Health care today looks much different than in the past and leaders at traditional hospitals are finding it necessary to expand their services outside the hospital, particularly into the post-acute and ambulatory care sectors. Expanding services to include other types of care facilities means expanding your supply chain and with that comes complexities, risks and opportunities.
Hospital leaders place great value on cost containment, and they want to leverage the IDN’s buying power across the entire network, including non-acute care. But the truth is, while some hospitals have done a very good job in this area, for many there is still ample opportunity for improvements in both supply cost reduction as well as utilization across the care continuum.
Supply chain professionals face several challenges when branching into non-acute care: huge numbers of sites across many specialties; limited staff and often fragmented supply chain operations at these facilities; and the use of multiple distributors who may not be aware of and/or aligned with the IDN’s supply chain goals.
In a webinar earlier this year, I outlined four main considerations to take into account when integrating a non-acute supply chain.
Supply chain expertise. Managers can’t create a successful non-acute supply chain by simply applying their acute strategy to the entire network. When hospital leaders are dealing in new care delivery environments, they have to develop their knowledge of unique needs and potential pitfalls, usually by collaborating with the people already working there.
For example, when new medical groups are brought into the system, supply chain leaders need to engage with the physicians and their staffs to understand the supply needs from a clinical perspective, then work to ensure that product choices meet the standard determined by those clinicians.
Once supply chain managers ensure clinicians’ needs can be met, they can focus on streamlining sourcing, procurement and pricing.
Technology and transparency. The first request we make with members when we begin to assess their non-acute supply needs is for a complete spend file by supplier, by spend category and ship-to location. Oftentimes they are unable to do this because the data is fragmented, incomplete and housed in disparate data sources, requiring the supply chain team to rely on vendor and distributor reported spend.
What the most progressive supply chain leaders have done is establish a non-acute procurement platform, either by extending the hospital’s existing ERP to its non-acute sites, or by implementing a separate non-acute-designed system. There are several cloud-based, user-friendly and cost-effective yet robust platforms available for non-acute care.
But whether they use the existing platform or obtain a new one, hospitals stand to benefit through streamlined processes, price transparency, time savings and greater control.
Service and execution. When a large health system in the Midwest branched into non-acute care, its vice president of supply chain needed to make sure the new system operated efficiently. So he met with his distributor and his GPO, and together they reviewed the system’s non-acute goals to make sure all parties were aligned with the system’s overall goals. The alignment of people, processes and partnerships, both inside and outside the health system, is a key factor in accelerating performance and one that supply chain leaders should remember when integrating a non-acute supply chain.
If you think about the sheer number of touch points involved in managing the non-acute supply chain, it can be pretty daunting. There are numerous moving pieces: new facilities; new products; price integrity considerations; and the need to ensure suppliers’ goals match those of the hospital. This system took the time and made sure to take advantage of all of the service pieces available from both its GPO and distributors.
Data and analytics. Once the other three pieces are in place, a health system can begin collecting and analyzing data – potentially the most valuable part of this process. Advanced analytics can help supply chain leaders as they standardize products among facilities, pursue better pricing and explore other opportunities that otherwise would be difficult or impossible to implement.
Effective planning and good communication can yield results. The Midwest health system achieved almost immediate results in the first year operating its non-acute supply chain. A West Coast hospital saved $10.8 million over three years while increasing contract compliance by 68 percent. And a third health system in the Northeast saved 25 percent on non-acute spend. That system also consolidated its distributors and achieved 73 percent formulary compliance, thanks to a standard electronic purchasing system across all of its non-acute sites.
Developing a high-performing, highly integrated supply chain among your network of providers can provide both a practical and impactful way to gain a competitive advantage for your health system. It can help you become a low-cost provider as well as establish a network within the organization to collaborate and create standards that reduce variation in product utilization and suppliers, and ultimately improve quality for patients.
About the author. Ned Lehman is responsible for leading the Vizient non-acute sales team, focusing on developing customized solutions to meet the complex needs of these customers. Prior to his current role, Lehman held several leadership positions at MedAssets, most recently leading the non-acute business. Before that he led the enterprise client executive team in the western U.S. Lehman received a bachelor’s degree in business administration from Fort Lewis College and a master’s degree in business administration from Colorado State University.