Conquering The Top Supply Chain Cost Drivers

Ask progressive doctors, surgeons and nurses to list their top cost drivers and they’ll likely unspool a litany of clinical, fiscal and operational sins familiar to just about anyone on the clinical and business sides of healthcare.

Of course, each clinical specialty may have its own nuances. But cost drivers making the scroll can include overuse of antibiotics, prescription drug consumption, unnecessary testing and treatments in laboratory and diagnostic imaging, population growth and aging, price inflation, technology advancements and changes, as well as over-utilization of services, such as the emergency room as primary care doctor. They also might cite increased demands for administrative participation, such as populating patients’ electronic health records and submitting payer paperwork, as well as searching for needed supplies that may be misplaced or missing for whatever reason. Naturally, they blame Supply Chain, and maybe rightly so.

As supply chain operations expands to assume larger “support services or system services” roles and embarks on the road to becoming what some studies predict as a healthcare organization’s largest expense category, particularly with the inclusion of outsourced labor and purchased services in the mix, what would Supply Chain professionals tag as their top cost drivers?

Healthcare Purchasing News reached out to more than 20 executives from providers, suppliers and service companies to share their insights. Here’s what they revealed in random and wide-ranging order.

Motivating factors

“As reimbursement declines and cost pressures increase, hospitals/healthcare providers must look for new ways to save money,” she said. “They must go beyond product price and place a greater focus on effective management. The Supply Chain team should not be held back by manual processes, and clinicians should be spending more time at the bedside.”

Lisa Zierten, Director, Marketing, Hospital Services,
Cardinal Health Inc.

“The conversations that we are having with leading health systems revolve around their desire to create a more clinically driven supply chain,” Scagliarini said. “The reason this is important is because health systems are looking to Supply Chain to better contribute to value-based medicine. In this era of value we can no longer be focused solely on contracts and price points.”

Mark Scagliarini, President and CEO,
Blue.Point Supply Chain Services

“For a healthcare system with a 3 percent net margin, a $1 reduction in costs is worth $33.33 in revenue. Therefore, if your reimbursements decline by $33.33 million and you want to keep your cash flow stable, you need to save $1 million in costs in the same period. To do this, you can either reduce direct labor, goods or purchased services costs. Supply Chain is responsible for managing goods and purchased services costs representing 45 to 50 percent of operating costs. The imperative, therefore, is to reduce goods and services costs aggressively to make-up for reduced revenues without sacrificing quality. This is similar to industries where cost management is an existential priority like automotive, computers, oil and gas, and retail.”

Chris Gormley, CEO, MedPricer

“The cost of doing nothing is leaving millions of dollars untouched at most healthcare organizations.”

Robert T. Yokl, President and Chief Value Strategist,
SVAH Solutions

Purchased services

“Purchased services typically account for half of health system spend. And purchased services are like the Wild West with many different groups owning contract negotiations. When contracts are created outside the Supply Chain department without oversight and knowledge from those trained to negotiate contracts, it exposes the health system to risk and increased cost, such as warranties that result in exorbitant maintenance and support costs.”

Michael DeLuca, Executive Vice President of Technology and Client Services, Prodigo Solutions

“Of the 45 to 50 percent of operating costs managed by Supply Chain, almost half of this is purchased services. Supply Chain has traditionally focused on reducing costs for physician preference items, medical/surgical goods and pharmaceuticals through price and usage reductions. Purchased services are anything bought by a healthcare system that isn’t a direct labor cost or good and includes items like lawn care, snow removal, elevator repair, transcription services, data storage, legal services, reference labs and radiology services. The large savings is driven in part because these categories have never been centrally sourced by health systems. These systems have grown through acquisition and left contract negotiations to local users in facilities, such as IT, administration and HR, who are not sourcing experts.

“Purchased services are different on several dimensions. For example, services are difficult to compare since there is no ‘part number’ equivalent. Services are based on contracts and statements of work. Services are highly preference-driven. For example, what makes one lawyer worth more than another lawyer? Price and [consumption] volume are difficult to collect because invoices rarely have granular detail. POs are not issued universally. This also makes benchmarking of services difficult. Challenges aside, proper management of purchased services costs can unleash substantial savings.”

Chris Gormley, CEO, MedPricer

“Purchased service expenses represent a significant portion of an organization’s total operating expense — oftentimes totaling even more than recorded supply expense. These significant numbers can be attributed to the fact that the category is largely decentralized with contract processes owned by several departments. This means that purchased services spend is not typically under the supply chain’s purview and, therefore, not subject to standard competitive processes and enterprise-wide terms and conditions. However, this means that if Supply Chain leadership is able to gain ownership of purchased services, the opportunity for savings is significant.”

Christopher J. O’Connor, President, Acurity Inc. and Nexera Inc.

“Of the $160 billion in spend that Valify has collected, cleansed, and categorized, the largest purchased services cost driver for Valify subscribers is in Facility Support Services, which includes categories such as property management, utilities, food service outsourcing, and bioengineering services. The next highest purchased services spend categories include information technology, outsourced clinical services and financial services.

“Property management and utilities are primary drivers due to the fact that there are over 3,000,000,000 total square feet of hospitals and clinics within the U.S., according to the most recent CMS data. Facility directors typically hire third-party service providers to maintain their properties cleaning, heating and cooling, and general maintenance.

“Food and Biomedical engineering services are resource-intensive functions and are commonly outsourced by many health systems. Outsourcing dollars largely contributes to these categories being the top drivers of purchased services spend. Additionally, spend in these areas is increasing year-over-year at a rate faster than other purchased services categories.

“Biomedical engineering cost trends have steadily risen due to increasing need to meet requirements of medical equipment being integrated to hospital technology networks and becoming more expensive to service. Health providers have found it more cost-effective to simply outsource these departments to the original equipment manufacturers and third-party vendors. The price of food has also increased by 26 percent over the past 10 years and is expected to continue to increase based on the USDA’s Food Price Outlook for 2017.

“One of the largest areas of growth in cost is coming from services around technology. Ten years ago, no one was talking about mobile strategies or cloud strategies, and electronic medical records were in their infancy. X-rays were stored in manila envelopes, and scheduling was done using a big book and a pencil. The move of these examples to digital, online and mobile device technologies has created a large need for services in healthcare. Additionally, services are needed to maintain ever more sophisticated hardware and equipment. Why this issue matters to the healthcare providers and payers, is that contracting for these services is something that Supply Chain managers across the spectrum are still figuring out.”

Les Popiolek, COO, Valify

“GPOs have done little in the area of purchased services, specifically IT. [These are] all areas that we have struggled with for years to try to control, and areas that suppliers are reluctant to put on contract as they know that we are not organized nor disciplined.”

Dee Donatelli, President & CEO,
Mid-America Service Solutions LLC

“Purchased services represents 11 percent to 15 percent in new supply chain savings.”

Robert T. Yokl, SVAH Solutions

Data management/science

“[One] key cost area is bad item master data. Without a single source of truth, provider Supply Chain teams may be ordering the wrong products and spending valuable time fixing errors. This means providers can miss out on negotiated contract pricing and reimbursement opportunities that offer significant savings. As a result, many Supply Chain staff teams are focused on reactive activities rather than proactive value-added tasks.”

Chris Luoma, Vice President, Product Management, GHX

“Organizational spend is being consumed by the cost of modernizing discrete technology systems, and attracting and retaining top talent to support an expanding span of responsibility. While provider systems are upgrading their data management platforms to create a digital advantage, they are uncovering the myriad of ways in which these discrete applications do not integrate with each other, and in so doing, create data deficits and necessitate continued and inefficient dependencies on provider-funded labor.

“The focus on single system solutions has converted providers’ significant and continuing investments in data management technology into annual annuities that have not achieved their objectives of automated data analysis, timely access to and evaluation of key metrics, and integration of clinical management systems to critically improve operating margins. All of these goals require unprecedented collaboration by and between suppliers and providers, and depend on a common and sustainable operational infrastructure that supports the independent benefit of all constituents. This collaboration requires technological and operational talent that, if available, is not typically present or funded at the required levels within the healthcare market.”

Mary Beth Lang, Executive Vice President for Cognitive Analytics and Computing, Pensiamo, and Vice President of Healthcare Pharmacy and Supply Chain Management Commercial Services, UPMC

“Data is king and the ability to manage and mine data will heavily influence the speed to which we identify, execute and sustain cost savings, not to mention gain clinical alignment. Data serves to accurately inform, and our ability to get at it [in] real-time can facilitate prioritization, but it also allows the Supply Chain professional to have a meaningful conversation with our clinical partners.

“Unfortunately, our systems and applications haven’t quite caught up to our data needs, and when they do we Supply Chain professionals haven’t adequately invested in the resources to manage and mine the data that exists in these systems. I believe the current situation is further compounded because we’re entering an era of evidence-based decision making where expectations are rising for quality and outcomes data to drive what products we put on our shelves.”

Ed Hardin, Senior Vice President, Supply Chain Management, Beaumont Health

“Managing the GS1 Healthcare US Initiative, we work with providers, suppliers, distributors and GPOs in the healthcare industry. Our perspective is unique in that we lead a collaborative industry group to help companies achieve supply chain efficiencies and comply with regulations through the adoption and implementation of GS1 Standards. So we get a lot of input from many different industry members from all points in the supply chain. We know that supply chain costs represent about one third of providers’ operating budgets – second only to labor.

“Three of the top challenges driving supply-chain costs are preventable errors, transactional inaccuracies, and reliance on manual records or inconsistent management of electronic health records (EHRs). All rooted in the use of proprietary information systems, these issues create major inefficiencies throughout the industry and can be solved with the proper implementation of GS1 Standards. Proprietary data systems are highly inefficient because their information is not easily understood by trading partners up and down the supply chain. The complexity and siloed nature of this model creates costly inaccuracies such as problems with inventory and supply chain disruptions, as well as serious risks in patient care.”

Greg Bylo, Vice President, Healthcare, GS1 US

“Multiple systems — both electronic and manual — that must be maintained with the ‘correct’ information are a cost driver throughout the entire healthcare supply chain. Price is just one of many details that can gunk up the works. Systems are rampant with packaging string, nomenclature and other item and vendor identifier issues. In addition, merger and acquisitions cause havoc on billing and ‘ship to’ addresses. Finally, it seems that most business partners build their systems to make themselves more efficient — not necessarily to make their business partners more efficient. Since these definitions of ‘efficient’ are different for each business partner, systems can tend to work against each other, causing operational cost increases and product not being delivered on time.

