As I read Fred Crans’ “relevance” piece this month I recalled something I wrote five years ago on what supply chain practitioners should be doing to seize the opportunities inherent in healthcare reform. Is what I thought still relevant? I have included that article below, and am pleased to report that it is largely relevant today. How is that possible when reform is now four years under way? Have we made no progress? Actually, there is movement and reason for celebration. As you will see, what I wrote about are three types of enduring activities that must be adopted, reform or no reform.
A personal note on supply chain relevance: I recently lost my last surviving grandparent, my paternal grandfather, who was 94. My maternal grandfather passed last year at 92 (so unless I screw something up, I’ll likely be writing about patient advocacy and relevance for many years to come). As is often the case, gramps needed an increasing amount of care in his later years. And, as the only family member “in healthcare,” I was often consulted on matters associated with that care. One matter involved a dispute on a medical bill he received.
The bill listed several supply charges of varying amounts at various, seemingly random, points in his hospitalization. These were categorically rejected by his insurance, and he was being asked to pay for these “supplies.” Finally, an aspect of his care where I actually had some expertise. My advice: ask for a detailed accounting of the supplies. They did, and the bill was written off. Great for gramps financially, bad for the hospital financially, but the underlying issue remains; our inability to know what was used by any given patient. The cost implications are clear (you can’t manage what you can’t measure), but the safety aspects are, in my mind, the most relevant. Much more to come on that topic.
Here is my earlier article:
In an Era of Healthcare Reform, Supply Chain Management Can Move to the Forefront
Healthcare reform is a priority on the national agenda. With the federal and state governments stepping up health plan initiatives, employers experimenting with new care delivery models, the public and providers feeling squeezed, and insurers backpedaling to protect their margins, the supply chain leadership has a unique opportunity to take center stage and support the quality standards of care Americans have become accustomed to and expect.
Regardless of any healthcare reform plan’s specifics, the future will focus on patient care, constrain provider revenues and more than likely increase patient throughput. With all that, provider-side leadership can expect significant challenges during the coming reform period. The most daunting will be to be seen as integral to the financial success of an organization as well as an advocate for quality patient care. In other words, supply chain management will be asked, “What are you doing to elevate the quality of patient care while also enhancing the organization’s economic situation?” What’s a concerned supply chain manager to do?
The answer requires the application of our skills in a new context and provides a rich opportunity to create a truly integrated care delivery context.
Integration: the Pathway to Relevance
The term “integrated” isn’t new to healthcare. Generally it’s been used in the sense of integrating for leverage, scale or efficiencies. The customer – the patient, has not always been the priority in supply chain activities. Maybe it’s time to rethink the existing approach and think about integration as an opportunity to improve service to the customer. It’s a model that works well for other industries such as the retail and service sectors, but our supply chain has failed to adopt and adapt practices and technologies that have proven successful in other industries. Consequently, the healthcare supply chain differs from every other supply chain in one fundamental way: it is not always centered on relevance for the customer: the patient. And if this isn’t corrected, we will not come through reform unscathed.
Every other industry’s supply chain must balance three fundamentals to survive: efficiency, effectiveness and relevance. Granted, we’ve expended endless energy on efficiency and effectiveness, but does the customer really care? Perhaps. Better to ask does this really benefit the customer and does the customer know?
We strive, for example, to increase our electronic transactions (efficiency), but ignore taxonomy standards that make the supply chain safer for the customer. We motivate improvements in systems and technology so we can purchase more product at a faster rate (effectiveness), but we can’t determine if the product has been recalled. Does that sound like something that would impress a patient? If anything, it might scare them to death. We aren’t helping them, and we certainly aren’t helping ourselves. Everything we do must somehow benefit the patient and improve care and outcomes – that’s the relevancy we must seek.
Achieving relevance requires integration between the quality a patient demands and the cost necessary to deliver on the expectation. That requires an effective supply chain partner, because that partner is essential to economic success and quality patient care. Consequently, supply chain leaders – the decision makers and determiners of fates of patients and organizations – are in a critical position relative to the quality of care a provider can deliver. For example:
- Depending on the perspective, we influence 20% to 50% of the total cost-of-care budget. In our predominantly not-for-profit system, a high percentage of every dollar saved on supply acquisition circulates directly back into patient care.
- Supply channels tie up much needed capital. Reductions in these areas can fuel investments in facilities and patient care equipment.
