The Pittsburgh healthcare giant partners with Big Blue to launch a new spinoff company, applying artificial intelligence to drive efficiency.

UPMC taps IBM Watson, big data, machine learning, to build better supply chain

By Bernie Monegain
10:17 AM

With an eye toward taking the healthcare supply chain to new levels, UPMC on July 8 introduced Pensiamo, a new company whose goal is to help hospitals improve supply chain performance, where costs are high and getting higher, second only to labor costs.

Pensiamo is an Italian word. Translation: 'We think.'

"We're analytical. We're high-tech. We can provide insights that others cannot," UPMC's James Szilagy told Healthcare IT News. Szilagy will transition from his role as chief supply chain officer for UPMC to CEO at Pensiamo.

Pensiamo starts up with 150 employees, spinning out certain functions of UPMC's supply chain into the new company. For now, UPMC itself is the sole customer, but Szilagy said there has been strong interest from others.

"So now that we have the organization stood up, we can take them to the next level," he said. "Many healthcare entities across the country have not invested in their supply chain organizations over the years, so they are not as far down the maturity curve as UPMC is. They need more value out of that supply chain organization than what is being delivered.

What Pensiamo will do, said Szilagy, "is come in and bring those hospitals and health systems the UPMC supply chain organization – all the business processes, the technology, the talent – and transform them at a much faster pace than the can do on their own. So, speed to value is much faster than with a more traditional approach."

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The Institute of Medicine estimates that nearly one-third of healthcare spending is waste, UPMC executives point out.

"At a time when patients are demanding higher quality and value, traditional approaches to providing healthcare supply chain services are no longer sufficient," Szilagy said.

Pensiamo will combine UPMC's healthcare supply chain experience with IBM's expertise in non-medical procurement services and IBM Watson capabilities, he said.

"The aim is to offer providers a supply chain management approach tailored to each institution's specialties, patient population and other unique needs, and which will learn and respond over time to the changing needs of the business," Szilagy added.

UPMC, widely recognized for creating one of the nation's most efficient and effective healthcare supply chains, regularly ranking among Gartner's annual list of top 25 organizations, will become Pensiamo's first customer.

IBM executives call Pensiamo a "breakthrough" in the industry – one that "will drive better decisions across the purchasing process," said Jesus Mantas, general manager, business consulting at IBM Global Business Services.

Big Blue, itself is well-used to the ins and outs of supply chains. The company manages supply chain spending and operations across several industries, with more than $57 billion of spending under its management.

UPMC has developed a number of successful supply chain ventures that also serve outside customers, including Prodigo Solutions, Health Care Pharmacy Central and BioTronics, all part of the health system's strategy of commercializing innovation.

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