The future of the health care supply chain

February 23, 2015
by Sean Ruck, Contributing Editor
Bruce Johnson has been with supply chain organization GHX since 2000. Prior to that, he spent 12 years with GE Healthcare. He shared his thoughts on the obstacles the supply chain needs to overcome as well as what hospitals should keep in mind when trying to curb costs.

“When you talk about the challenges of the supply chain, I think it’s a continuation of some of the trends you’re seeing because of health care reform,” says Johnson. “When I meet with hospital executives, they’re looking at what they can do to dramatically improve their costs and quality.”

To cut costs hospitals are turning to information tied to clinical data. The goals: To better standardize care, to improve patient experience and outcomes — and to boost efficiency. But “dirty” data can make that tricky.

“There’s definitely a lot of data, but it’s not necessarily clean or normalized data. You’re trying to marry supply chain with clinical data. But there’s a step before that. You have to clean up and normalize it to have actionable data you can use,” he says. Johnson says the growing use of UDIs and requirements for their use being introduced by the FDA will help in that regard.

Tradition needs to move aside
Key to progress, he stresses, is overcoming any traditional lack of trust between providers and suppliers. Facilities able to build a healthy partnership between provider and supplier and increase transparency of interactions will be the most successful.

“Some of our customers are very adamant about the fact that health care is dealing with patient lives and you’ll never be able to directly compare the type of transparency in health care to that found in automotive or electronic industries, for example,” he stresses. “But a common theme among leaders — regardless of what your take is on that — everyone agrees that [the] status quo and going after just price cuts per unit won’t get things done. That’s where we’re seeing more progressive organizations looking at other cost drivers,” Johnson says.

“The cost-cutting and negotiating of the past, say, getting 10 cents off unit cost, isn’t going to get a hospital where it needs to go.” Instead, he says, they need to consider inefficiencies. “If we look at that, is it possible there could be a savings of $10 per unit with smarter planning?”

The data exchange
“One of the things I think you’ll see — because the hospitals have to consider a new situation for them, against quality and outcome —will be hospitals looking at what partnerships they’ll need in order to have a big enough [data] slice of the population,” Johnson says. For many hospitals, getting a large enough data pool to effectively run algorithms means entering into new relationships to get information from a broader pool “The companies that have algorithms developed to leverage that technology to pull together some of the information will do the best at helping to standardize care,” Johnson says.

Johnson says there are there things to look for as a supply leader trying to improve efficiency:

1. Look at the data you’re responsible for — getting the process in place as far as contracts and having strategy there. What tools will you have in place to manage it?

2. What is your strategy around automation?
Best in class hospitals and suppliers are looking at how they get to the perfect order – ultimately a “touchless” scenario, one in which to meet the goal of maximizing efficiency requires no human intervention on the provider or supplier side, will likely be the way of the future.

“The key is the accuracy of the data,” says Johnson. “So that’s why the key there is touchless – because for both supplier and hospital, if you get the information error free, you can go from requisition to payment invoice. Having a way to decipher content and contract is key.”