Supply Chain Q and A

Mining Great Leadership

Wed, 16 Nov 2011 15:20:00 GMT

By Richard P. Miller, Chief Executive Officer, Virtua
Everyone wants to be part of something special, and it is the successful organization that realizes all players have an important role. But it takes unified leadership to create the successful organization.

At Virtua, we develop great leaders and work to enhance their skills. We evaluate the performance of our management team and then rate our managers in three categories: top talent, valued contributor and needs improvement. We never stop striving to improve, because an organization can never have enough talent.

We cultivate a culture where quality, integrity, and values are prevalent. Leaders must be humble and know how to listen and learn, and never feel threatened by others with new ideas. Selfless leaders lead by example.

That’s why leadership from the CEO down must demonstrate the values and behavior we expect to see throughout the organization.

Like an orchestra conductor, a leader must create vision and know what it will take to get there. Then, he or she must be able to communicate it, knowing that when the team works together, growing and building trust, great achievements will happen.

Hospital and Vendor Relationships: The Case for Change

Mon, 10 Oct 2011 20:09:00 GMT

by R. Timothy Stack, president and CEO, Piedmont Healthcare
Unsustainable growth in healthcare costs, healthcare reform and the emergence of value-based purchasing are pushing hospitals and health systems to improve quality, access and outcomes, while reducing expenses.

With this increased pressure, many hospitals are looking very closely at all costs to ensure that care is being provided in the most efficient, cost-effective manner.

Supply costs represent approximately 20% of operating expenses for hospitals and are typically the second highest expense behind labor. In the past, vendors have controlled the relationships with the hospitals and physicians when it came to new devices and implants. The vendor would convince physicians that the implant or device is the newest and highest quality device on the market and physicians would then require hospitals to purchase the device.Hospitals can simply no longer afford to purchase the latest and greatest technology every time. In a new reality of decreasing reimbursements and bundled payments, it is imperative that the hospitals and physicians are better aligned to make the business decisions regarding all supply purchases.

Therefore, the burden and analytics must fall to the vendor to “sell” the hospital and physician on the reasons for selecting a higher cost item over the current device. The analytics must include a financial analysis, including return on investment, as well as the quality outcomes so that hospitals and physicians can make the best decision that results in the highest quality, greatest efficiency and best outcome for the patient.

R. Timothy Stack is president and CEO of Piedmont Healthcare and a member of the American Hospital Association (AHA) Board of Trustees. Prior to joining Piedmont Healthcare in 2001, Stack served as president and CEO of Borgess Health Alliance, and president and CEO of Borgess Medical Center in Kalamazoo, Mich.

How are Supply Costs Related to Patient Revenues and Outcomes?

Wed, 31 Aug 2011 14:43:00 GMT

by Rosalind Parkinson, administrative director, Materials Systems, The Ohio State University Medical Center
When the hospital bottom line is threatened, most CEOs respond by negotiating better reimbursement from payers and fine-tuning the revenue cycle.

The next step is to ask supply chain leaders to contain costs by reducing the prices hospitals pay for supplies. This drill is repeated frequently. Nevertheless, the proportion of supply spend in some hospital budgets has grown to 35% within a steadily growing expense for healthcare overall. Are we being blinded by looking at supplies separately rather than as a part of the whole patient care experience?

Are supplies always a “cost?” In retail, supplies are seen as units of potential revenue. In hospitals, supplies are also tied to revenue, but our systems and culture do not currently treat them as a critical piece of the “billable event.”We usually know the prices paid for high end supplies and this data moves to charging specialists who establish codes to record their use. However, charge codes do not always fluctuate in response to changed prices for high end supplies. Finally, supply charges in the patient record may or may not figure prominently in the final claim for reimbursement depending on the terms of the contract with the payer.

This series of hand-offs serves to obscure understanding of how specific supplies contribute to patient revenue and outcome. When we view supply purchases only as “cost” to be recovered, we unconsciously remove awareness of the specific role they play in outcomes either in a single episode or continuum of patient care. If everyone knew how specific bundles of supplies contributed to “billable events,” we all might think more proactively about how supplies contribute to each patient care situation and move more nimbly to revenue enhancing alternatives and the choices associated with better outcomes.

