By Brooke Murphy
February 28, 2018
As published in Becker’s Hospital Review
This content is sponsored by McKesson Medical-Surgical based on content collected and compiled by Becker’s. The statements quoted in this article are separate and apart from any conclusions herein and such conclusions should not be attributed to the speakers themselves.
Health systems nationwide are ramping up non-acute acquisitions and expanding their continuum of care for value-based medicine. Stakeholders expect vertical consolidation to increase as health systems diversify by integrating physician groups, urgent care centers, home health services, rehabilitation centers and other non-acute or post-acute settings. Hospitals’ acquisitions of non-acute providers are expected to account for 84 percent of total provider acquisition volume in 2018, according to Accenture.
For many health systems, expanding non-acute networks across larger geographic footprints creates a decidedly more complicated supply chain. Disparate clinical and inventory management systems, geographic distance and varying clinical specialties can obscure purchasing trends and utilization habits and create process inefficiencies. Providers face challenges specific to managing and standardizing non-acute clinical spend. In short: The non-acute environment does not look like the acute-care world in which most supply chain executives have built their careers.
“Dissimilar outpatient settings aren’t operating on the same care management platform or using procurement systems or platforms and for good reason,” says Jacob Hookom, vice president, customer technology, information technology at McKesson. “A home care clinician isn’t going to use the same procurement process as an outpatient surgery center.”
Some health systems have attempted to gain visibility into and gain control over the non-acute supply chain by implementing centralized practices and inventory management systems across these ancillary sites. However, because each care environment has diverse products, technology and workflow requirements based on varying service models, this undertaking is often labor intensive and can create significant overhead without delivering much value.
“Problems are generated when health systems look at trying to get a handle on the financials of non-acute settings, as they try to enact or attempt to apply a one-type-fits-all [solution] to the non-acute procurement process. It only yields a great deal of expense and unnecessary overhead,” Mr. Hookom says. “That’s where working with your suppliers is the lowest common denominator in helping inform C-level visibility across your health systems.”
As health systems acquire more ambulatory, non-acute and post-acute practices, health system leaders see value in partnering with their non-acute suppliers to gain visibility into non-acute spend and by using analytics to identify cost savings opportunities, all while positioning themselves to better manage population health.
Mr. Hookom described three ways non-acute suppliers can help health systems reduce complexity, drive down non-acute costs and generate revenue.
1. Leverage purchasing data for right-size procurement and waste reduction.
“Working directly with suppliers and manufacturers to aggregate purchasing information allows health systems to achieve right-size procurement processes based on their non-acute affiliates’ purchasing frequency and utilization rates without having to implement an expensive IT infrastructure across multiple sites,” Mr. Hookom says.
“The most critical aspect of driving cost savings through analytics is the procurement process,” Mr. Hookom says. Having a robust procurement process involves developing quality standards, financing purchases, negotiating prices and disposing of waste products. When supply chain leaders gain visibility into procurement at individual facilities, they can appropriately source products and customize inventory according to quality, volume and price.
“By analyzing tertiary purchasing frequency and ambulatory management in these facilities, there could be a lot of waste going on,” Mr. Hookom says. “In terms of analytics driving decision making, we are able to look at exhaust data from your clinical care data such as what lab tests are being run, what procedures are being scheduled, to ultimately automate the re-supply process completely for that facility.”
2. Analyze inventory for SKU standardization.
In addition to identifying opportunities for improved procurement, non-acute suppliers can help healthcare organizations take control of the non-acute continuum and achieve better operation outcomes by standardizing non-acute SKUs to yield cost savings and improve the quality of patient care.
SKU variation hinders both operational and clinical efficiency by driving up inventory costs and complicating workflows for clinicians. Since quality and utilization processes differ by product, greater variation creates more opportunity for human and clinical error, which threatens patient safety. By gaining insight into SKUs in partnership with non-acute suppliers, health systems can enhance care quality by ensuring all clinicians use only the same high-quality products.
