Healthcare Supply Chain Management Supply Chain Management in Healthcare

healthcare supply chain management

Health care systems have assumed more clinical and financial risk under the Accountable Care Organization (ACO) value-based reimbursement model. Therefore, they consistently seek improvements in terms of quality outcomes, seamlessness, and reduced cost.

The “health care system” is a network of interconnected stakeholders that engage in delivering a product or service. Most individuals immediately think of the care cycle being the actual doctor visit, or procedure, yet the full continuum reflects the true

Each healthcare system comes with a set of challenges across the continuum of care such as:

  • Complexity across the health network of ambulatory clinics, physician offices, etc.
  • Integration of data and technology for enhanced Business Intelligence (BI) throughout the system
  • Visibility/traceability of patient, product, and services
  • Workflow in-efficiencies related to various supplies, instruments, and devices
  • Ongoing focus to reduction of cost of supplies as a ratio of operation’s cost
  • Financial performance impacts

Additionally, to this system complexity is the aspect of being an Accountable Care Organization under the Center for Medicare and Medicaid Services (CMS).  ACOs are groups of doctors, hospitals, and other health care providers, who come together to give coordinated high-quality care to their Medicare patients. The goal of coordinated care is to ensure that patients get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors.  Such value-based processes consider; safe reliable products, highly effective service offering, and traceability throughout the continuum of care coupled with visibility of real cost.

Healthcare Systems and supply chain professionals must be fully collaborative and integrated in this new ACO environment. The goal is to engage them in identifying items that offer the best outcomes for patients based on evidence compared to costs. Doctors and clinicians must cope with choosing from an array of medical items, models, and manufacturers with different costs, as well as the documented effectiveness of these products and their impact on the patient as well as reliability and compliance.

A challenge will be to restrict the large numbers of items on individual preference lists. A well-functioning collaborative system would allow a healthcare system to reduce its preference list to manageable volumes and offer the products that evidence shows have the most positive impact on patient outcomes.

Healthcare practices, clinics, and hospitals are becoming more networked by geographic, demographic and specialty care through growth, mergers, and acquisitions.  As this continues, supply chains must be adaptable so not to be fragmented, unstructured, and non-integrated within the total healthcare system.  This creates inconsistency that negatively affect the bottom line while the lack of integration impedes information and the ability to make informed decisions. This is a complex process that includes data collection, comparative cost/value analyses, and communication. 

“Due to vertical internal structures, supplies and supply data historically has been siloed so that information important for efficient business operations is fragmented,” Steve Kiewiet, Vice President of Supply Chain Operations at BJC HealthCare, told RevCycleIntelligence.com in June 2015. “We end up spending billions of dollars of inventory within these various silos because we live in a world where you can never run out of anything ever, in the interest of what is best for the patient.”

The healthcare systems need full transparency of the total cost of each item so they can plan their budget around “total” supply costs. This includes being aware of the losses they will incur from the aspect of expired, obsolete and excess supplies. Meanwhile, across the networked systems collaboration is essential to establish product standards and profiles that provide consistent reliability. 

A 2017 survey by Cardinal Health reflects that 78% of responders were manually counting inventory, while only 17% had implemented an automated technology system to store, sequence, track, and count inventory in real time. In the same survey, more than half the responders stated that the lack or missing of a product had interfered with patient care.

Streamlining processes within and across these functions will ensure efficiency of supply chain management execution, while supporting transparency and compliance.  Ensuring transparency of supply chain management processes allows stakeholders to be equipped with the right set of data to react positively to challenges, such as having too many items out of stock or too many suppliers providing similar products.

The need to reliably forecast supply chain outcomes will drive the increased use of advanced analytics to improve supply chain management performance.  An automated and technology-based supply chain can improve patient outcomes by improving efficiency and effectiveness in every sector mentioned above. It allows organizations to see proactively where a certain supply item is within the healthcare system coupled with a process to select and coordinate the delivery to the point of use with the patient.  Furthermore, as technology integrates into various information systems, clinical and administrative staff gain a bird’s-eye view of their operations with the ability to optimize processes through supply chain analytics and business intelligence.

Today’s Healthcare Supply Chain

Managing the healthcare supply chain is typically a very fragmented and complicated process. This involves managing supplies, obtaining resources, and delivering services and goods to the healthcare provider and patient. According to a survey from The Joint Commission on Medicare/Medicaid Services, “65% of healthcare leaders indicated their organization has an immature supply chain system with loosely defined, unstructured, limited cooperation between departments within their organizations, and limited cooperation with external vendors.”

To overcome this, collaboration with supply chain management organizations can provide the solutions needed to optimize the healthcare supply chain and improve patient outcomes. Anticipating this transformation, Ryder System, Inc., brings value added solutions such as:

  • Standardized internal procedures to reduce data integrity errors,
  • Centralized supply chain data base management, integration, reliability
  • Better management of product utilization and inventory control with varying demand
  • Increased product/equipment traceability
  • Techniques to improve invoice and billing accuracy
  • Eliminate duplicate core activities
  • Sharing information with all levels of supply chain partners
  • Positively impacting patient flow by offering models based on sequencing and deliver to procedure, kitting for clinical needs, inventory management to demand patterns, and ensuring timely product that reduced length of stay and case start on time metrics, etc.
  • Establish better suppliers – benchmarking, supply chain engineering, VA/VE
  • Engage in strategic alliances, partnerships, advocates
  • Better management of shipping and receiving activities
  • Management of transportation and transfer activities

Ryder provides distinctive competencies through engineered solutions to facilitate the flow of information, products, and services from suppliers to patients. Therefore, Ryder has a direct, positive impact on patient continuum of care by:

  • Taking a patient centric approach
  • Advising on products based on their contribution to organizational and clinical objectives via a total cost of ownership focus
  • Incorporating improvements in clinical protocols through supply chain management integrated to reduce medical errors and improved safety (core metrics such as; wrong procedure/product/service/equipment, expired date product, contamination with risk for SEPIS, MRSA, Streptococcal )
  • Implementing continuous improvement methods that focus on efficiency, quality and cost to provide greater value in care by:
  • eliminating operating, procedure and patient room waits and cancellations, (core metrics such as; On Time Start/First Case, Case Cart Accuracy, room turnaround/availability)
  • reducing the length of stay (LOS), Left Without Being Seen (LWBS) metrics which are critical in healthcare
  • increased compliance
  • Fostering the Case Mix ratio to align to healthcare system strategy of growth
"Each healthcare system comes with a set of challenges across the continuum of care."