Proving the Business Case for the Internet of Things

UPMC, IBM JV to cut health supply costs

William Payne
July 12, 2016

Pittsburgh based health care provider and funder UPMC is partnering IBM on a new joint venture aiming to cut costs through the use of supply chain cognitive analytics. A new company, Pensiamo, will develop services and applications to streamline health care supply chains through the use of IBM's Watson Health technologies. Pensiamo will be majority owned by UPMC, with IBM holding a minority stake in the new company.

For US health care providers, supply chain costs are the second-largest and fastest-growing expense behind labour costs. The US Institute of Medicine has estimated that nearly one-third of US health care spending is wasted.

"At a time when patients are demanding higher quality and value, traditional approaches to providing health care supply chain services are no longer sufficient," said James Szilagy, UPMC chief supply chain officer who will become chief executive of Pensiamo. "The new company will combine the best of UPMC's health care supply chain experience with IBM's expertise in non-medical procurement services, as well as IBM Watson capabilities infused with UPMC's domain expertise. 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."

UPMC will be Pensiamo's initial customer under a long-term contract.

"IBM brings substantial experience providing procurement services and applying Watson technology to clinical care and research. Through this partnership, Pensiamo will offer a new category of cognitive supply chain services. This is a breakthrough the industry has been waiting for -- unlocking new insights from the volumes of structured and unstructured data existing on medical products and treatments--and will drive better decisions across the purchasing process," said Jesus Mantas, general manager, Business Consulting, IBM Global Business Services.

UPMC is a non-profit health enterprise with more that 60,000 employees, 21 hospitals, 5,000 beds, and 400 clinical locations. An affiliate of the University of Pittsburgh, UPMC has $12 billion in revenues, and serves a health insurance membership of 2.3 million.

UPMC and IBM have a history of working together on health care efficiency. UPMC has also separately developed a number of supply chain ventures for third party organisations, including Prodigo Solutions, Health Care Pharmacy Central and BioTronics.