“Due to a lack of trust in these systems, human beings still need to interface into systems or between multiple systems. Human ‘middleware’ are left to make judgment calls on what needs to be done to make sure their customers have what they need to do their jobs. Not only is there additional costs associated with this work, the impact on data can be significant. Prices are changed on [purchase orders], but the reason for the need for the change never researched. Vendor representatives make changes on the fly,  GPOs issue new contracts and prices but do not affirm that the vendor, distributor and customer all agree and have made the change before transactions go through. Multiple changes across multiple systems cause both data integrity issues and supplies to be delayed.”

Joe Colonna, Vice President, Supply Chain, Piedmont Healthcare

“Our customers have multiple data management systems in place, but it’s becoming increasingly challenging to leverage deep actionable insights when the data is not aggregated appropriately.”

Doug Golwas, Senior Vice President, Corporate Sales,
Medline Industries Inc.

Contract/non-contract pricing

“What if you perform better than 90 percent of your price benchmarks? Is this good enough? A price benchmark is only as good as sourcing approach used to arrive at the prices and terms used in the benchmark. What if all price benchmarks are based on buyers accepting the first offer made by a supplier? What if they are based on simply rolling over a contract with prices negotiated three years ago in a supply market with declining prices?

“The only way to really know that you have the best price in the market is to compare your contracts fairly with appropriate tradeoffs for quality and cost, but to set-up methods where suppliers compete for your business. GM, United Technologies, Dell, Exxon Mobil and Wal-Mart know they must constantly strive to have a lower cost since the market demands it and consumers compare prices every day.”

Chris Gormley, MedPricer

Manual vs. Automated processes

“Time spent on manual tasks, like supply chain management, is nearly 20 percent of physician and nurses’ workweek. Supply chain administrators have an opportunity to improve their role through automated solutions, which reduce the amount of time spent counting inventory. For clinicians, there should be a greater focus on removing non-value added, nonclinical tasks from their workloads. This would allow clinicians to spend more time and effort on patient care. Our survey found that 66 percent of respondents wish supply, inventory and administrative tasks were something they didn’t have to do because it takes the focus off patients, education and training.

“Revenue leakage results from inefficient charge capture. Manual processes that rely on clinicians to document product usage introduce the potential for human error and items beings overlooked. Seventy-eight percent of participants in our survey said they are manually counting their supply chain inventory. Respondents identified a lack of urgency around updating the supply chain and introducing solutions that would address manual inventory management challenges. And nearly one third of respondents believed their facility had not introduced a new inventory management system in six or more years.”

Lisa Zierten, Cardinal Health Inc.

“Even the top health systems average contract utilization rates of 60 percent and many are much lower. They’re paying more for supplies than they should be. The solution to improving compliance is using a contract management and marketplace solution that operationalizes the contract and drives health system users to the right product, at the right price, every time. These same technology solutions can update prices and add new items to your marketplace in real-time, and alert you to contract renewals before they come due. The ROI can be significant due to dramatic cost savings potential.

“If Supply Chain can improve process efficiencies and do more with less, it means more time and money to spend on patient care and other revenue generating activities. Health systems are turning to supply chain technologies that improve the purchasing experience for clinicians, administrators and others involved in the requisition process to give them more time to focus on patient care or their primary business function.”

Michael DeLuca, Prodigo Solutions

“Manual processes and limited ability to forecast supply needs result in poor inventory management discipline. This causes costly overstocking in some instances, ‘fire drill’ logistics in others when products are out of stock when they’re urgently needed, and waste due to product expiration.”

Chris Luoma, GHX

“Spending too much staff time to make up for operational inefficiencies, inadequate data and analytics to provide visibility into supply chain spend, and limited visibility into total landed cost of product.”

Don Carroll, Vice President, Business Development,
Vantage Point Logistics Inc.

Time is the commodity that most of us never have enough of bcause so many supply chain operations are conducted using manual processes.”

Glenn Tamir, Vice President, Sales & Business Development, Supplymind LLC

Lack of product/service standardization

“It’s an ongoing challenge to manage product, contract and pricing data with thousands of changes occurring across the industry on a daily basis. The absence of standardization in the way this information is managed, shared and transmitted creates price leakage or missed opportunities for savings maximization between providers and suppliers.”

Chris Luoma, GHX

“Often hospitals report having seven or more separate supply chains running within their organization. A huge driver of supply chain costs are the Clinical Specialty Areas, including the OR, IR, Cath Lab, and several others. In these areas, clinicians have often assumed responsibilities for purchasing — after all, they’re experts in the products used and care delivered. But they don’t have supply chain skills, nor do they have the tools — including data about consumption — needed to drive good decisions. They’re responsible for managing expensive inventory, but without data, they’ll err on the side of overstocking to avoid stock-outs. In turn, expirations run high and costs are driven up. In many organizations, I see such a high number of product expirations that literally, a provider could fund several more nurses, or purchase much needed equipment, by eliminating this unnecessary expense.

“Managing these separate supply chains means more clinical time is spent managing inventory, taking time away from patients and driving up overtime. With a more centralized approach, you can create greater visibility to products being used in each of these areas, which can also drive more product standardization, reducing costs and supporting value analysis efforts.”

John Freund, CEO, Jump Technologies Inc.

“Variation not only drives price but it also increases the overall cost of managing the products. This variation also makes it exponentially harder to make sure that you have the right stuff at the right place at the right time, especially when the definition of ‘right’ is set at the individual user level. Think about the extra effort and cost that go into managing multiple vendors with multiple contracts across potential thousands of items, In some cases you can have a dozen contracts for essentially the same type of device. Price is one thing but making sure you have those items on the shelf is an operational cost driver as well. Beyond cost, keeping all of these same/different items in stock means there is a constant dance of contracts, item adds, purchase orders, invoices and stock management that could lead to an item not being available.”

Joe Colonna, Piedmont Healthcare

“[Variation] is a cost driver that exhibits itself in many forms. Included in this are things like the way clinicians provide care, care pathways, and supplies used in the delivery of care to the business processes used across the healthcare industry. Let’s look at two examples, one clinical and the other business. As the clinical example, joint replacements in any given health system could involve different brands of joint replacements used across physicians. This variation in supply costs money to train clinical staff and to maintain inventories, and could also contribute to the variation in patient outcomes and experience. A business example is the lack of automated ordering and supply chain processes that require manual processes instead of electronic processes using data standards. Both examples contribute to significant costs.

David Reed, Vice President, Healthcare Business Solutions and Operations,
Cook Medical Inc.

“Variability in both clinical and business processes is a challenge. Variation impacts cost through waste, inventory, defects, waiting, motion, etc.”

Richard Beach, Assistant Vice President, Materials Management, Intermountain Healthcare

“Many of the healthcare organizations that we have studied take a fragmented approach to logistics. Each department manages its own logistics or courier function, with no visibility to what the other functional departments are doing. This can lead to service overlap, where drivers pass each other on the highway, or even show up to the same facility at the same time to deliver items from different departments. The waste and expense that this kind of system can produce is obvious. What is less obvious is that lost opportunity cost. By fully connecting the transportation of the entire organization and creating an intra-company logistics network, healthcare organizations can leverage their scale, reduce intra-network shipping and freight costs, and share supplies and pharmaceuticals. They can eliminate waste and overlap, while taking full advantage of the economies of scale and physical connectivity.

“As health systems have expanded geographically, many have built [central] fill pharmacies, laboratory operations, equipment warehouses and print shops in each of their facilities. While this approach allows the health system to provide the services needed to care for patients, it also produces redundancies. As agility and scalability become more necessary for the healthcare of the future, centralizing and streamlining these redundant facilities is top of mind for healthcare leader. An integrated intra-company logistics operation can transport the pharmaceuticals, specimens, equipment and print material to facilities that do not have these departments and liberate real estate, taking significant costs out of the health system without impacting care. It also allows for better inventory management and sharing.”

Bonni Kaplan DeWoskin, Vice President, Marketing, MedSpeed

 

“The issue of supply chain cost drivers is a multifaceted problem due to variations in reimbursement methodology, particularly how hospitals get paid. Advanced healthcare delivery organizations must understand their costs across all services so they understand their internal expenses per patient episode by procedure, diagnosis and location of service. Reimbursement schemes have taken on a life of their own, and now we are faced with multiple alternative payment systems, ranging from bundled payments to fee-for-service, to shared-value and global-fee models. All these different methods assume the delivery organization has systems and management tools in place to track, monitor and allocate purchases, services, staffing and capital expenditures for actual ‘episodes of care.’ Therefore, the top three cost drivers are the technology to allocate capital, expenses and costs, which must include labor to track, monitor and provide feedback financially and clinically per episode of care to the organization.”

William D. Kirsh, D.O., MPH, Chief Medical Officer, Sentry Data Systems

 

Clinical preference items, implantables & technology

“Many organizations do not have a process in place to address their strategic clinical technology needs effectively. This includes reviewing existing clinical assets, including imaging, laboratory and robotics, etc., monitoring the life cycle of key systems, assessing risk (such as cyber threat monitoring), or analyzing the impact of new technologies on improved patient outcomes, throughput, and reimbursement. This is a critical area for acute care providers to consider as they face shrinking reimbursement and limited access to capital while more patients are seeking care in outpatient settings.

“As organizations shift from fee-for-service to value-based reimbursement, the supply chain needs to play a leading role in creating a strategy for managing new implant technology as well as a safe and effective way to assess its effectiveness. For example, the decision to shift the ratio of cardiac valve implants more toward a transcatheter approach (TAVR) can spell the difference between a cardiovascular surgery program that is profitable or one that is not. Providers must be able to quantify and weigh a product purchase based on the impact of that decision on the clinical and financial outcomes of the procedure for which it is used.”

Christopher J. O’Connor, Acurity Inc. and Nexera Inc.

 

“Technology continues to advance to the point where depreciation isn’t completed before the next ‘big thing’ needs purchased. Software and devices that are expensive in both purchase, implementation and training costs also require health systems to maintain current upgrades on all systems to reduce risks from hackers, potential ransomware and obsolescence. Often, facilities also face additional costs to make certain staff understand how to use the technology and keep up with medical advances.

Suzanne Alexander-Vaughn, Senior Product Manager, Product Development, Global Automation & Medication Adherence division of Omnicell Inc.

