract services could help the system achieve its goals. Surgical Solutions tailored a contract to help them with their specific needs and provided a bundled package of technicians, capital equipment leasing and repairs and disposable instrumentation. The service included preop room setup, intraop support, and postop room breakdown as well as instrument inspection, transportation, and decontamination (in conjunction with the hospital’s sterile processing department).

As Royer describes the rollout, “Like any new thing, there was apprehension when we started. No one knew what to expect. But it worked out well. Now the right person has responsibility for the right tasks. It freed our staff to be more patient focused.”

“Establishing [a contract service] model allows two organizations to co-invest in a common vision. The future of healthcare is in long-term strategic partnerships.”

Erlanger physicians, nurses, and technicians saw several benefits, including efficiency in the ORs and cost benefits in the new contract. The service contract eliminated repair costs, dramatically reduced spending on capital expenses, and ensured loaner equipment was on hand if there was breakage. Perhaps most importantly, according to Royer, the service contract made surgery faster and more predictable and reduced OR turnover time.

“We got better at maximizing resources—bringing in new equipment, shuffling items between locations, and making the most of them,” says Jeff Loy, Assistant Vice President of Supply Chain at Erlanger. “With fees based on utilization, there was a shared benefit from increasing surgical capacity.” The efforts paid off with bell-curve growth.

In reflecting on Erlanger’s success, Royer highlights that the contract service model works because it is much more than a simple hospital-vendor contract—it is a partnership with aligned incentives and shared goals. “Establishing this model allows two organizations to co-invest in a common vision,” says Royer. “The future of healthcare is in long-term strategic partnerships.”

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