- Supply chain leaders have responsibility for the processes that guide our organizations’ choices of patient care products and technologies.
- Most important, supply chain leaders manage information flow critical to the next generation of cost and quality management strategies. From the immediate need to eliminate fraud and abuse to the future need to study patient supply consumption, data systems hold the key to accurate identification of patient care supply utilization.
What Do We Do Now?
The following steps outline a process a supply chain leader can follow to begin moving toward a successful future:
If you have a documented strategic supply chain plan, review and refresh it against potential future demands. If you don’t have one, create one. Now. While this may seem like a tedious exercise, once you’ve done it, obstacles to your efficiency, effectiveness and relevance will become apparent. Make sure your strategic plan dovetails with your organization’s plan. There should be a seamless flow from your organization’s mission through its strategic plan to your supply chain strategic plan. Everyone who reads your plan should be clear on the role the supply chain team plays in the overall mission. This connection to the organization plan also helps ensure your plan is keeping pace with changes in organizational strategy. Further, your plan should be supported with tactical implementation steps that address each of the following areas:
- Empower. Does your organization’s supply chain empower the patient? Probably not. Most provider supply chains key off of a patient’s proxy (caregiver) or traditional review-and-react processes. Additionally, there are probably several supply channels within your organization. These processes and practices work well under today’s requirements, but will your organization be prepared if the future requires you to inform a patient of all the products used in the delivery of their care? Though this may seem remote, consider a few of today’s prevalent trends:
- Patient interest in specific product utilization is already being shaped by current pharmaceutical and device suppliers’ marketing campaigns.
- Patients are seeking information to compare and contrast provider quality. In turn, providers are starting to seek data to study and improve product quality.
- Latex allergies have spawned the labeling and sequestering of latex-free products for patients and caregivers with this allergy. This is exactly the rationale that triggered government regulation requiring labeling of all ingredients on consumer product packaging. That’s not going away.
- Current government-endorsed EHR, RHIO, HIE and HIPAA initiatives set a precedence of personal health information accessibility.
Every supply chain is measured by its relevance to the customer. If we fail to innovate with our eye on the primary healthcare customer – the patient – it will not matter how effective or efficient our current methods are; we run the risk of becoming irrelevant. Customer requirements for innovative, new supply chain models will render yesterday’s practitioners irrelevant.
- Educate. Within any provider organization, the value of the supply chain to the customers must be measurable and communicable. Every provider supply chain strategic plan should achieve ever-increasing levels of supply chain staff education and endeavor to educate everyone in and around the organization on the value provided by the supply chain team. Staff exposure to new ideas and methods help ensure a plan is flexible to accommodate the latest information and approaches. As you educate stakeholders and constituents on the value of your supply chain, their challenges will serve as tests to your ability to adapt to evolving requirements. Reforming the industry’s perceived value of the supply chain can and should start at home, close to the ultimate customer, the patient.
- Data. You cannot effectively manage that which cannot be measured. We must adopt and implement industry standards, seek methods to capture data relative to the patient and develop methods to assimilate data into usable information. Virtually every aspect of success hinges on these critical factors.
- Supplier management. Reform will ultimately energize innovations in products and services that, in turn, generate an improvement in cost effectiveness. Consequently, healthcare product and service marketing will be built upon these virtues. Supply chain leaders will continue to discern fact from fiction, however, the environment in which this occurs will become increasingly pressured and complex. Supplier margins will be constrained and more aggressive marketing tactics will emerge. Cost improvements will be restated in terms that currently are generally immeasurable (e.g., associated LOS reduction, clinical labor savings, etc). Additionally, cost effectiveness debates regarding supply channel middlemen (distributors, GPOs, even certain manufacturers) will be re-energized and new models will evolve that target or eliminate some participants, including ineffective materials management.
Your strategies in these areas contribute to your plan’s ultimate goal: to develop a patient-centered supply chain infrastructure that becomes the standard against which all cost-effectiveness opportunities and challenges can be tested. As the plan shifts to focus on informing the patient, motivating scrutiny of the traditional venues and methods of care delivery, your ability to identify and inform your organization of relative cost effectiveness becomes your key to success.
As Bob Dylan once said, “The times they are a-changin’,” and everyone involved in healthcare is feeling it. But you have the opportunity to take advantage of these changing times to strengthen your position and benefit from the rising importance of supply chain management.