Standardization has also emerged as a valuable tool to drive efficiency, reduce costs and improve compliance in supply chain management. Specifying a limited group of vendors to provide a limited brand of supplies, for instance, enables organizations to take advantage of volume discounts, further driving down material costs.
From an analytics perspective, we can really support health systems and their non-acute settings by facilitating SKU standardization efforts, cost reductions, and helping achieve volume and leverage with manufacturers,” Mr. Hookom says.
3. Establish adjacent distribution channels to generate revenue.
Some health systems are leveraging the expertise of their non-acute suppliers to establish new distribution channels, such as durable medical equipment retail offerings.
This strategy is especially timely given the health needs and demands of the baby boomer generation and the fact that routine care is frequently completed at home – not in the acute care setting. Many health systems have reinforced their efforts for retail or cash sales to make up for lost reimbursement and to expand their overall revenue.
“On the revenue front in the non-acute setting, we’re seeing something very similar [to acute settings],” Mr. Hookom says. “We’re seeing additional channels of distribution to patients as part of that care continuum health systems are establishing, either in durable medical equipment or specialty pharmacy or home health or post-acute care. Health systems are seeking adjacent product categories or capabilities to achieve additional revenue streams.”
Supply chain’s role in population health management
Population health is driving the need for more patient-centered supply chains that support the delivery of care where and when patients need it, which is increasingly outside the acute care setting. By partnering with supplier organizations, health systems can best position themselves to combine supply chain, utilization and clinical data to understand population health needs and tailor clinical spend accordingly to help deliver better clinical outcomes.
Patients are increasingly treated outside of acute care facilities. Roughly 94 percent of patient interactions occurs outside the hospital setting, according to 2017 data from The Advisory Board. Consumerism and the premium patients place on convenience are further driving healthcare’s migration into patients’ homes. This shift in where patients receive care will spark a cascade of changes in how health systems approach supply strategies.
“Care conducted in the ASC setting is moving to physicians’ offices, and services provided in physicians’ offices are moving to the home,” Mr. Hookom says. “So, the whole idea of where supplies are used is also migrating.”
As a result, supply chain leaders are increasingly called on to deliver products, drugs and services to meet patients’ clinical and social needs through new distribution channels, such as digital and remote care, and in less traditional locations, such as the home.
“In the advent of telehealth and home health, medical products that are part of the traditional supply chain are being used more frequently by the patient in the home,” Mr. Hookom says. “We see a great deal of care and concern from our customers in terms of what products they’re putting in their patients’ hands that are representative of the care their own staff provide.”
Healthcare organizations will increasingly tap into supply chain leaders’ knowledge and data as they attempt to discover what clinical products are most effective for treating which populations of patients. In fact, nearly 90 percent of providers and suppliers said integrating supply chain data with clinical data was a strategic focus for their organization in the next year, according to 2017 Healthcare Supply Chain Trends Survey.
“To effectively analyze supply savings, one of the most innovative things we’re seeing is supply chain working with the clinical analysts’ or patient population, which ultimately drives those supply expenses,” Mr. Hookom says. “By establishing those data sets with your clinical analysts for comparison, and working with your suppliers to aggregate and analyze utilization data, you’ll realize the benefits to quality of care and the application of those products across patient populations.”
Health systems today need accurate and in-depth views into their business to find meaningful ways to remain competitive and profitable. This is especially the case when health systems acquire non-acute facilities. It takes flexibility, a willingness to change course and trusted expertise to take processes designed for acute-care hospitals and adjust them to the unique needs of ambulatory care or ancillary facilities.
Fortunately, health systems have willing and informed partners at their fingertips. Robust partnerships between health systems and their suppliers can integrate purchasing and clinical data for operational cost savings, leverage purchasing data for right-size procurement and waste reduction in non-acute settings, facilitate SKU standardization efforts and capitalize on new channels for revenue generation, among several other benefits.