Three decades ago, health care was largely a service industry, structured around individual physician practices: doctors treated patients, hospitals provided supporting resources, and insurers or the government (through Medicare and Medicaid) paid costs plus a small margin.

Fast-forward to the early 2000s when the reimbursement process saw significant changes. As part of the Affordable Care Act, and in response to substantial cost increases, plus a rapidly expanding Medicare population, CMS began taking steps to shift their risk to providers and facilities through the implementation of bundled payment programs for certain procedures. They also began reimbursing on outcomes, not on services. While private insurers have not yet adopted this reimbursement strategy, it is widely believed that they will follow CMS’ lead.

Hospitals and clinicians have responded to the shift to value-based care by taking steps to standardize how they practice, while health care supply chains have sought to leverage the resulting economies of scale to move market share. Out of these complementary needs comes clinical-supply integration (CSI). 

The complexity of CSI and health care’s transformation brings the need for informed perspectives. Sharing theirs with Supply Chain Management News are Teresa Dail, RN, BSN, CMRP, chief supply chain officer, Vanderbilt University Medical Center, president, Vanderbilt Health Purchasing Collaborative and president, Vanderbilt Health Supply Chain Solutions; and Marty Lucenti, MD, PhD, senior principal at Vizient.

Q: Clinical-supply integration has been described as the holy grail of the health care supply chain. Do you agree with that statement? Why or why not?

Teresa Dail: I agree, and the reason is that now, more than ever, care and health are being defined as more than just what occurs within the four walls of the hospital. Value-based reimbursement really has led us down this path, and I see the clinical integration of supply chain within health systems as being vitally important to the future of the care we provide.

I believe that the conversation can no longer be focused just on cost. However, there is a lot of talk now around non-traditional entities wanting to break into the health care market. My concern is that they are only focused on a cost reduction approach and not necessarily looking at the outcomes of the care that is delivered.

It’s particularly interesting to me that Vizient, as a national GPO, is looking at this because I believe that ultimately the decisions—even at the GPO-sourcing level—need to be informed by clinical expertise. The products need review and comparison of outcomes data, and that should drive decision-making about which products or services are put on contract, based on that evidence.

Marty Lucenti: Clinical-supply integration is the holy grail of the health care supply chain because it is a systematic way of engaging practicing clinicians to lead a multidisciplinary team through the process of standardizing to the optimum outcome. It is a disciplined evaluation of practice variation and implications to outcomes—quality, safety, satisfaction and cost—and standardizing to the best possible scenario.

It is not a case where cost and quality are at odds with each other. It’s a process where you should be able to standardize to the highest-quality, lowest-cost element of a procedure. Currently, every other industry does this, except medicine. It has never had economic pressures that ensure all work adds value because historically, the reimbursement was just “do whatever you do, and we’ll reimburse you for it.”

But change is a complicated endeavor for clinicians because they learn the way they practice under an apprenticeship model. They have not been trained to evaluate which aspects of their care add value and which don’t. If a clinician wants to change their practice pattern, believing there’s something that’s really beneficial, they don’t do it by themselves. They want to get together with their colleagues and look at clinical evidence and outcomes data before making that decision. Clinical-supply integration provides the structure required for that collective decision-making.

Q: How would you differentiate clinical-supply integration from the value analysis process so that teams understand what the end goal is?

TD: For me, value analysis began in the early 2000s. I was recruited to be a clinical resource manager to help bring the traditional materials management approach together with the needs of clinicians. It meant that we looked at the vendors we had on contract. How could we standardize to get a lower cost from the ones we chose? And then, we tried to convince physicians they needed to go down that path.

Clinical-supply integration is a multidisciplinary approach across the entire patient encounter, whether that experience is within the four walls of the hospital or in provider settings outside the hospital. It utilizes data and expertise to drive decision-making based on outcomes and the understanding that standardization, while it could potentially impact cost from a contracting perspective, can also improve quality.

ML: Clinical-supply integration is the layering on top of a clinical governance structure. By that I mean, [CSI] practices, processes, staff work and analytics are on top of the evaluation methodologies from value analysis. Then, you make them an input to a peer group of orthopedic surgeons, for example, doing total joints. You get the practicing clinicians to be the governance over process changes. This is important because of the various tradeoffs that can occur when one element in a clinical procedure is changed. For example, supply chain may say, "We can save money by changing to this screw," and the surgeon may say, "But I’ve never used that screw, and when I tried to use it, it added 30 minutes to my case. It may not be worth the money saved if it adds a half hour to my operative time." You need that person who can do all the tradeoffs, and that needs to be the practicing clinician.

Q: What do you see as the primary barriers to achieving clinical-supply integration, and how can they be overcome?