 

“The cost drivers for pharmacy play out across the rest of the healthcare continuum, particularly correlating to the clinical equipment parts and orthopedic implant markets. The primary issue in both spaces is the cost to manufacture and store small volume parts both of which are prevalent for differing reasons. In the clinical engineering space, the time over which equipment is maintained leads to an issue with the availability of parts. Original equipment manufacturers purposefully maintain a decreasing inventory of parts over time, the exact inverse of what is required for the strategic maintenance of assets for which there is no capital or differential reimbursement driving replacement. Non-existing dynamic parts management and predictive failure models only exacerbate the OEMs’ inability to drive to a more cost-effective life-cycle maintenance model. Unless OEMs accept the economic reality of equipment being maintained and used until such time as a total-value assessment justifies replacement, this cost-pressure will remain. Change in this space is possible but not while OEMs continue to target large margins on their sale of service and parts.

“The same macro-issues exist in the orthopedic and spinal implant markets where hundreds of thousands of SKUs are produced by suppliers who are supporting actual annual SKU demand measured in the low-thousands. This issue is marked by supplier inventories of implants and specialty instrument trays with turn-rates lower than 1.8. The inventory carrying cost to the supplier is translated as increased and non-negotiable cost to the provider. Until collaborative evidence based practice and product-patient demand-matching is facilitated, the costs of this critical area — as well as other similar categories — will drive unsustainable contribution margins for providers.”

Mary Beth Lang, UPMC

 

“Our customers are also consistently faced with how to manage holding costs for high-value inventory — not a small challenge. The ability to move non-traditional med/surg items into the traditional distribution channel allows our partners to save on the buy side, have greater control over the inventory that may reside on consignment or trunk stock, save on freight and receive it with their daily orders on the same trucks delivering their med/surg items.”

Doug Golwas, Medline Industries Inc.

 

“Collaboration with physicians continues to be of concern. Many aggregation groups are working to reduce physician preference item expenses but to do so needs commitment. To drive commitment we need to reduce the variation in practice and products. That’s difficult to do even in the very best managed organization.

“Recently I had a member of our aggregation group say [that] we spent millions on capital last year without a budget. The lack of asset management, new technology review and processes and the impromptu spending in capital is costly and dangerous. How many pieces of new technology do you have under a dust cover in the OR corridors?”

Dee Donatelli, Mid-America Service Solutions LLC

 

Mergers & acquisitions/continuum of care

“As hospitals merge and affiliate with other institutions and non-acute providers, the additional operating and supply chain costs represent new cost saving opportunities. However, they must first address the complexity of disparate systems (such as enterprise resource planning systems), overlapping services (such as warehouse and distribution/services centers), and labor (such as multiple purchasing departments), as just a few examples. Failure to create an integration plan to address these complexities can result in challenging hurdles that prevent the organization from realizing cost savings across the expanded corporate supply chain and instead result in increased operating costs.”

Christopher J. O’Connor, Acurity Inc. and Nexera Inc.

 

“Our customers are increasingly moving towards an integrated care model that includes acute care, post-acute, physician and other specialized services so they can keep patients within their system. With this includes the challenges of controlling the total cost of the supply chain across the entire continuum of care. As health systems increase in size, so does the complexity of managing the overall health system’s supply chain needs.  The question becomes how can they deliver the right product, at the right time, to the right location?  Then the new question becomes how can they replicate that process across the entire system?

Doug Golwas, Medline Industries Inc.

 

“All costs are going up — from supplies, technology, medications, utilities and construction projects while reimbursements continue downward. Care locations are also changing to areas of lower reimbursement, including urgent care and community-based healthcare facilities. Many health systems that house these facilities are still working through how to manage the expenses of supply and medication delivery to those areas while maintaining an effective level of cost oversight. Consumers are more likely now to shop for care and base decisions on information found online, sometime requesting certain products that may not be the most effective treatment for their need, financially or clinically. Increased regulatory requirements around tracking expiration dates, temperature and environmental monitoring also add to operational expenses. “

Suzanne Alexander-Vaughn, Omnicell Inc.

 

“The extent of coordination across multiple clinicians for a single patient can drive costs up or down. And as consumer expectations enter healthcare this also can have a huge impact on things like patient satisfaction and even their ability to follow care instructions. Let’s look at an example. Two doctors are seeing the same patient. Doctor A, the patient’s primary care physician, orders a chest x-ray and refers the patient to a specialist. The next day the same patient goes to see Doctor B, a specialist, who orders a chest x-ray as well. Historically, both chest x-rays get done and read, and in some instances, get paid for. But there’s no value in that. Situations like that highlight poor care coordination and can leave a patient wondering why they are having the same test performed twice. Care coordination extends beyond the healthcare institution all the way through to the patient’s home. Do I have the patients’ drug/devices when they go home? Do I have their procedure of care documented?”

David Reed, Cook Medical Inc.

 

Labor/management expertise

“Labor costs continue to increase and many hospitals are challenged to find and retain employees with the skill sets they need. This includes clinical positions, supply chain positions and leadership positions. All departments and roles require a range of skills to manage their operations while balancing growing uncertainty in healthcare due to reimbursement constraints and rapid technology changes. In many areas the addition of opioid addiction, and associated costs of drug diversion and compromised care also impact labor costs.”

Suzanne Alexander-Vaughn, Omnicell Inc.

 

“Finding qualified supply chain personnel to manage the expanded operational demands has become increasingly difficult. Experienced professionals are in high demand and are expensive to recruit and retain. As such, many smaller healthcare delivery organizations are unable to sufficiently invest in the talent required to optimize their operations. Further complicating this issue is the disproportionate talent gap that exists between large healthcare suppliers and the customers that they serve. This gap has resulted in, at its most progressive, a non-reciprocal model that focuses on improving the provider inefficiencies while leaving supplier opportunities for operational reductions untapped.”

Mary Beth Lang, UPMC

 

“It’s rare that an organization doesn’t have a handful of non-labor cost savings initiatives and with that financial objectives, but the ability to put them into effect and sustain the savings is most often a direct reflection of the supply chain professional’s ability to execute on multiple initiatives at once. Good project management helps to facilitate execution of initiatives, particularly multiple initiatives, but most importantly helps to coordinate and prioritize resources and, when necessary, can say no to competing expectations. Unfortunately, well-meaning ideas and their subsequent initiatives to drive down costs don’t deliver because of a lack of good execution. I’ve often quoted a line I heard many years ago as a consultant working for what was then one of the Big 6 firms: ‘The execution of ideas is really what separates capable from great talent. Be the latter!’”

Ed Hardin, Beaumont Health

 

Pharmacy

“Two key drivers of rising pharmacy supply chain costs are inefficient pharmaceutical inventory management and drug price inflation. Provider organizations are faced with complex choices around optimal inventory selection and volume, managing classes of trade, including 340B and specialty, and supporting drug shortage mitigation. Inefficient or nonexistent predictive data modeling leads many healthcare organizations to select suboptimal strategies to manage inventory, therefore increasing costs and complexity.

“The acquisition cost of the drug inventory that needs to be managed also continues to rise. The onerous FDA approval process for DESI drugs, continual launches of new specialty, biologic, and orphan drugs, high cost shortage management alternatives, and standard inflationary drug pricing practices are drastically increasing the cost of pharmaceutical products in inventory.”

Mary Beth Lang, UPMC

 

“From the pharmacy supply chain perspective, the top three cost drivers we see are pharmacy practice compliance mandates (e.g., USP 797/800, DSCSA, DQSA, 340B); the need for capital expenditures on physical plant, IT, and related software applications; and the new high-priced biotech drugs that are coming to market. “

Christopher J. O’Connor, Acurity Inc. and Nexera Inc.

 

“The primary cost driver that our CEOs voice is pharmacy costs. The ever-increasing expenses are becoming unmanageable at the in-patient level based primarily around reimbursement, or lack thereof.”

Dee Donatelli, Mid-America Service Solutions LLC

 

Supplier partnerships

“It has been well documented across other industries that companies and suppliers that have true partnerships have lower costs. Unfortunately, there are few examples of this in healthcare. The good news is that a shift in approach is occurring. We are working with health systems and suppliers to assist them as they partner on value based contracts. All parties should be measuring outcomes, cost, and quality tied to product decisions and working together to optimize the value achieved through the correct level product at competitive prices.”

Mark Scagliarini, Blue.Point Supply Chain Services

 

“One inventory management-related cost contributor is poor vendor collaboration practices. Lack of visibility to consumption and on-hand inventory limits supplier partners’ ability to help providers minimize costs through efficient ordering and inventory management practices. All of these issues lead to time and cost inefficiencies for providers.”

Chris Luoma, GHX

 

Inventory consumption/usage patterns

“According to our benchmarks we often see where a health system has market leading price, but total costs and usage are higher than peer hospitals. Supply Chain needs to understand where there is waste, overuse of items, and misalignment of use when compared to clinical best practices. Variation in product selection leads to variation in clinical care and can impact outcomes.”

Mark Scagliarini, Blue.Point Supply Chain Services

 

“Increased use of products, equipment and technology are all good for improved healthcare but there is an associated cost. We must ask the question: Are we doing the necessary cost-to-outcomes analysis to determine the efficacy of the increased use?

“Over utilization of tests, procedures and services is another issue. These result in a waste of time, energy, and resources. Over-utilization also has safety aspects for patients.”

Richard Beach, Intermountain Healthcare

 

“Inventory waste, including expired products, lost products, and the risk of over or under stocking is an issue. Without proper visibility into the supply chain, many hospitals/providers could be ordering too much or not enough. Our survey found that one in four hospital staff have seen or heard of expired products being used on a patient and 18 percent have seen or heard of a patient being harmed due to a lack of necessary supplies.”

Lisa Zierten, Cardinal Health Inc.

 

“One area that’s getting a lot of attention lately is bulk buys. I’ve had a number of Supply Chain leaders comment that they’ve been able to successfully negotiate great pricing with key vendors by making some pretty significant bulk buys. Often, the dollar amount of these buys is in the millions, and of course, the product pricing is significantly discounted. But when you look at actual usage data on these items, you might see the hospital has now purchased enough inventory to last several years and frequently, they’ll end up with product that’s going to expire and be wasted before it can be used. More cash is tied up, more cash is wasted. These bulk buys are great in theory but need to be approached with more caution — and more data.”

John Freund, Jump Technologies Inc.