Some of our colleagues are finding ways to shake this tree by showing clinicians supply prices for every item at the point of use. If price information is totaled as a ”bundle” associated with quality outcome, end users could be continually aware of how the cost of supplies they are using compares with the optimal profile. When clinicians are able to scan standardized supply identifiers into the electronic health record, the resulting information could create a culture of supply cost awareness from the bedside to the billing office.

When the electronic health record is meaningfully used and the FDA mandated Unique Device Identifiers are in place, this visibility will be possible and innovation can proceed quickly. There will no longer need to be a “hazy” buffer between knowing the cost of a supply and the revenues and outcomes directly associated to its application. As supply chain experts, it is our responsibility to develop goals for supply chain integration with the patient experience and revenues associated with it. We bear much of the responsibility for allowing our function to remain separate from the mainstream. We need to actively promote an alternative vision.

Rosalind Parkinson is administrative director, Materiel Systems, The Ohio State University Medical Center, and serves on the Leadership Team for GS1 Healthcare US.

Technology Improves Patient Experience

Tue, 01 May 2012 12:33:00 GMT

By Brian G. Grissler, President & CEO, Stamford Hospital
Providing patients with compassionate, patient-centered care is a primary focus for us.

Against this backdrop, a motivation to continue to enhance the patient experience led us to become part of a group of over 100 hospitals nationwide focused on personalizing, humanizing and demystifying the healthcare experience for patients and their families.

Over the last several years, we have hardwired our culture to put our patients first, created a more healing environment and have empowered patients to participate in their healthcare. We are about to embark on another exciting offering to our patients that will enable us to enhance patient care and the overall experience.

Stamford Hospital will be one of the first hospitals in the country to provide innovative "smarter" hospital rooms to patients through the use of new technology. Launched three years ago at the University of Pittsburgh Medical Center (UPMC) and jointly funded by IBM, the SmartRoom solution uses real-time location-tracking devices and other technology to bring patient information from the electronic medical record (EMR) and other data sources to a flat-screen monitor at the patient’s bedside. The technology also allows patients to identify physicians, nurses and other caregivers as they enter the room, with names and their roles automatically displayed on a monitor visible to the patient.

Most important to patients and their healthcare experience, this technology offers access to patient education, the interface with the TV and the ability to receive e-mails and have their personal photo album populated with pictures from family and friends.

As an organization, we will continue to seek out opportunities like these to enhance our patients’ experience whenever they seek care from us.

Motivation for Change

Tue, 16 Aug 2011 02:56:00 GMT

By Michael Louviere
Like so many integrated delivery networks (IDNs), Baptist Health System has been challenged by supply and distribution issues for its 46 physician clinics, which are scattered throughout north and central Alabama.

Around 2004, BHS tried without a great deal of success to standardize physician supply purchases with a former distribution partner.

In 2008, however, we had plenty of motivation and a window of opportunity.

The clinics were ordering products from multiple distributors, and routinely paying widely varying prices for the same items through a multitude of ordering methods. Delivery costs were extraordinarily difficult to forecast or manage as there was no established formulary. To exacerbate matters, manufacturers were imposing as much as five percent price increases in early 2009.

My team and I realized the time was right to make a change when BHS brought in a new president for Baptist Health Centers. We were very fortunate that the new president understood value. He was instrumental in putting together a strong physician strategy to manage the clinics and one of those components was the distribution.

Like other leading IDNs across the country, BHS came to the conclusion that we needed to partner more with our physicians in order to reign in supply costs. We felt we needed to start doing something. Using BHC’s current base of 80 docs, we got to work on a plan to pitch the idea of aggressive standardization and a future agreement to work with one distributor.

The value proposition was simple:

provide standardized products and processes across all BHC clinics (including better tier levels on contracts),
explore lower cost alternatives,
provide the best technology solutions to order product (in this case, electronic ordering),
manage inventory (using best practices) and
review what was purchased in quarterly audits and review with key clinic management.

The ultimate goal? Better patient care.

In presenting my objectives to the BHC board in late 2009, I told the group, “Your primary objective is the best quality patient care. Your clinics are the primary source of medical care for my department and many BHS employees.” And then came the clincher: “We have a potential early Christmas gift for you – $400,000 in supply savings.” The group was told the plan would mean they would have to agree on a strict formulary of the top 200 most commonly ordered products and move to one primary distributor, a plan that would also provide incentives for both BHC and the distributor to improve operations.