TD: The first one that comes to mind is the culture within an organization. So many institutions continue to function in silos. Many institutions also don’t have a value analysis process that’s even looking at doing clinical evidence comparison for new products and technology, let alone thinking about supply integration. So, moving from a siloed department structure within an organization is a cultural barrier. I can’t stress enough there is no need to reinvent the wheel to overcome this challenge. There are peer groups willing to share their successes in this area. Reach out to groups and look for others who can serve as champions in your organization.

Another common barrier is misaligned incentives. How do you effectively develop a value proposition that gets everybody to understand that ultimately, CSI is a positive thing for the patients, the clinicians and the organization? It’s answering the “what’s in it for me” question and being able to articulate that value proposition in a way that gets individuals interested in it, who typically have not bought into any sort of an integrated approach. It takes everybody being aligned, and I think that right now, from what I see, there’s a struggle toward that alignment.

A third barrier is the traditional model of supply chain/supplier relationships with hospitals. Some of the more progressive suppliers are starting to think about how they can demonstrate the value they’re bringing to an organization with their products and their technology. Some are attempting to do that through risk-sharing. However, the supplier, hospital and national GPO relationship, that whole triangulation, is still based upon the cost and the sell. They are not really focused on outcomes data and being willing to have that conversation versus the traditional sell conversation.

I believe there is a wealth of insight in clinical analytics and solutions. I’m a big supporter of bringing together cost and quality. It’s a first step in changing the paradigm in the way we interact with suppliers. It would enable us to look beyond FDA-approved information or post-market studies. Instead, we could look at real-time evidence around how a product is performing within a certain population and if there’s any difference at all, relative to the vendors for that given population.

ML: The first barrier is clinician engagement. You tackle that with great governance structure and great alignment strategy. There are many ways to align people, but in general, the most effective methodology I’ve ever seen is just getting all your clinicians to understand that the next generation of medicine is being committed to the process of improving the organization’s care.

The second barrier is the ability to show clinicians how they’re practicing differently and then, meaningfully mapping how their practice variations affect their outcomes, so they can actually determine who is getting the best results. Then they can standardize to that.

The third barrier is the ability to pull together all the literature, all the evidence in a meaningful, productive way, so that you can make evidence-based decisions. You want insights into how your practices are different, but you want to be able to also look at the literature and say, “Where is it going?” Having an approach that pulls together all relevant research and evidence from journals, publications, etc. is also crucial.

Q: Vizient defines clinical-supply integration as success in the following four domains of performance: engagement, insights, knowledge and process. In which of these areas is your organization doing well and in which areas are they most challenged?

TD: I believe Vanderbilt is doing very well in engagement and in knowledge. Part of the reason for that is we’ve been on this journey since 2008. I have six medical directors for supply chain and they lead many of our initiatives here. We’re not looked at as just logistics and distribution.

I think process is hard. When you have 22,000 people working in an organization, and people come and go, being able to distill what we’re doing down to the lowest level, engaging everybody and going down the same path is always a challenge.

I would say insights have also been a challenge for us. We know what we need to be looking at, but the need to cobble data together in a way that is credible is very challenging. It’s labor-intensive, and then getting it in a format that’s consistent and consumable has been difficult for us. There’s not just one place to go right now for all the data we need.

As you look to moving toward a clinically integrated supply chain, it’s important to remember, it’s not just a singular supply chain solution. It’s bringing all of the different teams together to say, “How can we address not only care, but health?”

ML: I have seen the process as the traditional value analysis work, pulling together the ability to analyze practice variation. I think the value analysis community has done a good job of moving us forward to systematically look at some of this. They’ve provided us some of the processes. We see various maturities across the industry in that space.

I have seen various approaches to getting evidence, to acquiring the knowledge that I was talking about. There are many different solutions out there. I see a lot of organizations making significant strides, pulling together relevant literature and providing that to clinicians as they do it. I consider the two areas of process and knowledge to be where I’ve seen some really stellar outcomes. But I would say that there is a lot of variation across the industry. There are some doing both process and knowledge really well. However, some of the smaller organizations don’t have the resources to be able to invest in those processes and are significantly falling behind in those areas. 

But where I’ve seen a real opportunity is in hospitals that are still relatively immature at creating engagement methodologies with their clinicians, i.e., establishing an alignment strategy with a governance structure that consistently looks at practice variation in all of its facets. And then they need to migrate toward standardized, highest-quality, highest-value practice patterns. Very few providers are really at the cutting edge of that. Another real opportunity for many health systems is an ability to provide insight through analytics, so their clinician governance committees can look at both practice variation and resulting outcomes variation.


Succeeding in the evolving health care market will require health systems to move toward achieving clinical-supply integration. Only by forming strong interdisciplinary partnerships between clinicians and supply chain leaders will organizations find synergies that reduce unnecessary variation, manage utilization and optimize contract value. The result will be consistently delivering quality patient outcomes at the lowest possible cost.

For more information about how Vizient can help your organization improve care delivery, achieve clinically integrated supply goals and unleash new opportunities that support value-based care, click here.

Published: March 27, 2018