 

“By creating a demand-driven supply chain, where all purchasing, inventory, and demand systems in the health enterprise are connected using a single standardized platform, dramatic reductions in inventory excess can be realized.”

Glenn Tamir, Supplymind LLC

 

“The biggest cost driver we help our clients with in relation to supply chain is the underutilization and over-purchasing of mobile equipment. For example, IV pumps, of which hospitals have hundreds if not thousands, cost upwards of $3,000 each, and they typically sit idle 60-70 percent of the time. Yet nurses will tell you they never have enough because they can’t find them when they need them. We often see hospitals with a 3:1 ratio of IV channels to beds, to cover this perceived shortage. This is a case of over-purchasing, spending millions on equipment that goes unused the vast majority of the time.

“Realistically, and we’ve seen this with clients, most hospitals can operate at a 2:1 ratio or even lower if they have a method to keep track of this equipment. The issue is compounded when missing equipment causes delays or risks to safe patient care. A lack of readily available IV pumps can impact on-time case starts in the OR, and not being able to find equipment for recall or preventive maintenance presents patient safety risks. Multiply this across not only IV pumps but wheelchairs, specialty beds, sequential compression devices, bladder scanners, mobile radiology equipment … the cost is far more than most hospitals realize.”

Charlie Springsteen, Product Manager, Versus Technology

 

“Inventory management inside and outside of the care facility with visibility reduces inventory carrying costs, reduces obsolescence and ensures integrity regarding recalls, lot control, etc., and ensures material availability at the point of use by the clinician.

“Technology is a force multiplier. Reducing the constant search for available goods saves time on behalf of the clinicians, increasing their ability to focus on patient care. Overstocking, due to lack of confidence in material availability, creates wasted space in an already confined space.”

Norman Brouillette, Vice President, Operations for Technology & Healthcare, Ryder

 

“Supply utilization management represents 7 percent to 15 percent in new untapped supply chain savings.”

Robert T. Yokl, SVAH Solutions

Lack of clinical alignment/support

“Standardization efforts should focus on a department and patient formulary approach, not just a contract and SKU approach. Value Analysis team’s first step is to define and/or understand clinical best practices and the optimal use of products for their patient needs. Once this is done then supply chain can focus on getting the appropriate contracted suppliers and the most competitive price. Too often this process happens in reverse. An analysis is performed on the price of a product that has always been used without understanding functional alternative products that can perform the same task at a fraction of the cost.”

Mark Scagliarini, Blue.Point Supply Chain Services

“The proverbial low-hanging fruit does not exist or certainly not to the degree it once did. It’s harder to reach and it’ll take a multi-disciplinary team of people to get it down, including the willing involvement of one’s physicians. As a former consultant and most recently with the provider roles I’ve been a part, my initial weeks on site working with my new customers would always include, among other things, an assessment of cost saving initiatives, their success and sustainment. What I have repeatedly found is that a correlation exists between lack of clinical alignment and the inability to manage and drive down costs. I don’t know how we as supply chain professionals can expect to bend the cost curve without walking side-by-side, as partners with physicians but to do that our position must be that physicians aren’t the drivers of cost. Rather, it’s in our ability to align with them — or not — that serves to drive costs.”

Ed Hardin, Beaumont Health

Off-contract/Rogue/Shadow Purchasing

“Purchasing control leakage that allows off-contract, rogue buying techniques is a cost driver. For many hospitals, the requisition process is highly reliant on end-users to manage inventory and submit orders, making it labor-intensive and error-prone. A fully automated supply chain provides visibility and control to help providers pay on contract and identify savings opportunities.”

Chris Luoma, GHX

Overstocking

“An enormous driver of costs in provider organizations is the overstocked inventory that sits on shelves “just in case” it’s needed. In facilities I’ve worked with recently, I’ve consistently seen supplies by overstocked by 40-50 percent and even higher in some areas. Recently, I had an opportunity to meet with 15 hospital CFOs and when I asked them about supply chain, to a person, they seemed to downplay the importance. Either supply chain reported into a different area of the hospital or they didn’t really think it had a high impact on their overall financial performance. But when I asked them about their total supply spend and if they knew what their annual inventory turns are, I could see them starting to think about how much cash is sitting on their shelves in unneeded inventory. After some conversation, they agreed that a major source of cash for capital projects was reducing the inventory sitting on their shelves. With cost of cash high, these wasted dollars in inventory grow even more significant, because at the bottom line, it’s game changing.

“Remember, supply chain is an area where you are punished for stocking out, but not rewarded for managing inventory to velocity. The incentive is to over stock a supply room.”

John Freund, Jump Technologies Inc.

Strategic sourcing

“Many healthcare systems have outsourced their sourcing capabilities and price control to GPOs. GM, United Technologies, Dell, Exxon Mobil and Wal-Mart wouldn’t combine with other industry players and buy off the same contract. These organizations recognize the importance of strategic sourcing and purchasing excellence as a critical differentiator against the competition. They fund their operations and invest in their own teams, technology and methods. They use the appropriate sourcing strategy for each category whether it is conducting competitive bids for leverage categories or forming close partnerships with mission critical suppliers.

“Leading IDNs in healthcare have adopted a similar approach shifting over 60 percent of their spend to contracts managed by their own teams or with closely affiliated independent regional groups. This is because they gain more savings and save fees through their own sourcing efforts than as a part of a national GPO. This is not simply because of their volume, but also committed contracts and targeted sourcing strategies. The tools, technology and information sources that power GPOs exist to power your own sourcing team and gain similar results to larger IDNs even if you are a smaller healthcare system. It just takes a commitment to invest in the resources for a repeatable and efficient process.”

Chris Gormley, MedPricer

Outcomes & readmissions

“Outcomes are a key cost driver. To start, I am making the assertion that outcomes and readmissions are interlinked. This becomes important as healthcare funding moves toward outcomes-based payments that are bundled together for an episode of care. I don’t think anyone wants to have a patient readmitted. However, readmissions do happen. As funding models shift towards value-based care we need to think about what each patient needs to get back to health beyond the procedure or event itself. Think about a patient who is chronically showing up at the emergency department with respiratory issues. They receive treatment and are sent home — only to show up again a few days later with the same issue. In an outcomes-based reimbursement model a provider may not receive any additional reimbursement for the readmission. Ensuring that the patient recovers and remains healthy may require that a healthcare worker visit their home only to discover that environmental issues in the patient’s home contribute to the cause of readmission.”

David Reed, Cook Medical Inc.

Operational Risks

“As healthcare takes on added clinical and financial risk, one of the areas that we are asked to solve is how to reduce risk. Intra-company logistics is an often overlooked source of risk. A branded vehicle that gets into an accident can cause negative publicity for a healthcare operation, impacting reputation in the community. A specimen or controlled substance pharmaceutical that goes missing can inconvenience a patient or affect the care they receive. Even a late delivery of an item needed for surgery, could force a hospital to delay the surgery and cause physician and patient dissatisfaction.

Bonni Kaplan DeWoskin, Vice President, Marketing, MedSpeed

How Can Healthcare Supply Chains Improve? Experts Weigh In.

Across the board, healthcare is seen as one of the greatest opportunities for supply chain improvement.

Whether it is a hospital, pharmaceutical manufacturer, drug distributor or retailer, every link in the chain could better manage their inventory, or work more closely with suppliers. The opportunity for growth is so great, third party providers are investing heavily in the sector, with specialized services tailored to a growing healthcare logistics market.

But, beyond noting the vast potential for efficiency gains, news reports rarely hone in on how hospitals can better manage their value chain. Perhaps it’s self distribution? Increased investments in technology? Vertical integration? In our latest series, we explore how hospitals can better manage their supply chain, and why they should. But first, the expert’s take:

How can healthcare supply chains improve?

Abe EshkenaziCEO, APICS

In the past, each hospital department was responsible for ordering and maintaining its own inventory. This approach was inefficient and costly.

As the healthcare industry has evolved, many hospitals have become part of affiliated systems or hospital corporations. As part of these changes, centralized supply chain management organizations within these healthcare systems have become much more common, but there continues to be significant opportunity for improvement.

The industry needs to modernize its supplier relationship management activities, increase product standardization, and allow clinicians who perform supply chain functions, such as inventory and ordering, to focus on patient care. Hiring, training and retaining supply chain management professionals should be an imperative for the industry.

Cathy Morrow RobersonFounder and Head Analyst, Logistics Trends & Insights

A number of industry-specific concerns have created opportunities for supply chain improvements. For example, healthcare has been highly regulated over the years; the 2012 patent cliff which caused the U.S. drug market to contract by 1{3d48c2ffeac5b3f3ac54732d49a0b0ca9fd7cec0f4630955c0e7b180206e5d78}; and the rise of the middle class in emerging markets, including China, have all resulted in a rethink of how to store, transport and deliver healthcare goods in the most cost-effective and efficient means possible.

Healthcare companies have responded through mergers & acquisitions and relocating facilities to emerging markets. Logistics providers have responded by following their healthcare customers. In addition, with the rise of biopharmaceuticals and other temperature-sensitive pharma, logistics providers began to introduce temperature-sensitive transportation and inventory management, all tracked and monitored via sensors in many situations. We’re also continuing to observe logistics providers acquire niche pharmaceutical logistics providers to expand capabilities and further penetrate particular geographies.

Technology has played a major role in the transport, inventory management as well as in supplier relations. Online collaborative tools and the management of healthcare goods from origin to destination can be done in real-time including those goods that are sensitive to temperature, humidity and/or bumps while in transit.

IoT, also known as Internet of Things, is another opportunity within the healthcare industry. Using sensors and in combination of your smartphone, one can monitor and share with physicians on a regular basis such readings as blood sugar, heart rate, cholesterol and more. In fact, a lot more can be done via the vaguely described IoT. Many startups are popping up to offer a variety of unique offerings for the healthcare market.

Lastly, white-glove last-mile delivery services are on the rise. On average, the US population is aging and for many of our elderly, staying at home has become a choice. Delivery, set up and training of such medical devices as oxygen machines and even delivery of pharmaceuticals and medical supplies is a service offering that several logistics providers are introducing.

Jon SlangerupPresident and CEO, American Global Logistics

Due to its sensitive and personal nature, the healthcare supply chain is perhaps the most critical and often most criticized service delivery system of all. My experience in healthcare is limited, but I do know a thing or two about creating positive customer experiences, and healthcare services have a ways to go in this regard.