But I knew it wasn’t going to be an easy sell to physicians. There would be changes, some of them emotional, involving processes and routines, new roles for staff, new technology, and different vendors and sales reps.

I tried to gauge the BHC board’s tolerance for change. “The questions I posed to them were, ‘Is it worth $400,000 to you? Are we ready to take control of our supply process and costs? Can we embrace automation and move into the electronic age? Can we eliminate price variations? Can we make process improvements, and simplify inventory management and product ordering at the same time?’” Fortunately the answer was yes.

The goal was to reduce costs in the first year by five percent. Much of that entailed finding the right partner and willingness on both sides to standardize. And of course, they blessed it. Why wouldn’t they? If we lowered costs inside the clinic, the savings would go back into their practice.

One of my first steps was taking the plan on the road, visiting the clinics to discuss their expectations, needs and wants. I knew our physicians were ordering 10,000-plus different products, and explained that if we could standardize down to 5,000, they wouldn’t have to keep that entire inventory and the lower cost would inevitably help them manage their practices better.

Next, we looked at potential distribution partners. We wanted someone who could bring us good pricing and help us standardize, which means where we go, they go, and we sell physicians and nurses at the same time to move and standardize products. And then, of course, we needed good service. We wanted to be able to buy equipment; we wanted service on equipment; and because of the constraints of cost, we wanted someone willing to take the risk with us to lower our per-patient-visit supply cost.

Before we sent out requests for proposal for an exclusive physician distribution agreement, I assembled a small team of five clinic representatives (one of whom had prior materials management experience) to finalize our objectives. I told the group, we want to go after one distributor, and we want to start thinking how that distributor can help lower your costs. If, together, we can begin to look at a formulary, it’s going to be a win for everyone.

With the plan in place before the end of 2009, BHS entered into a distribution agreement. One of the major pendulum swings in choosing was the willingness to partner with BHS to lower its BHC clinics’ supply and distribution costs. And that meant guaranteeing some things in writing. With our new agreement, we saved $400,000, and we accomplished that in one fiscal year.

BHS anticipates even greater long-term savings that are sustainable as the agreement continues. And the savings are not the only benefit. Supply cost per patient visit was reduced from $8.22 to $6.96 in one year and there is increased physician productivity.

Michael Louviere is VP Supply Chain, Baptist Health System.

Attracting Top Talent, a Supply Chain Survival Strategy

Mon, 30 Apr 2012 12:29:00 GMT

By David Hargraves

Know it or not, you are witness to a dramatic and permanent change in healthcare supply chain management. Change is all around us.

Our roles are expanding into non-traditional areas, increasing in size and scope, increasing in complexity, increasing visibility and increasing in strategic importance as evidenced by the emergence of the healthcare chief supply chain officer position. What actions are you taking today, to prepare your supply chain organization for the increased demands of tomorrow?

Attracting, developing and retaining top supply chain talent has been proven to have a significant positive effect on a company’s bottom line. Supply chain personnel must be experts in logistics, legal terms, negotiations, inventory control, risk management and corporate governance. Our roles require a mix of capabilities that are difficult to find, but we must fill these skill gaps in order to remain competitive.

In a time when large systems are becoming larger and smaller systems face an increased struggle for financial independence, investing in supply chain talent might sound like a far off dream. But there are actions that you can and should take right now to increase the bench strength of your supply chain team improve your organization’s bottom line. Right now, with little effort and no cost, you could identify the skills and competencies you need, conduct a gap analysis of your current organization and develop a plan to fill in the skill gaps. Below are some tips to help you execute your plan and ensure you’re attracting and growing the best supply chain talent.

Hire fewer people, but pay them more. The 2010 Salary Survey by ISM shows that the average entry level supply chain employee earns $50,506 per year. How do your starting salaries compare? Use procurement automation and Lean principles to remove inefficiencies in your organization and then use the labor savings to ensure your pay is competitive in your market.

Provide support for education, professional certification and training. Financial support may already exist in your organization but your support is what your people need. Be visible. Let them know you value education and certification.

Make your organization a known top destination for new SCM graduates. Undoubtedly your institution spends a lot of money each year on “branding.” What efforts have you done to do the same for your supply chain organization? Develop relationships with trade associations and universities offering supply chain curriculums in your area. If you don’t have a local chapter of a supply chain trade group, consider starting one.

