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% 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% 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% 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




Healthcare Supply Chains Are Shifting As Cost Pressures Rise

Supply chain managers are used to cost-cutting drives. When expenses rise or revenues fall, it is their job to find savings through logistics, procurement or operational efficiency. But it’s a whole different ball-game when you throw patients into the mix.

The patient-centered supply chain cannot extend lead times, procure a different product, or afford to run out of inventory. For that reason, hospitals typically see supply chain as a cost of doing business: a necessary evil weighing down profitability — but does it have to be this way?

The discussion may be found at:  Healthcare supply chains are shifting as cost pressures rise


3 Most Common Healthcare Supply Chain Management Challenges

The top healthcare supply chain management challenges for provider organizations include provider preference items, a lack of supply chain health IT, and invisible costs.

From gauze and paper gowns to implantable medical devices and prescription drugs, provider organizations must implement efficient healthcare supply chain management processes to cut overall costs and standardize care delivery. But for many organizations, healthcare supply chain management is not as simple as tracking how items are acquired and where they go after purchase.

A December 2015 SERMO revealed that supply chain management was the second largest expense for healthcare providers.

While only one-third of the 150 surveyed hospital leaders described their organization’s supply chain management process as “very effective,” about two-thirds strongly agreed that improving healthcare supply chain management would lower costs, boost hospital revenue, and improve care quality.

Many healthcare organizations, however, face some roadblocks with making their supply chain more efficient. Some of the top healthcare supply chain management challenges include costly provider preference items, a lack of health IT implementation for supply chain functions, and limited hidden costs transparency.

The core of healthcare supply chain spending is product cost, but healthcare organizations should be aware of invisible costs associated with the supply chain, such as distribution and inventory holding expenses. To develop a healthcare supply chain management strategy that incorporates visible and hidden costs, healthcare organizations may want to consider a Lean approach.

With falling claims reimbursement rates and performance-driven payments, improving the healthcare supply chain management process is just one way to prepare healthcare organizations for the value-based reimbursement transition.

The article in its entirety may be found at: 3 Common Supply Chain Management Challenges

Why the Supply Chain Matters to Your Organization’s Success

From Population Health to Disaster Preparedness, Supply Chain is your Strategic Asset

In the last decade, supply chain has moved away from being focused solely on acquisition costs to become a core strategic partner within many healthcare organizations. The essential link that ties together all of the various stakeholders in the continuum of care, supply chain is uniquely positioned to play a critical role in population health management programs, disaster preparedness, and fulfilling all dimensions of the CQO Movement and Institute for Healthcare Improvement (IHI) Triple Aim.

Michael Schiller, CMRP, Senior Director at AHRMM of the American Hospital Association, discusses the promise of supply chain in this Q&A.

What is supply chain’s role in population health management programs?

MS: AHRMM assembled a task force of healthcare experts to examine the current population health landscape, determining the scope and impact these programs are having on the physical and behavioral health of people within their communities, defining supply chain’s current role, and envisioning supply chain’s strategic role moving forward. Based on their research, the group developed several guiding principles for others to employ when implementing their own population health management initiatives:

  • Supply chain sits at this intersection and is best suited to collaborate with both internal and external stakeholders – clinicians, suppliers, and distributors, identifying relationships others may not see that deliver benefits that may have otherwise gone unrecognized.
  • Technology is key to implementing, managing, and sustaining most population health management programs where information sharing and communication between various parties is critical to improving the health of a population.
  • Supply chain professionals are a primary source of data and analytics on which many population health management programs are measured. Sharing robust, objective, and scientifically grounded real-world data between various parties can be used to educate stakeholders on the need for change and secure their support for these changes.

Original article in its entirety: