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Healthcare’s C-level leaders are under immense pressure to improve operational efficiency and maintain their organizations’ bottom lines amid some challenging industry dynamics, including regulatory uncertainty, declining reimbursement and rising expenses.
At the same time, financial incentives to keep patients out of the hospital and healthcare consumers’ increasing demand for convenience are pushing more care toward lower cost, non-acute environments, such as physician’s offices and urgent care centers. “Ninety-five percent of patient visits are actually in the non-acute care settings,” said Greg Colizzi, vice president of health systems marketing with McKesson Medical-Surgical. “That non-acute prevalence will continue to grow, and it’s going to require more healthcare executives’ time, thoughts and efforts.”
Consequently, many healthcare leaders are rethinking their non-acute strategy to address these market pressures and the growing demand for outpatient care. Seventy-one percent of health systems plan to expand their community footprint through acquisitions and expanding care facilities, according to a 2017-18 survey from the Health Industry Distributors Association. However, few C-level leaders are prioritizing supply chain investments to match this expansion.
Only 7 percent of leaders said they had plans to build a consolidated service center, and 8 percent shared plans to construct a distribution center for their supply chain processes, according to the same survey.
While non-acute growth helps health systems better meet patient demand, expanding this network across a larger geographic area can complicate the supply chain. Supply costs are usually a health system’s second greatest expense after labor, so any inefficiencies or misalignment within the supply chain can create significant waste and variation that threaten a health system’s financial health. When C-suite leaders only view supply chain as a logistical function, rather than an asset to non-acute strategy, they miss out on game-changing opportunities to help lower costs.
Mr. Colizzi and his colleague Becca Norris, vice president of strategic business initiatives for McKesson, joined 15 C-level executives from health systems to discuss how leaders can tap the supply chain to optimize their non-acute strategy during a roundtable discussion at the Becker’s Hospital Review 7th Annual CEO + CFO Roundtable in Chicago.
It’s no surprise that more patients are demanding access to convenient, low-cost healthcare options outside of the hospital. Sixty-one percent of patients said they are willing to switch providers to get appointments sooner and 52 percent would do the same to access more convenient care locations, according to a 2016 survey from Accenture.
The healthcare leaders that gathered in Chicago said they are pivoting their non-acute strategy appropriately to reflect this change in consumer behavior.
“What we focus on right now, and as the future goes, is really making it seamless for patients at the outpatient level,” said the president and CEO of a large integrated health system in the Midwest.
Part of creating a seamless outpatient experience is offering patients access to care in more convenient locations, according to the vice president of clinical information systems and chief medical information officer of an academic medical center in the Midwest.
“In our market, there’s a 90-minute commute for a patient just to get downtown for a 20-minute visit,” this executive said. “So how do we decentralize and get closer to where our patients are, or give them other ways to access our systems, so we can meet our patients where they are, rather than having them come to us?”
The academic medical center is solving this dilemma by partnering with other healthcare providers, opening more clinics in the community and using services like telehealth and e-visits to reach patients in their homes.
Along with pressure to meet consumer demands, healthcare executives also cited expansion as a key component of their non-acute strategy.
“We are looking at a lot of expansion right now, and we’re probably one of the country’s fastest growing health systems,” said the president and CEO of a seven-hospital system in the South. “We’ve been growing about 15 to 17 percent of basic revenue for five straight years.”
The health system is working with a third party to provide consumers with urgent care centers that will be branded under the system’s name. The CEO said the goal is to provide better care alternatives for patients across the system’s geographic reach, with the idea they will all feed into the system’s large academic tertiary hospital and children’s hospital.
The role of the healthcare supply chain leader has changed dramatically in the past decade due to the increased expansion of non-acute care settings, with the breadth of their responsibilities becoming broader and more important than ever before.
“There’s a quote we’ve heard several times in the supply chain business that goes, ‘When I think about my non-acute business, it only represents about 2 percent of my overall budget, but 35 percent of my headaches,'” said Mr. Colizzi.
Healthcare leaders must equip their supply chain teams with the tools and resources needed to best manage inventory and costs across sprawling non-acute environments. Sometimes this involves acknowledging the health system does not have the capabilities or bandwidth to manage the non-acute environment on its own, according to the vice president of supply chain at a five-hospital system in the Midwest.
“Many executives are fearful about outsourcing, but you can’t be all things to all people. There are just certain things you can’t do,” he said. “Unless a system has its own distribution network, it’s going to have to look to distributors that handle the non-acute space.”
Inventory management software, enterprise resource planning systems and data analytics tools can also help supply chain leaders achieve system-wide product visibility to better identify waste and variation. Before implementing such a technology, Mr. Colizzi said healthcare leaders must analyze whether the system will support clinicians’ productivity in the non-acute space.
“You really don’t want your clinicians ordering Band-Aids and managing inventories. You want them spending times with patients,” he said. “I rarely see a request for proposal that addresses the need to improve staff efficiency and productivity. It’s almost always focused on the cost.”
The non-acute supply chain is an increasingly important area for C-level leaders to look at when assessing how to improve systemwide performance and financial health. When health systems empower their teams with the right tools to help improve standardization and efficiency across the non-acute supply chain, they can achieve reduced care variability, improved patient outcomes and lower supply chain costs.