Recruit non-traditional supply chain talent. The fundamental principles of supply chain are the same, irrespective of any particular industry. If you are restricting your search for supply chain talent to only those candidates with healthcare purchasing experience, then you are missing a fantastic opportunity to diversify your organization. Consider hiring a person from another industry, a veteran or a salesperson from one of your suppliers.

A recent research report by Gartner found that over 90 percent of the supply chain executives interviewed believe that talent acquisition and development is at least “an important challenge”.This challenge will only increase in the coming years so now is the time to take action and prepare your organization for the significant changes that are occurring in our industry.

David A. Hargraves, C.P.M., is the senior director, clinical supply chain, at the University of Pittsburgh Medical Center, an $8 billion international healthcare delivery network where he is responsible for all clinical contracting, strategic materials distribution, inventory control, value analysis and supplier risk assessment.

Preparing for the New Economics of Healthcare

Mon, 11 Jul 2011 17:28:00 GMT

The economics of healthcare are changing as a new value-based business model, accelerated (but not caused) by healthcare reform, is emerging to replace the volume-based model that has been in place for many decades.

Hospitals and health systems are responding rapidly to gain the new competencies required for success in a changing environment. Hospital-physician integration, care management, information systems, service distribution, payer relationships, and scale/market essentiality are key focus areas.

To develop, enhance, and finance these competencies, hospitals and health systems must engage in the highest-possible level of strategic and financial planning and analysis, covering a five to 10-year period. Development of mult-iyear strategies and related decision making should be guided by robust, modeling, budgeting, and reporting. Such an effort ensures the alignment of strategic initiatives with the new-era requirements and an organization-wide understanding of the financial and capital capacity implications.

Access to the external capital required to fund strategic plans is contingent on an organization’s financial performance. The quantification of impacts and risks is critical. Risk and sensitivity analyses can help to validate the affordability of plans and indicate their effect on financial performance. An organization’s leadership can then implement specific responses to industry and market changes as a means to improve financial performance, thereby defending the organization’s credit position and capital access.

Market and capital strategies, day-to-day operational planning, and financial planning must be integrated organization-wide. It is no longer possible to address one issue at a time, incrementally. All parameters and forecasts related to payment, volume, capital costs, and other variables will likely change in the next decade, so their simultaneous modeling will be critical to leaders’ understanding of the organization’s current position, where it needs to go, and whether it has the resources to get there.

As Senior Vice President of Kaufman, Hall & Associates, Dan Majka consults on a national basis with regional healthcare systems, academic medical centers, and community hospitals. His areas of expertise include the preparation of integrated strategic and financial plans, development of capital allocation processes, financial advisory services for bond issues, and merger and acquisition-related analyses. Dan has an M.B.A. and a Masters of Health Administration from The Pennsylvania State University.

IDNs Forming Stronger Supply Chain Infrastructures

Tue, 28 Jun 2011 04:09:00 GMT

The path to a stronger U.S. Healthcare System seems to be paved with potholes right now.

Both the Feds and States will have no choice but to cut healthcare payments/subsidies. The trickle down effect will land smack dab in the middle of your desk as a Healthcare Supply Chain leader.

It’s not about you as much as it is up to you to make a difference. In order for the IDNs to strengthen the Supply Chain infrastructure, a continual push to promote, hire, and retain more experienced, energetic, passionate, and highly educated team members will be in order.

From a Supply Chain leader perspective, the following traits are what I have observed over the years in those persons who seem to be the most successful.

They take care of themselves; Take care of yourself, physically, spiritually, mentally, and emotionally, so that you can help others close to you take care of themselves and so on.
They lead by example; Push others to excel, while you are pushing yourself as well. Know when to press, and when to back off.
They give while expecting absolutely nothing in return; Remember, it’s not about you, your rewards come from helping others achieve theirs. Offer yourself up to the national, local, regional associations and help raise the tide that helps raise all ships, don’t just focus on your small piece of the neighborhood.
They stay balanced; Our world is running so much faster than it was just 10 years ago. It is easy to see those around you who lack balance just frying trying to keep up or get ahead. There will be carnage from this inability to stay balanced.

Hang on! We are a critical part of our world’s healthcare solution, be proud of what you do, be proud of who you are, stay balanced.

Jeff Wagner is Vice President of Materials Management for MidMichigan Health, Midland, Michigan, with 30 years of Healthcare Supply Chain experience.