Most importantly, it’s important to acknowledge that transforming healthcare is not obvious or easy. There are many moving parts within the industry’s highly complex, institutionalized system of government regulators, insurance providers, hospitals and clinics, pharmacies, and other physical and digital infrastructure. However, I view the common denominators as being information access and patient care/experience. These “high tech and high touch” components are fundamental to the efforts being made across most supply chains to optimize services and goods fulfillment, and equally critical to healthcare. The key difference here, of course, is that healthcare is about people who deserve and expect very special care.

So what are the core drivers and opportunities for improving the healthcare customer experience? I would say it begins with choice and ends with the quality of care and in between are the various decisions and hand-off points which characterize the healthcare value chain. Fortunately, we live in a time of ubiquitous information and instant communications, so the high tech part of the equation is progressing rapidly. The internet enables an ever-increasing array of healthcare options, underscored in part by the emerging online fulfillment of prescription drugs.

Technology will go a long way in leveling the playing field for those in need of care through instant information access, speedier patient processing, personalized post-care follow up, and proactive reminders about future appointments and care requirements. However, how this ultimately improves the patient experience boils down to how people are treated, which in the final analysis, is the core value proposition that trumps all the rest.

Tania SearyFounding Chairman, Procurious

Healthcare isn’t my forte….but luckily I have a few healthcare gurus in my network….so I “phoned a friend” or two to gain insight on this one.

Traditionally healthcare is an area that is less mature than other more advanced supply chains such as FMCG, IT or automotive which are typically leaner and have had more of a cost focus. For example with inventory, Pharma still holds extremely high inventory with DIO of 6 months+ when others measure in days. Sometimes stocks run into years and the high value of some products can really impact cashflow. Conservatism has meant many companies have not been as ambitious in their outsourcing models for logistics retaining their own warehousing facilities.

Equally the supply chain is complex and fragmented. In many cases there are multiple hand-offs before a product reaches a patient – this adds complexity and cost and prevents end-to-end supply chain management. Digital has a key role to play in this simplification and as the supply chain starts to consolidate, it will begin to change rapidly as distributors/pharmacies become redundant.

Original link in it’s entirety: How can healthcare supply chains improve?

Keeping Track Pays You Back

Tracking solutions improve patient care and bottom line

The future looks bright for for-profit hospitals, which are likely to see a 2.5 percent to 3 percent growth rate in 2018.1 But for not-for-profit and public healthcare facilities, the horizon looks a little dimmer as they continue to grapple with the same fiscal challenges as last year.2 Despite good inpatient volume, for these facilities, revenue growth is likely to plummet in the months ahead as spending continues to climb. This is according to a 2018 outlook report by Moody’s Investor Service which says low government reimbursement rates — which accounted for 61 percent of gross patient revenue in 2016 — clinical staff shortages, labor costs, bad debt, escalating insurance deductibles and co-pays, and increased spending on essential technology all play a role. However, it’s essential technology that could also play a role in leading healthcare providers closer to the light.

Big data is the big focus

Hospitals that provide quality care, greater efficiency and patient safety are likely to be using data analytics and other information gathering technologies to achieve their goals. Omnipresent connectivity — interoperability — is the target most facilities are aiming for. Compliance deadlines for GS1 standards are also approaching and while nearly all non-federal acute care hospitals have an electronic health record (EHR) system in place,3 not everyone see it as the seamless, communication dynamo it was meant to be — not without the right technology in place.

Capturing data at the point-of-care is one way that healthcare facilities are tying all of their once disparate data systems together in real-time — a practice that is likely to be as common as it is for clinicians to don personal protective equipment before starting a surgical procedure.


“We wanted to change the need for each system to utilize its own numbering and nomenclature methodologies, which force the providers to expend significant time trying to manually manipulate and maintain data that really isn’t ours,” explained Mosser. “We needed total system-to-system interoperability.”
Franciscan Missionaries of Our Lady Health System (FMOLHS) is an admirable example of how perceptive planning and smart product selection can lead to success. The organization recognized a need to synthesize the varying content they generated and stored in multiple data systems. The goal, said William Mosser, Vice President, Materials Management, FMOLHS and LogisticsOne, was to connect the Supply Chain, Clinical and Financial departments so that they could immediately share and access each other’s information in a joint effort to improve care, eliminate waste, and cut unnecessary spending.

Implementing a system that would allow clinicians to scan medical supplies at the point of use was part of the build. “Since we are very active in promoting and using GS1 Data Standards, we saw the opportunity to utilize manufacturers’ data, based on our contracts, to directly feed our Clinical Information System (EPIC) automatically,” explained Mosser. “The data required by EPIC (item number, description, UNSPSC Codes, HCPCS codes, dimensions, price and so one) are all known and driven by the manufacturer of the products we use. For us to take that data and translate it into other system-driven naming conventions simply makes no sense. The GS1 data standards that the manufacturers feed into the required data pools meet all of our expectations. The challenge was to find someone who would be willing to work with us to connect the dots … and make this all interoperable.”

FMOLHS was satisfied with the various supply chain management technologies they were already using from GHX so they decided to enlist another application from the vendor to help make their vision a reality. “They are a trusted partner and one who already had the wherewithal to understand the need and help drive the change,” Mosser said. They adopted GHX’s ClinicalConnexion solution and point-of-care barcode scanning which increased OR efficiency significantly since clinicians no longer had to manually key in surgical supplies to patient EHRs. Charge capture also increased dramatically from 40 percent to 95 percent, along with other benefits that prompted the organization to implement EPIC and ClinicalConnexion across FMOLHS’s entire healthcare system.

“Our clinical teams simply capture what is used via EPIC tools and bar coding and the ClinicalConnexion feeds the required data to allow us a clearer picture of cost per episode of care, including highlighting financial variation in similar procedures and care plans,” said Mosser. “We have immediate access to information that was previously maintained in different systems, with different keys that required manual intervention to align the data points. Plus we don’t need to maintain our item master with staff manually updating elements that are all owned and maintained by the manufacturers.

“In the end, the investment is minimal compared to the benefit of seeing first hand, what devices and supplies are used by physician for each episode of care,” he continued. “The level of data we have available for identifying costs and revenue improvement opportunities are fantastic. And providing this level of data to our physicians and clinical leaders allows us to have more evidence-driven decisions to achieve best practice clinical outcomes.”

“The introduction of the Universal Device Identifier (UDI) initiative created broader mandates surrounding the tracking and tracing, and chain of custody, of these critical products. With the current Class 2 and Class 3 UDI requirements in place, it is federally required that patient identification is tied to the use of these products,” added Robert Sobie, Senior Worldwide Director & Business Leader at BD.”With a POU tracking system in place inside the procedural/OR rooms it’s easier for the circulating nurse to document patient specific usage of these items while allowing interoperability between systems to reduce clinical documentation time and increasing accuracy. This can also be accomplished with systems outside of the procedural/OR rooms but would require the circulating nurse to leave the room during the case potentially increasing the possibility of nosocomial and surgical site infection rates with repeated exits and reentry.

“A correctly deployed tracking system allows inventory tracking and data confirmation in real time eliminating the need to wait until the conclusion of the procedure to do this,” continued Sobie. “Postponing this documentation until the end of the procedure can increase the turnover time thereby decreasing efficiency and causing costly delays. Lastly, the digital integration reduces the time spent with inventory reconciliation, order entry, order tracking, audit and recall management, all things that ultimately increase labor costs and the risk of a stock-out event.”

Sobie discussed the success that the multi-site Memorial Hermann Healthcare System has after implementing the BD Pyxis system in an effort to eliminate the time-consuming task of manually loading and locating products, improve accuracy of inventory information, address duplicate data entry and other issues. “With concerns over increasing labor and supply costs, regulatory compliance and patient and caregiver satisfaction, the Supply Chain team at Memorial Hermann worked in conjunction with their OR clinical counterparts to implement the connected, end-to-end supply solution from BD Pyxis,” Sobie said. “By deploying this advanced tracking system Memorial Hermann has also successfully implemented the GS1 standards and have been tracking Universal Device Identification (UDI) information for over five years.”

Pyxis advanced tracking system from BD

Also, recall management labor decreased 95 percent and staff now spends less than one hour a day managing implantables, physician-specific and trunk stock inventory. “By working together with BD Pyxis we’ve created a truly end-to-end patient care focus from the point-of-order through the point-of-use by the entire Hermann team” said Chris Toomes, Regional Director of Operations, Memorial Hermann Healthcare System. “We now digitally track the use of medical devices from the time the order is placed until they time they are used on a specific patient. We integrate the data usage and product disposition information into other systems and processes to increase accuracy and create new efficiencies. By using medical device consumption data to drive clinical and supply chain decisions, Memorial Hermann has been able to substantially reduce costs, the number of suppliers used and our business operations.”

Perfecting physician preference cards

As the cost of labor and medical products increases, facilities must find proven ways to bolster productivity and savings in all departments, including the central sterile/sterile processing department where outdated physician preference cards are filled, causing a lot of wasted time and money.

“The key to doing this effectively is streamlining process and the supplies and equipment used during a procedure; if hospitals are not documenting that information, they may be picking and sterilizing extra items that are rarely used,” said Suzanne Alexander-Vaughn, Senior Product Manager, Omnicell. “This causes unnecessary activity in purchasing, central sterile supply, case pick operations, operating room setup, and room turnover times. Reducing these inefficiencies also allows the organization to refocus clinical staff time to patient care instead of administrative tasks.”

 

The article in it’s entirety may be found at: Keeping Track Pays You Back

Not Even The Mattress Pads Were Spared: An Inside Look At A Top Hospital’s Struggle To Cut Costs

In only 18 months on the job, the chief operating officer of Brigham and Women’s Hospital had weathered relentless and unforeseen events that battered the elite Harvard-affiliated medical center.

A record snowfall had paralyzed Boston and stanched admissions for a month. Installation of a $400 million electronic health record system had obscured a fall-off in patient volume. And the hospital had lost $24 million preparing for a threatened nurses strike.

But by July 2016, with the hospital’s finances improving, Dr. Ron Walls was upbeat. “I had this moment,” he recalled, “when I said, they can’t possibly throw anything more at me now.”

The moment didn’t last.

The hospital’s new chief financial officer poked his head in Walls’s office. “Got a quick minute?” he asked.

He was there to sound an alarm: In the 2017 fiscal year that was about to start, he told Walls, operating income wouldn’t cover the hospital’s expenses; 2018 would be in the red as well.

