The Procurement Prescription

The transformation of GenesisCare U.S. sheds fascinating light on one of healthcare’s most complex and foundational business systems

Earlier this year, Florida-based GenesisCare successfully emerged from Chapter 11 reorganization. The integrated oncology and multispecialty physician network provides care for more than 120,000 patients in Florida and North Carolina with a catchment area largely in underserved areas. With a much slimmer footprint and independence from its global parent organization, the company has a better market position and the ground strength to grow as it follows its mission to redefine the care experience by improving patient outcomes, access, and care delivery.

Rebranded as GenesisCare U.S., it is no longer affiliated with units in Australia, Spain, and the U.K. With 140 centers across the two states, the system offers comprehensive and coordinated care in radiation oncology, medical oncology, hematology, urology, diagnostics, ENT, and surgical oncology.

Michael McKenna

In 2020, when Michael McKenna joined as the head of U.S. procurement, he reported to the Australian business unit, but plans to adopt global strategies didn’t necessarily scale. “The specifics of the U.S. healthcare market, with its regulatory frameworks and complex reimbursement models, as well as market variability across 17 states presented high implementation hurdles,” he explained.

With a 25-year career in academia, international development, pharmaceuticals, and banking – McKenna’s executive leadership positions include stints at Barclays, Pfizer, and Novartis – he was no stranger to constant change. These days, he’s GenesisCare U.S.’s VP, Head of Procurement, Engineering and Facilities.

Before the June 2023 filing, he transformed the company’s tactical purchasing function into a more strategic procurement function, rethinking category management, planning, and supplier relationship management. The purchasing group became proactive, with less dependence on spot buying.

“We looked to leverage economies of scale where it made sense and adopted hybrid and local sourcing strategies as appropriate,” he said. “Soon after joining, Covid hit and supply assurance became even more critical than it already is in healthcare given the extraordinary disruption to the supply chain. Because of the team’s experience, we were agile and relentlessly focused on finding alternatives to meet immediate needs while simultaneously laying the foundation for an improved cost structure going forward. Procurement always requires a delicate balance between present needs and future planning – in healthcare, especially, you need highly adaptable multitaskers, which is something I selected for when building this team. The team’s broad capabilities and understanding that the procurement journey does not end, but rather begins, with the signing of contracts led to facilities management being added to its remit.”

Without a substantial hiring budget, McKenna delegated parts of the new scope to team members and reallocated other responsibilities to create the bandwidth required to take on the new responsibilities. He also reinforced with leadership that “an outsourcing deal only begins when the ink dries on the page: There’s a difference between contract management, supplier relationship management, and service management that often gets lost. Just because you have outsourced a service doesn’t mean you can walk away from it – in fact, it requires well developed capabilities across the entire organization to ensure you capture the benefit of the bargain,” he noted.

Given the heavy capex investments and the complex technology needs of a healthcare enterprise, service management is critical. McKenna worked with clinic staff and service providers and their account managers to ensure the delivery of the right service levels, ensuring real value for their spending.

When they moved into Chapter 11, McKenna took responsibility for the service engineers for linear accelerators and CT machines, a function that had previously been handled out of Australia. “I continue to do that today,” he revealed. “This involves a lot of overlap with supply chains and it’s a real-time case study comparing an in-sourced model with third party suppliers and OEMs, as well as managing a spare parts inventory, logistics and distribution, and really trying to optimize the cost of servicing these machines.”

Medical device downtime doesn’t necessarily lead to revenue loss, but it does lead to a delays in patient treatment and revenue collection. Preventative maintenance and rapid response requires a great deal of coordination and problem-solving skills. Taking on an operational role has been a good experience for McKenna to build new skills, such as sizing the cost base to match revenue and ensuring that the cross-charges make sense to the business units consuming the service.

“You’re always trying to make sure that you can have your costs appropriately sized to revenue to generate a reasonable profit, which sounds simple but isn’t,” he observed.

“The playbook that exists in procurement and supply chain organizations across industry is to look for opportunities to reduce cost and improve quality, and make sure that balance is right. You have to ensure that you’re not overengineered, that you’re not over-buying, and that the things being consumed are in fact needed and working well for the firm. It’s an iterative, continuous process to rationalize both the SKU list as well as the supply base to deliver world-class cancer care and manage the company’s financial commitments.”

The procurement team works with GenesisCare’s pharmaceuticals distribution partners and clinical operations teams to optimally manage the complex price determination mechanism in the pharmaceutical market. “You’ve got the manufacturers, the payers, you’ve got Medicare,” he enumerated. “You have all of these things moving in tandem; prices change on a quarterly basis, and you have to be able to get in front of that.”

Size is a factor in drug pricing, and GenesisCare’s relatively small size in comparison with large healthcare systems doesn’t give it much leverage to negotiate with manufacturers or distributors on price. “You can get rebates based on your volumes, but we also must work to operationally adjust to price changes. Our operations team has developed an in-house formulary to determine which drugs are clinically appropriate and then, in that context, make the determination as to the implications for margin.”

McKenna is not a proponent of micromanagement, especially when it comes to procurement and supplier management. “The procurement discipline is both art and science, and there are many paths to success. Yes, you’ve got to be on top of all the things, but a lot of that challenge is resolved by having good people that you can trust, who understand the short, medium, and long-range needs and are competent, capable, and proactive on behalf of the organization without you having to worry about it at every moment,” he stressed.

“So, when the urgent things do override, it’s a quick conversation to course correct and then we get back on the path. It’s about adaptability, good people, and empowerment. My philosophy is, ‘Hey, we’re all going to make mistakes, and in the end, it is about learning and striving to be better tomorrow.’”

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An integrated oncology and multispecialty physician network in Florida and North Carolina providing care for more than 120,000 patients annually, GenesisCare U.S. offers community-based cancer care and other services at convenient locations. The company’s purpose is to redefine the care experience by improving patient outcomes, access, and care delivery. With advanced technology and innovative treatment options, skilled physicians and support staff offer comprehensive and coordinated care in radiation oncology, medical oncology, hematology, urology, diagnostics, ENT, and surgical oncology.

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