Affiliation Frenzy: How Healthcare Reform Will Drive Supply Chain Innovation

Tue, 21 Jun 2011 19:20:00 GMT

There is a great deal of ambiguity around accountable care as policy makers and healthcare providers struggle to develop new models of care.

In the absence of specific direction from the government, providers and health plans are creating innovative approaches to participate in the CMS proposed Medicare Shared Savings Program. The proposed clinical integration requires resources that medical groups, hospitals and health plans do not independently possess to engage in risk-sharing as Accountable Care Organizations (ACOs).

Since the full cost of becoming an ACO remains elusive, many providers are entering into affiliations to share resources. These collaborations will allow providers to measure quality of care processes, patient experience and outcomes. Since providers can belong to only one ACO—and some markets can support only a limited number—they are choosing partners that can ultimately move into population management while assuming financial and performance risks.

This affiliation frenzy can and will have a direct impact on supply chain. Effective collaboration will depend upon value analysis, sourcing and contracting to drive efficiencies, enabled by innovative technology. UPMC for years has deployed such technology to automate the “procure to pay process.” In the first two years of deployment, the e-marketplace has resulted in hard dollar savings of $3.5 million, 40 percent improvement in contract compliance, expansion of committed contract portfolio to 1.7 million items, and 47 percent of all transactions processed without staff intervention. For every 5 percent improvement in transactions processed without staff intervention, UPMC can reallocate the resources of two FTEs. To date, the work of 24 FTEs has been reallocated to strategic sourcing activities.

All providers will need to adopt such sourcing technologies to meet health care reform mandates. Supply chain leaders who fail to embrace innovation may find themselves and their organizations struggling to survive in a radically changed health care landscape.

—Mary Beth Lang

As Senior Director, UPMC SCM Commercial Services, Mary Beth Lang is responsible for the SCM Affiliation Network and leads placement of Prodigo Solutions technology and services to healthcare providers nationally. Lang is a doctoral candidate at Robert Morris University Information Systems and Communications program conducting research on physicians’ perceptions of how accountable care will change care delivery. Prior to joining UPMC, Lang was the SVP Business Intelligence and President of Diagnostix, LLC for Amerinet.

Supply Chain Will Play Increasingly Significant Role

Wed, 15 Jun 2011 04:20:00 GMT

As healthcare faces its most uncertain direction since the advent of Medicare in the 1960s, introspection is in order on those of us in the supply chain segment of healthcare delivery.

While no one is entirely certain of the precise impact healthcare reform will have in the coming years, it is with great certainty that we cannot continue down a path of unbridled cost increases. Taking into account the increasing percentage healthcare costs consume of our individual/personal dollars year after year, along with the increasing percentage healthcare costs consume of our public expenditures year after year, this trajectory is unsustainable.

Comparing our health care costs globally to every other advanced economic country in the world evinces a stark realization: we are THE MOST COSTLY and thus have a considerable length to go just to align our costs with countries with similar (and in many cases better) patient outcomes.

For that reason, we supply chain professionals will be playing an increasingly significant role in the coming years as we embark upon whatever version of health care reform ultimately transpires (and despite the outcome of court challenges, reform will ensue). In fact, we may be entering a “golden era” for supply chain professionals, as never will we see an opportunity such as now to bring sound contracting, logistic, and general supply chain principles forward.

While in the past, the economics, and in some cases the politics, of the entire healthcare system allowed many to only moderately challenge (in some cases completely ignore) stasis with product selection/standardization and delivery (particularly PPI and other individual taboos); with the new imperative, this will no longer be possible for survival. Thus, the work of the materials professional will become ever increasingly consequential to the entire reform effort. The daunting challenge to reform health care and reduce costs will provide well-prepared supply chain executives unparalleled relevance and importance.

Thomas Golaszewski is vice president, resource and materials management, Meridian Health.

Facts Are Stubborn Things

Tue, 24 May 2011 11:39:00 GMT

Given the state of healthcare, everyone knows that difficult decisions lie ahead, including some tough healthcare supply product and technology choices.

At ECRI Institute, not a day goes by that we are not asked by a hospital, “How do we make our value analysis program more effective?” Or, “How do we ensure our limited capital dollars are spent wisely on clinical technology?”