“Chris, how do the numbers come back up?” Walls said he asked. The CFO, Christopher Dunleavy, was ready with a solution: Cut $50 million from the hospital’s $2.6 billion in annual spending.

That conversation set in motion an unprecedented cost-cutting drive that would affect the jobs of hundreds of the hospital’s 18,000 employees and reach into every corner of the institution — even overriding nurses’ choice of mattress pads. It also led to an aggressive push to boost revenues 4 percent a year.

Over the past three months, the Brigham provided STAT unusual access to meetings of its top management and internal deliberations and documents. This inside look shows how one of the nation’s leading hospitals is confronting the daunting financial and marketplace forces buffeting academic medical centers across the U.S.

“This wasn’t about ordinary cost-cutting,” Walls said. “It was very clear we had to become a much leaner, more efficient organization.”

The heart of the Brigham’s austerity plan was a buyout offered this past June to more than 1,000 senior employees, including more than 400 veteran nurses. Some 800 workers decided to retire, including 7 percent of the nursing staff — a remarkably high acceptance rate. Many of them are leaving this week.

While hundreds of new nurses are being hired at substantially lower entry-level pay, the large exodus underscores a critical challenge for the Brigham’s leadership: how to cut costs without harming patient care.

One of the departing nurses, Hallie Greenberg, called the buyout generous but worried that the hospital will miss their collective experience and knowledge. “The senior folks teach the junior folks,” she said. “There is so much about every profession that is unwritten law.”

Academic medical centers are expensive to run: They deploy an army of specialists and sophisticated technology to treat the sickest patients. They’re the backbone of the nation’s biomedical research enterprise. And they train new doctors.

But they’re now caught in a vise.

Private and government insurers are tightening reimbursements as the cost of drugs and other essential elements of care are on the rise. An aging population with chronic diseases is seeking more complex, and costly, care, while routine and often more profitable cases — delivering babies or replacing knees — are increasingly shifting to community hospitals.

And in Washington, uncertainty over research funding for the National Institutes of Health and the futures of Medicaid and the Affordable Care Act clouds the reliability of key hospital revenue streams.

“This is a pivotal moment for academic medicine,” said Dr. Betsy Nabel, president of the Brigham. “The nation needs academic medical centers to train the next generation of physicians and scientists and drive discovery and innovation in medicine.”

 

After the Brigham launched its push to slash spending, it got more bad news from its parent company, Partners HealthCare, the big integrated health system that includes Massachusetts General Hospital. After years of criticism that it charges higher prices than most of its competitors, Partners announced a plan to cut about $500 million over the next three years. The Brigham’s share is about $150 million, meaning its own 2018 effort is just a start.

The Brigham isn’t calling any of this a crisis. Some of the financial pinch reflects payments for major capital projects, including the medical record installation and the recently opened $600 million Building for Transformative Medicine, a combined outpatient care and research facility from which the hospital expects a return.

For all the cost-cutting now, the hospital has long been a powerful economic engine, racking up $2.7 billion in revenue last year while operating in the black. On average, 94 percent of its beds are occupied and patients are routinely backed up in the emergency room or in recovery after surgery, awaiting an open bed.

Still, Walls knew that a cash-flow crunch is a worrisome financial indicator, potentially affecting the hospital’s ability to borrow money to invest in the technology and facilities required to maintain its top standing.

Dunleavy’s warning would have been more disconcerting, however, if Walls hadn’t immersed himself in the nitty-gritty required to pull the hospital out of its tailspin the previous year. He figured his team could handle anything after mastering the arcane world of operating room scheduling.

Surgeons are a key power center of a hospital, and their operating room schedules are considered sacrosanct — so essential to their jobs that the days and times are often set out in a hiring letter.

“Surgeons own that time,” Walls said. “You don’t mess with a surgeon’s block time just like you don’t mess with a person’s payroll.”

But Walls and his team messed with it anyway.

Just two months into the 2016 fiscal year, they discovered that the hospital’s operating margins were already running $27 million under the budgeted amount. They had relied on faulty estimates of their 2015 patient volume — thanks to data lost during the transition to the new Epic electronic records system — and set targets for 2016 that were too optimistic.

Walls wondered whether he had “steered the ship off the rocks onto an iceberg.”

He concluded that the Brigham, like many hospitals, wasn’t vigilant enough in ensuring that assets such as operating rooms and MRI scanners were being used efficiently. So he directed his senior VPs to create and actively monitor a set of “vital signs” of hospital performance — everything from the number of surgeries to how many patients walk out of the emergency room before getting treatment.

They ran an analysis of OR occupancy each hour of the day and plotted the results on a graph. It resembled a wedding cake, with a red line, representing the number of ORs with patients in them, cutting through it.

The “cake,” as Walls began calling it, starkly showed how many ORs were staffed and available at any given hour but idle because no cases were scheduled — and why OR use was running in the low 70 percent range.

Brigham surgeons are assigned OR rooms in four-hour blocks. The practice was that if a surgeon hadn’t booked a slot 10 days in advance, it would be allocated to other surgeons in his or her division. The division could hold on to the times until 48 hours in advance before releasing them to other surgical specialties. That left little time to book a new case.

The main reason surgeons hang onto their blocks, Walls said, was fear of not having a room available for a last-minute case. So armed with the cake analysis, Walls, with the support of Dr. Gerard Doherty, the Brigham’s chair of surgery, devised a new plan: The surgeons and their divisions would release any unbooked slots 10 days in advance to the entire surgical community. In return, they were guaranteed an OR if they needed one at the last minute.

“My guys are going to kill me,” one surgeon told Walls, “but I think this might work.”

Doherty helped sell it. “We had to ask for a little trust in the beginning,” he said. The hypothesis was, it would make more times available for surgeons. “If Dr. Smith has a Tuesday slot blocked, nobody else can get in there,” he said.

The plan was implemented at the beginning of 2016. At the meeting each Wednesday, Walls and his colleagues eagerly checked the data. Just two months later, the red line was crawling along the top of the cake: The ORs were running at about 85 percent of capacity.

“It lifted the mood of the whole room,” Walls said.

It also lifted surgery volume. By May, partly due to this success, the hospital had fully recovered from the $27 million shortfall.

That experience helped prepare Walls for this year’s round of cuts, when he again messed with the Brigham’s traditional ways of doing business.

The saga of the mattress pads:

Of all that Walls had to worry about, mattress pads may have seemed the least obvious.

But the subject arose at a meeting this past June, called to wring $10 million in savings from the hospital’s huge medical supplies budget. A Partners executive had come up with only a $3 million trim, exasperating Walls.

Have we turned over every stone, he asked the executive. Surely a company the size of Partners could leverage its purchasing power to come up with more savings.

When the executive responded with “mattress pads,” Walls had no idea what she was talking about.

She explained that a few years earlier, Partners hospitals had collaborated on a test of several rival pads to determine whether they could agree on one and negotiate a volume discount. The best pads are highly absorbent and resist wrinkling underneath patients, which can increase the risk of bed ulcers.

That choice, the executive added, cost the hospital an extra $400,000 a year.

For a moment, the room was silent. “Are you serious?” Walls finally asked.

If every other hospital in the system thinks the new pad is OK, it should be OK with the Brigham, he said, turning to the hospital’s head nurse. Without compelling evidence that it would affect patient care, he told her, the decision would have to be reversed.

The issue was kicked to the hospital’s new products committee, where Dorothy Bradley, program director for nursing simulation, ran a quick absorbency test. Spreading the two pads on the floor, she poured water on them and concluded there wasn’t an important difference. She also called a Mass. General wound care nurse, who told her they hadn’t seen any increase in pressure ulcers with the winner from the earlier trial.

With that information, the committee quickly acquiesced in shifting to the Partners pad, which was one-third the price.

“People always like the one they’re used to,” Bradley said as a way of explaining the initial decision. “I don’t believe we knew we were the only outliers.”

In Walls’s view, the original decision “was about allowing an individual part of the system the autonomy to opt out just because it wanted to.” The hospital no longer can tolerate that approach, he said: “Those are the kinds of things we have tightened down.”

 

Original Link: Not even the mattress pads were spared: An inside look at a top hospital’s struggle to cut costs

Over 50{3d48c2ffeac5b3f3ac54732d49a0b0ca9fd7cec0f4630955c0e7b180206e5d78} of Orgs Lack Adequate Healthcare Cost Reduction Goals

An overwhelming majority of healthcare executives (96 percent) stated that cost transformation is a significant need for their hospital or health system. Yet, over one-half of organizations either do not have a healthcare cost reduction goal or have a small goal that will not transform cost structures, a recent Kaufman Hall survey showed.

One-quarter of over 150 senior executives in hospitals and health systems stated that their organization has no target for decreasing costs.

Single hospitals were most likely to have no healthcare cost reduction goal, with over 40 percent stating that this was the case.

The survey also found that about 26 percent of respondents said their hospital or system has a cost reduction goal between 1 and 5 percent and another 29 percent have a target between 6 and 10 percent.

Researchers noted that these modest goals will not be enough to “lower cost in an organized and deliberate way.” The cost decreases also will not keep pace with annual inflation.

“Financial realities demand a new way of providing care,” stated Walter Morrissey, MD, Kaufman Hall Managing Director. “This is not business as usual, involving incremental change. To meet community needs under healthcare’s new business imperatives, and to participate as a provider of choice in narrow networks developing nationwide, organizations must have a strong value proposition and a cost position that is significantly lower than competitors.”

Despite a lack of adequate goals, executives agreed that lowering healthcare costs within their organization is imperative as the industry shifts to value-based reimbursement. Almost 80 percent of participants said that their organization needs to refine its cost structure for the transition away from fee-for-service.

Other popular motivators for lowering healthcare costs included:

• The need to close the chasm between the organization’s financial plan and current operating performance with 68 percent of respondents

• To remain competitive with 61 percent of respondents

• To generate capital to fund strategic growth initiatives with 51 percent

While lowering healthcare costs topped executive priority lists, most organizations are not seeing their cost transformation strategies producing positive results. Three-quarters of executives reported that their cost transformation success was average to below average.

Single hospitals and small health systems were particularly skeptical about their cost transformation success, with 82 percent and 92 percent respectively saying their results were average to below average.

Conversely, health systems of 10 or more hospitals stated that their cost transformation success was better than average to very successful. Larger system executives also perceived their organization as successful across a range of targets, even in the over 20 percent cost reduction range.

