Finding PPE is just start of long game: Q&A with Atlantic CFO Kevin Lenahan

The purchase request was standard: 800,000 gowns. From his regular supplier. It’s usually a quick turn. It’s proving to be anything but.

We’ll let Kevin Lenahan, the chief financial officer at Atlantic Health, pick it up from here.

“I ordered these gowns more than a month ago,” he said. “This is from the company we always buy from. They were supposed to be here in the middle of May. Then it got pushed to the week of the 24th of May.

“Last week, I found out it was going to be first week of June. And then, later in the afternoon of that same day, I found out they only were going to be able to fulfill 60% of what we ordered.”

Lenahan’s struggle to get gowns has been the norm. PPE procurement during the COVID-19 pandemic has been anything but routine, numerous health officials have said.

Finding product — and vetting companies that say they can get you what you need — is only step one.

Figuring out how big orders need to be based on an anticipated burn rate, trying to determine when orders will arrive — and how much of the order will be fulfilled — comes next.

Only then can you attempt to figure out if the fit — both the sizing and the comfort — works.

Costs? Trying to mitigate those may be the hardest job of all.

These are the kind of things that keep Lenahan going all day and all night.

“What I’ve learned is we have to have a Plan B and a Plan C for everything,” he said.

ROI-NJ talked Lenahan about procurement in a pandemic. Here are his thoughts, condensed and edited for content and clarity:

ROI-NJ: Let’s start at the beginning. When did you realize COVID-19 was going to be a major issue?

Kevin Lenahan: By mid-January, we saw that this was coming, and we started to increase some of our purchasing. I ordered a bunch of gloves and gowns in January in preparation. I thought I was OK on masks. We didn’t see that part of this coming.

ROI: How do you mean?

KL: The burn rate on masks was greater than anyone could have anticipated. This is the factor most people missed early on: The burn rate of PPE.

COVID-19 was on us so quickly — and we had so few tests available — that we had to treat everyone coming in as if they had it. We called them PUIs, or people under investigation. Because of that, we had to use far more masks than we would have anticipated. The burn rate was incredible. So, we got ahead on the gowns and gloves, but not the masks. And, obviously, we weren’t the only ones with this issue. As you recall, everyone needed masks in the beginning. And that’s when everyone started to get limited on what they could buy.

ROI: How do you mean?

KL: By the middle to end of February, suppliers were limiting us to our historical buy rates. Suppliers were only going to sell you the amount of supplies that you historically had bought. And, then, maybe a couple of weeks after that, they started to say, ‘We can only sell you 80% of what you historically bought.’ And this was at a time when we were using PPE at a much faster rate than we normally did. So, we had to start searching for alternatives, items such as KN95 masks, which were Chinese knockoffs of N95s. The problem with those was not just the quality but the sizing. That hurt us, too.

ROI: How so?

KL: Every time you get a new brand of a mask — or a new brand of anything — you have to fit test it, because every mask fits every employee differently. Sizes can be different. The feel can be different. We need to make sure every employee has the right equipment. And you lose some inventory when you do that. We usually fit test once a year; now, we were doing it on the fly. This is one of the challenges.

ROI: You do have some advantages. Atlantic is a larger system — with seven hospitals and numerous other care facilities — and that has to help with buying power. Of course, in times like these, I’m guessing you are partnering with other systems like never before.

KL: Our size absolutely helps because, when I’m ordering supplies, I’m doing it for the system and the system, too, is not just the hospitals. We have numerous outpatient locations, Atlantic Medical Group, Primary Care Partners, Atlantic Health Partners and we have a very large home care company and ambulance, mobile health company. Being part of a large system has been very helpful because (we’ve) historically been very strong financially.

But it’s not just about Atlantic. I talk almost daily with the CFOs from Hackensack Meridian and RWJBarnabas to see how we can work together. We have other partnerships with CentraState and Hunterdon Medical Center, too. And Atlantic is part of AllSpire, so I’m talking with systems in Pennsylvania.

ROI: We’re guessing you’re talking about more than just PPE.

KL: Absolutely. Part of my job is to anticipate what will be needed. Talking with others — hearing their issues — helps me see what may be coming in the future.

ROI: OK, we’ll go there — what are your thoughts and fears and concerns for the future?

KL: Our first concern will always be for the safety of our patients and our caregivers. To do that, we need to make sure they have what they need. And that’s more than just PPE. If we start doing more procedures and more surgeries, what drugs or other supplies are we going to need more of? If we have more non-COVID patients, how is that going to impact our food supply? And we have to consider how items are being used. We are using gloves and disinfectant wipes in ways that we never have before. That obviously increases the burn rate.

These are not normal times. We have to try to predict what we’ll need, where we can get it from and how long it will take to get here.

ROI: Which takes us back to the gowns.

KL: We’re OK on gowns for the next 30 days. I’m worried about the summer, if they don’t come in. And, either way, it’s not going to be enough. I think 800,000 gowns would probably last us a month, maybe six weeks. Before, it probably would have lasted three months. And, now, I know I’m not even going to get the 800,000.

So, how do I fill in the rest of that gap? And at what cost? Traditional companies that we order from have not price-gouged at all. We’re still paying the historical rate, but I’m going to pay probably double or triple to fill the rest of that order.

These are the challenges: Figuring out the burn rate, the availability of the resources, how we’re going to pay for them and how are we going to make sure the staff is comfortable with them. It’s like a perfect storm.

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