Our best answer to these pleas is simple to say, but not to do: make your decisions evidence-based. Easier said than done, yes. But doable it is if we ask ourselves some key questions up front. For example, how do we define evidence? What are the specific facts we should seek and how should we judge their relevance? And who should be part of this decision in the first place? In the case of supply decisions or capital decisions, the dilemma generally is not a paucity of information but a surplus of conflicting “data” surrounded by a sea of speculation, opinion, and the occasional personal agenda.

While tough decisions make all of us lose some sleep, good decisions come from a rather simple principle: get the right data, the right process, and the right people before you get going.

Not all “evidence” is created equal (especially clinical evidence as it turns out) so making sound judgments requires an understanding of the strength and weakness of the evidence presented. One must understand the fact set not just gather the fact set—and that requires systematic analysis and a sound process that marries the clinical, technical, financial, and strategic factors into a cohesive evidence-based process. Though odd, it is often as important to know which facts to ignore as to know which to count.

Of similar importance, get the right people on board. Everyone knows that the “right” decision can be struck down by the dreaded “politics,” so making effective evidence-based decisions must take into account the people involved. In other words, gathering the perfect facts will not help you if the “people” don’t trust them. Though this all sounds challenging, experience has shown that good decisions around supplies and technology will come if you find the facts and follow the evidence. Simple enough, right?

Since 2001, Anthony J. Montagnolo has served as Executive Vice President and Chief Operating Officer of ECRI Institute, an internationally recognized technology assessment and patient safety organization.

Standards Movement Gains Momentum

Wed, 25 May 2011 02:17:00 GMT

The standards movement is gaining tremendous momentum.

The Efficient Healthcare Consumer Response that was presented in 1996 indicated that the rewards and benefits of these efficiencies in the healthcare supply chain could realize $11 Billion in savings annually.

To date, very few of the efficiencies have been implemented. A follow up survey was conducted recently which indicated that the amount of savings in 2010 money would be over $50 Billion dollars. With the state of today’s economy and the continued shrinking margins, it is baffling to me why all aspects of the supply chain— from the manufacturer to distributor to provider to GPOs—do not see the benefits. Why are we not all running to the finish line to implement these efficiencies?

The FDA will be introducing guidelines in the near future which will mandate manufacturers to label products with a Unique Device Identifier (UDI) as stated in a bill passed by President Bush in September 2007. It will be up to the providers to scan these bar codes and connect the data to the patient record.

Many say this is impossible. However, I can tell you from personal experience that scanning the product and capturing the data in material management, as well as point of use and the operating room system, is possible. Many of the software providers are working diligently to ensure the systems are capable of capturing the information. Keep in mind that efficiencies are vast. However, the benefit to track recalled items to the patient is a significant patient safety benefit.

Jean Sargent is CMRP, FAHRMM, Director Supply Chain at USC Health Sciences.

The Conversation

Tue, 03 May 2011 15:05:00 GMT

It is hard to believe that in 2011 we are still having this kind of conversation.

Supply Chain Leader (SCL): I need a lower price on the device that my physicians prefer to use.

Company Representative (Rep): I am already giving you the lowest price out there.

SCL: Really? Because my independent data shows that our price is at least 25 percent higher than the average.

Rep: Well, you know those data bases are from hospitals all over the country, some large, some small, and out of my territory.

SCL: So, there are lower prices out there? But I thought you just told me that our prices are among the lowest.

Rep: Well I can’t speak for the whole country just my territory.

SCL: Ok, so even if I was to believe that in 2011 your company is still so technology -poor that you only know about the prices in your territory, are you telling me that we have the lowest price in your territory?

Rep: I am giving you the best price in your region.

SCL: My region or your region?

Rep: Your region.

SCL: So, what is “my” region?

Rep: The corner of Smith and Elm.

SCL: Hey that is the location of just this hospital!?

Rep: You know what, you’re right, that is kind of silly. Because we consider you to be a good business partner, and we want you and your physicians to be happy, I will give you a 25 percent discount on those devices that you currently purchase from my company.

SCL: Well that is good to hear. I am glad we had this meeting.

Rep: Me too. Oh and by the way, we need to meet next week. I have a whole new line of improved devices that the physicians want to use. They have already seen them and they want to use them right away.

SCL: Ok. I assume these will be priced according to the deal we just agreed too?

Rep: Oh, I would love to be able to do that but I can’t…because this is new technology.