Hospitals and health systems may not be realizing significant cost savings because their leaders are primarily focusing on traditional priorities that just scratch the surface, researchers pointed out.

Between 60 and 70 percent of executives said that their organizations see labor costs and productivity, supply chain and other non-labor costs, and revenue cycle optimization as key areas for lowering costs.

“Progress is slow because traditional areas will not yield the magnitude of cost reduction required to transform an organization’s cost structure,” stated researchers. “Business and service initiatives and clinical and workforce redesign actions are required.”

Original link: Over 50{3d48c2ffeac5b3f3ac54732d49a0b0ca9fd7cec0f4630955c0e7b180206e5d78} of Orgs Lack Adequate Healthcare Cost Reduction Goals

Healthcare Supply Chain Management Market to Reach $2.3B by 2022

The pressure to improve operational efficiency under value-based care and the demand for cloud-based solutions will drive the healthcare supply chain management market.

 – Growing at a compound annual growth rate (CAGR) of 8.4 percent, researchers projected the global healthcare supply chain management market to reach $2.31 billion by 2022, a recent Markets and Markets report showed.

The value of the healthcare supply chain management market is up from an estimated $1.55 billion in 2017. But researchers noted that the global healthcare supply chain management market is still somewhat restricted because of the costs of implementing and maintaining a solution.

However, the North American market is strong. The market is slated to hold the largest share of the healthcare supply chain management market, and it will also experience the highest CAGR during the forecast period, researchers predicted.

Hospital consolidation, regulatory requirements, increasing chronic disease burden, and patient financial responsibility growth will boost the US market, while healthcare supply chain optimization efforts will drive Canadian providers to seek solutions.

Researchers attributed the global market’s growth to provider organizations facing increasing pressure to improve operational efficiency and profitability, especially as value-based reimbursement models tie payment to quality and cost performance and payers reduce claims reimbursement rates under fee-for-service systems.

The development of cloud-based healthcare supply chain management solutions also contributed to the projected market’s growth, the report stated.

Healthcare supply chain management solutions are categorized as on-premise or cloud-based delivery modes. Researchers projected the on-premise healthcare supply chain management mode to hold the largest share of the global market in 2017.

Provider organizations have favored on-premise solutions because of their usability. On-premise solutions also have a lower risk of healthcare data breaches.

But provider organizations will start to consider more cloud-based options by 2022. Cloud-based modes will see the highest rate of growth during the forecast period, the report added.

“Growth in the cloud-based segment can largely be attributed to the several advantages offered by the cloud-based delivery mode over the on-premise delivery mode,” researchers wrote. “Cloud-based solutions are less costly to install and maintain than on-premise solutions which contribute to the high growth and popularity of the cloud-based mode.”

Additionally, the report showed that provider organizations are selecting healthcare supply chain management software products versus hardware solutions.

Researchers predicted the software segment to acquire the largest share of the global market in 2017. Healthcare supply chain management software solutions offer provider organizations increased efficiency and business intelligence services at a lower cost, the report stated.

More providers will be seeking healthcare supply chain management solutions by 2022, researchers explained. Manufacturers are set to command the largest share of the global market, but the provider segment should see the highest CAGR from 2017 to 2022.

In the current healthcare landscape, providers are looking for systems that can support high-quality patient care while also improving profitability. As reimbursements become linked to care quality and cost performance, provider organizations are finding that their revenue is shifting and earning the maximum amount for services delivered will not be as easy as performing a test or procedure.

Ensuring that practices and hospitals implement effective inventory management practices will be key to increasing profitability and improving care delivery efficiency, researchers stated.

Healthcare supply chain management solutions will also gain popularity among hospital and health system users as healthcare merger and acquisition activity increases. Under a hospital consolidation project, leaders and providers tend to centralize business processes and a comprehensive system is critical to tracking inventory across several facilities.

The leading healthcare supply chain management vendors are SAP (Germany), Oracle (US), Infor (US), McKesson (US), TECSYS (Canada). The report also listed GHX (US), Manhattan Associates (US), JDA Software (US), Jump Technologies (US), and LogiTag (Israel) as key players in the global market.

 

Original Link: Healthcare Supply Chain Management Market to Reach $2.3B by 2022

Financial Challenges Continue to Trouble Community Hospital CEOs

Selecting the correct purchasing group is imperative as purchasing and supply chain are immediate impact areas. 

February 07, 2018 – Financial challenges continued to keep community hospital CEOs up at night in 2017, according to a recent American College of Healthcare Executives (ACHE) survey.

Once again, hospital leaders identified financial obstacles as the top issue their organization faced in the past year. Respondents have consistently cited financial troubles as the most pressing issue for hospitals since the ACHE’s 2004 survey.

“Assuring patient safety and providing quality care is the No. 1 job of hospital leaders,” stated Deborah J. Bowen, FACHE, CAE, President and CEO of ACHE. “The survey results indicate that leaders are addressing the challenge of doing so in a changing and uncertain financial and regulatory environment.”

Specifically, the survey of nearly 30 community hospital CEOs revealed that Medicaid reimbursement was the biggest concern in terms of financial challenges. Hospital leaders experienced challenges with adequacy and timeliness of payment.

Healthcare executives in a recent Deloitte survey also cited Medicaid reimbursement and funding as a top concern in 2017. Health system leaders worried that political debates and proposals regarding the Medicaid program would lower funding to states, causing state actors to decrease Medicare reimbursement rates, cover fewer services, or drop enrollment.

Lowering rates would harm a hospital’s bottom line but limiting coverage and enrollment would also increase uncompensated care costs, the Deloitte report stated.

Uncompensated care costs are already on the rise for hospitals. Over 4,800 hospitals spent $38.3 billion on uncompensated care in 2016, up from $35.7 billion the previous year, the American Hospital Association recently reported.

Hospitals may see their uncompensated care costs grow under new Medicaid policies, too. CMS plans to implement an Affordable Care Act provision that mandates the federal agency to reduce Medicaid Disproportionate Share Hospital (DSH) payments by $43 billion between 2018 and 2025.

Medicaid DSH payments help hospitals cover the costs of treating greater proportions of Medicaid beneficiaries, especially since Medicaid reimbursement only pays hospitals 88 cents on the dollar for treating these patients.

When designing the Affordable Care Act, policymakers included the DSH payment cuts to offset coverage gains under Medicaid expansion programs. However, when the Supreme Court ruled that states could choose whether to implement the program, policymakers did not remove the payment cut provision despite some states not realizing coverage gains through Medicaid expansion.

Medicaid DSH payment reductions went into effect in October 2017.

According to the ACHE survey, community hospital CEOs also felt troubled by other financial challenges, including:

  • Increasing costs for staff, supplies, etc., with 64 percent
  • Reducing operating costs, with 57 percent
  • Government funding cuts for items other than reduced Medicare and Medicaid reimbursement, with 56 percent
  • Bad debt, including uncollectable emergency department and other charges, with 54 percent

Additionally, community hospital CEOs reported that their organizations faced significant issues with governmental mandates. This is the second consecutive year governmental mandates ranked second.

With governmental mandates, 70 percent of hospital leaders reported that CMS regulations were a major issue in 2017, followed by regulatory and legislative uncertainty impacting strategic planning with 67 percent, cost of demonstrating compliance with 54 percent, and state and local regulations and mandates with 54 percent.

Political uncertainty dominated 2017 as policymakers and health leaders debated a possible Affordable Care Act repeal and replace. A new administration also ushered in Medicare and Medicaid reform, with CMS Administrator Seema Verma canceling two upcoming mandatory bundled payment models and the federal agency launching the bipartisan Quality Payment Program.

Uncertainty and health policy changes had hospital leaders constantly responding to new mandates and rules.

The third challenge for community hospital CEOs was personnel shortages, which outranked patient safety and quality this year.

About 69 percent of hospital leaders stated that their organization is facing a registered nurse shortage. Not far behind are primary care providers, with 63 percent of respondents experiencing a shortage of these providers.

Other providers in demand at community hospitals in 2017 included:

  • Physician specialists with 52 percent
  • Physician extenders and specially certified nurses (e.g. physician assistants, nurse practitioners, and certified nurse midwives) with 36 percent
  • Therapists with 30 percent

Personnel shortages may be a lasting issue for community hospitals. Overall, the Association of American Medical Colleges (AAMC) projects the physician shortage to reach up to 104,900  providers by 2030.

“That personnel shortages have become one of the top three concerns suggests that hospitals are keeping their attention on attracting and retaining a talented workforce to ensure the short- and long-term needs of patients can be met,” explained Bowen.

Original Link: Financial Challenges Continue To Keep Hospital CEOs Up At Night

Don’t Let Freight Escape Your Cost Management Efforts

There are many costs in a health system. Some are large (orthopedic implants), others are small (housekeeping chemicals); some are relatively easy to control (office supplies), others are much more difficult (biologic mesh).

Supply chain appropriately should apply resources to the highest cost categories, making sure the easily controllable ones are actually being controlled, and finding ways to influence the ones that are harder to control. But that should not mean that you ignore the somewhat lower cost areas — particularly if one is relatively easy to control and subject to waste if ignored.

Freight represents an excellent example. Costs for freight should be actively managed to reduce the number of expedited shipments and to reduce the cost of all shipments.

Freight costs are a fact of life in business. No matter how you look at it, there is a cost associated with getting supplies from the place they are manufactured to the place they are used. Ultimately, the purchaser of the goods pays at least part of this cost. However, there are many ways to control and reduce freight costs.

A package deal?

Perhaps the best way to limit freight costs is to get them included in the price of the goods. Purchasing goods “FOB Destination” means that all freight costs will be included in the cost of the goods. There will be no separate cost for freight added to the invoice. Some may argue that it is better to pay less for the goods and see the actual freight cost separately. The problem with this argument lies in the application of freight cost. The amount on the invoice may or may not be the actual cost. Many sellers actually label it “freight and handling,” which is another way of saying “freight and additional profit.” From my experience, most purchasing professionals agree that contracting for goods FOB Destination is ultimately less costly than paying for freight separately.

Sometimes it is not possible to negotiate FOB Destination terms. Some suppliers will not budge from FOB Origin where the buyer is responsible for the freight costs. In this case, there is still a good way to contain the cost. The one advantage to an FOB Origin contract is that the buyer can determine the method of shipping. This means you can require that the seller use your preferred carrier and use your negotiated rates. Not every supplier will agree to this easily. It is a little more work for them, and they often get some benefit from the shipping company based on the amount they ship using their outbound shipping contract. Many organizations now use a third party like Optifreight or Triose to help them manage these inbound shipments and convince sellers to use their negotiated rates – rates that are even lower (according to the companies) than you are likely to get on your own.