These kinds of conversations are driving the inability to build true business partnerships between providers and suppliers. However there is a change in dynamics that is benefiting providers, and suppliers of devices and services ignore it at their own risk. Providers are working with all stakeholders to determine the true value of their business relationships and all of those stakeholders have much more skin in the game.

You can see this reflected in the decisions providers are making related to equipment, supplies, services, consultants and even GPOs. There is a clear move away from the most expensive or loyalty-based choices to new models of getting the right thing at the right price. Many of these models involve strong end-user (including physicians) support and leadership.

The risk I see for suppliers of devices or services is not letting go of old business models that are designed to support a sales force that has been trained to develop relationships with one group of provider constituents. I still see old business models and sales pitches aimed not so much at reducing the cost of goods, but more like magic tricks, designed to distract the audience while business continues along the same way.

Worse yet, I still see sales techniques that are based on the premise that constituents, such as physicians and hospital leadership, do not talk to each other. While I would not call them outright lies, there are clearly two different versions of the same reality being presented to physicians and hospital leadership. I recognize that it is hard for some companies to walk away from what are currently very profitable business models. However, I believe that the successful business models of the future will be those that bring true value, in all sense of the word, to all of the provider stakeholders.
—Joe Colonna

Joe Colonna is Vice President, Supply Chain Management, for Piedmont Healthcare in Atlanta, Ga.

New Supply Chain Model Requires Relationship Building

Tue, 26 Apr 2011 11:39:00 GMT

Collaboration is becoming more and more essential to strategic decision making within the supply chain.

The good news is that silos are breaking down between physician, clinicians and finance and supply chain, yet the opportunity to affect positive change will be lost if supply chain leaders cannot expand their thinking outside of the traditional acquisition, receipt and invoice or even value analysis.

Our partners and customers must also know who and what supply chain is, and how it can benefit them and their customers in an increasingly challenging business place. The new supply chain model requires building relationships based on credibility and trust.

To do so, extending your supply chain presence to where physicians and clinicians practice, and to where financial operations are managed, learning requirements and measures that demonstrate them, and crafting supply chain to integrate more closely into their scope, is imperative.

For example, facilitate meetings between finance, physicians and key clinical staff to discuss multiple vendors providing implantable devices with the goal of identifying what strategies will meet all partner's needs to place supply chain at the negotiating table. Bring accurate data, keep an open mind and ear, and walk away with concepts that can be shared back with the group. At the very least, you will learn what aspects of supply chain are important to each of the key stakeholders.

So get up, get out of your office and go meet your partners.

—Howard G. Mann

Howard G. Mann is senior director, materials management, Saint Luke's Health System, Kansas City, Missouri

The Importance of a Clinically Integrated Supply Chain

Wed, 13 Apr 2011 08:04:00 GMT

As all of us are faced with unique challenges, we should realize how important it has become to have our clinical teams aligned with us as we create our Supply-Chain strategies.

We have felt the pain related to decreases in reimbursements, transparency of quality indicators and the ever-rising costs of new technology, so for us to even begin to address these challenges, our clinical and business processes must transform into one overall strategy.

Most integration can begin by having a self-governance process that allows participation from cross-functional teams. Integration also begins with the simple tool of listening and then trying to understand the environment we have to live in; this world should always be based on quality & safety for our patients, as well as fiscal responsibility as this will ensure our success in the future.

Justifying many supply-chain decisions should now be done based on evidence-based parameters and patient outcomes to create a winning proposition with our clinicians and reimbursement partners. Not only should acquisition price be analyzed but what are the associated costs that cause the market price? Can we change any of these? Is the use of new technology, when a proven older technology can deliver quality outcomes and we just have not had the time to truly look at utilization? Are we investing in new technology only because we feel this is what makes us “cutting-edge” or are we changing patient outcomes that could justify the price upcharge? Are we looking at our outcomes, reimbursement data and price points at the same time to make an informed decision? This is what it will take to get us to the next level….

By having your clinical teams involved in your processes you not only give them the choice they need to provide quality, safe patient-care but you allow them the opportunity to help us understand the importance of true value-based purchasing and a patient-first environment.

As you hire supply-chain talent in the future, ask yourselves-Do you have the team you need to get to the next level of clinical integration?

--Rosaline Parson

Rosaline Parson RN, BSN, CCRN, is Corporate Director, Supply-Chain Services, Orlando Health/Healthcare Purchasing Alliance Inc.