Know the code

Reducing the costs of expedited shipments is another strategy that should be used to minimize freight costs. An expedited shipment is any order that must be delivered faster than the norm. These are usually overnight or second-day deliveries from manufacturers. They can also be special deliveries from a distributor. One key element in controlling these costs is assuring that the user who is requiring the expedited delivery is also responsible for the costs associated with it. This is not always the case. Sometimes all freight charges are expensed to a single department, often Supply Chain. Other times the freight charge will just be buried in the expense to the department where they just see the total cost. In both of these cases the department has little information or incentive to do anything different. Part of this best practice is establishing a freight cost code for every department and applying all freight charges to that code.

Another key element is good inventory control in procedural areas like Perioperative Services and Cath Lab. Keeping adequate supplies and reordering in a timely basis can significantly reduce the number of expedited shipments required. Standardization in these departments will help as well. Controlling one or two items that you use frequently is much easier to manage than many items you use infrequently. But no matter how well you manage inventory in these areas, there are likely times when an expedited shipment will be needed.

The final strategy in controlling these costs is to use the least costly method consistent with the need and from where the item is being shipped. Second day is much less costly then overnight, and regular overnight is less expensive than “by 10:30.” Lesser known but as important is the “normal” delivery period. Depending on where the item is coming from, “normal” delivery might get there as early as an “overnight.” FedEx and UPS have programs that will have this information.

While the savings may not be as great as negotiating a new spine implant contract, the savings can be substantial and relatively easy to achieve. If you are not tracking and controlling freight costs now, take the steps needed and add this best practice to your operation.

Original Link: Don’t Let Freight Escape Cost Management Efforts

How Hospitals Can Turn Cost-Cutting Drives Into An Advantage

If healthcare professionals tap supply chain fundamentals, they can unlock a world of savings.

At the end of the day, the patient-focused supply chain runs like most others. There is a focus on customer service, process improvement, strong relationships, communication and cost management. Healthcare may be unique in its patient-centric focus, but the fundamentals of supply chains remain the same regardless of the industry. Below, a few strategies taken from the retail, manufacturing and service industries that can help turn cost-cutting drives into a competitive advantage:

Logistics has a direct result on patient outcomes

A stock out in the supermarket may force the customer to buy another brand of egg noodles. A stock out in the factory may delay a production schedule and initiate a prickly call to the supplier. But a stock out in the hospital may have life and death consequences.

In the healthcare supply chain, supplier performance has a direct impact on patient treatment and care.

Consider a family member needing a special heart stent that is sitting on the truck caught in a traffic jam on the way to a delivery at the hospital. Might this be an over dramatic example?  Not really. UPS offers a specialty service in healthcare logistics, where they focus on specialized healthcare capabilities of shipping and compliance, storage and distribution, cold chain, and integrated supply chain and fulfillment services. Their focus is on the importance of the patient, noting reliability, scalability and security. FedEx expands healthcare logistics to include medical devices, pharmaceutical and biotech, diagnostics, equipment, and clinical trials.

Both providers seem to understand the importance of their role in the patient centric supply chain.

In any industry, working with suppliers who understand the unique needs of your business makes managing the supplier chain easier. They understand the cost and performance issues, speak the common language, and provide the specialized products and services needed to support end user customers.

Suppliers in the healthcare supply chain, or those who have segments of their business focusing on healthcare, also understand their unique roles in impacting patient care. Buyers don’t need to convince them as to the importance of excellent customer service, flawless materials, and tightly managed supply chains. Their role in patient care is implicit.

Lean fundamentals have also found theirway into the healthcare environment.

The Virginia Mason Institute, part of the Seattle based Virginia Mason Medical Center, are experts in lean healthcare, working with hospitals, medical centers, and healthcare professionals in incorporating lean concepts to improve business operations. This results in lower costs and positive impacts on patient care. Using the lean concepts developed in the Toyota Production System (TPS), lean healthcare works to eliminate waste, improve flow and add value, all from the from patient’s perspective.

Lean healthcare, as advocated by the Virginia Mason Institute, provides a culture of continuous improvement, implementing processes that are value-added to the patient and eliminating those that are not. It aligns leaders and staff around a shared vision, empowers frontline staff to drive improvement efforts, and performs root cause analysis to get to core of problems.

The associated cost reduction and efficiency improvements are important in an industry under constant pressure to deliver cost reductions and improved patient outcomes.

The healthcare landscape is undergoing massive changes. Hospitals and medical centers are merging trying to create greater economies of scale, pharmacy and insurance companies are combining in an effort to leverage retail delivery of healthcare services, medical device companies are under manufacturing related cost pressures and big pharma is battling recent tax legislation around the funding of drug research.

Supply chain professionals will be under increasing pressure to lower costs through improved operations throughout the supply chain. Process improvements like lean certainly help, but they are only part of the solution.

Aggregating spend through GPOs provides leverage

Group purchasing organizations (GPOs) are entities that help healthcare providers to aggregate demand from multiple sites and organizations to create leveraged procurement opportunities with manufacturers and distributors.

According to the Healthcare Supply Chain Association (HSCA), members of GPOs include hospitals, ambulatory care facilities, nursing homes, and home health agencies. GPOs do not purchase any products, but negotiate contracts their members can use when making their own purchases. The GPO member still makes the final decision as their purchasing process, supplier selection and needs. The leverage provided by the GPOs may provide competitive support for their non-GPO related purchases.

 The HSCA notes hospitals and other health care providers are increasingly relying on GPOs to help manage their procurement process, lower costs, and improve efficiencies. Some GPOs offer e-commerce applications to help their members manage the procurement process. Additional services include product standardization, clinician education, and as a clearinghouse for new products and services. GPOs vary in size and scope, with some being owned by hospitals and others servicing only specific healthcare segments.

Up to 98{3d48c2ffeac5b3f3ac54732d49a0b0ca9fd7cec0f4630955c0e7b180206e5d78} of hospitals in the United States utilize GPO contracts for procurement, according to the HSCA. They see areas of growth in the healthcare segment to include long-term care, ambulatory care, home care, and physician practices.

While operational improvements like lean healthcare and improved logistics can help in overall cost management, many of the cost savings will be found through better buying decisions. An expanded use of GPOs to aggregate spend is one way to leverage suppliers.

Pressures on buyers are well known, but the pressure on suppliers to find new and profitable customers, spurred by consolidation, is also building. And no one knows what will happen as Amazon enters the healthcare market.

At some point we are all customers and wish for the best experience possible.

Original article: How hospitals can turn cost-cutting drives into an advantage

 

Mobile Tech Expands To Strengthen Supply Chain Links

Smaller devices push for larger gains in point-of-care, point-of-use performance

When fictional industrialist Diet Smith introduced to Dick Tracy in his eponymous comic strip the “2-Way Wrist Radio” in 1946 and then the “2-Way Wrist TV” in 1964, he might have envisioned physicians sending prescriptions to pharmacies, radiologists reading X-ray images and supply chain managers monitoring inventory locations and tracking individual products remotely via mobile devices.

Today, more than a half-century after Smith’s futuristic inventions made the funny pages, healthcare organizations employ mobile tech for a variety of communications, electronic interactions, and tracking and tracing functions. They include identifying patients and linking those patients to the proper clinical procedures and products used on them, tracking and managing access to and usage of medical/surgical and pharmaceutical products and equipment, tracking specimens for the laboratory, and transmitting data to electronic health records and billing.

Mobile tools employed by clinicians and administrators run the gamut between hand-held computers and mobile readers, including smart phones, wrist-mounted devices and electronic eyewear that can project images and instructions via online/wi-fi-enabled chips.

In short, if mobile capabilities represent the future of healthcare interoperability, then welcome to the future. Clinical and supply chain operations continue to push the boundaries of what’s possible, leaping over broken barriers even as they face and strive to be at least one step ahead of ongoing issues with security concerns.

The point is/of use

Carl Natenstedt

Mobile access makes it a good time to be in healthcare business if it’s simple and seamless, according to Carl Natenstedt, CEO, Z5 Inventory Inc., Austin, TX.

“Mobile technologies, including voice, scanning and other solutions that can accompany today’s powerful mobile devices, enable great advances in healthcare supply chain,” he said. “By placing easy-to-use mobile technologies that are reliably connected to the primary operational systems like ERPs and EHRs in the hands of clinicians and support staff, we can enable the capture of real-time product usage information accurately and consistently. This data, when analyzed with modern data mining techniques can open up new opportunities for operational improvements unlocking savings previously unattainable. The key to success for new mobile solutions is ease-of-use. These solutions need to be as simple and unobtrusive to use as today’s modern social media apps. They need to run on reliable, easily integratable platforms, making them ubiquitous in the clinical setting.”

Mobile tech can fuel financial and operational opportunities in several ways, which Gregory Seiders, Director, Supply Chain, Claflin Co., Warwick, RI, categorizes as preventing losses in terms of costs or increasing revenue.

“While mobile technology can certainly aid in preventing losses, perhaps the largest opportunity is increasing revenue through capturing patient charges,” Seiders insisted. “With clinicians rightfully focused on properly completing procedures and patient care, it is little surprise that not all billable items used in a procedure are recorded on paper. Mobile technology can be used to quickly tie captured bar codes and lot numbers to patient Medical Resource Numbers (MRNs), with scanning capabilities speeding data recording and preventing common errors. The inherent benefits of speed and accuracy lead to improved efficiency, lower cost, and a chance to create an environment of continuous improvement within the supply chain.”

Mobile tech also can reduce the amount of time that clinicians spend trying to locate products they need, Freund continued.

“We have all seen the case studies that show where clinicians can spend as much as 20 percent of their day on supply chain-related activities, the most frustrating of which is trying to find the items they need,” he said. “Using mobile technology, nurses can simply scan the bar code for an item that has stocked out of a supply room. The mobile device will display all locations in the hospital or even in other hospitals within the system where that item exists and enable the nurse to execute a transfer of the item from one stocking location to another. Having this capability allows nurses to spend more time with patients and less time looking for supplies.”

For the article in its entirety:  Mobile Tech Expands To Strengthen Supply Chain Links