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At the recent Supply Chain Leadership Forum during the AHRMM conference in Washington, D.C., a group of supply chain executives came together to discuss current issues affecting health systems. Tasked with making their systems’ supply chain run as efficiently as possible, the executives admitted that the current growth rate did not make this easy.
As health systems expand their footprint by acquiring non-acute facilities, it’s a challenge to the supply chain to integrate these facilities in an organized manner. And in a market where it seems like there’s a new acquisition every week, things can quickly get out of hand.
As Kelli McRory, Associate Director, Strategic Sourcing Clinical at Jefferson Health put it, “…It seems like every day we’re adding another urgent care, another surgery center – and with our latest merger with another large health system, the size of our non-acute space is just going to get bigger and bigger. So, it’s an exciting time, but we clearly are just trying to keep up. We have had a merger every year.”
One of the early steps many health systems take when integrating non-acute facilities is attempting to standardize product purchases to adhere to a formulary of approved products. Standardizing product selection can help reduce costs and provide consistent care. This is common knowledge in the acute care world, but non-acute facilities are likely to need a different formulary, since what’s used in the hospital is not always required in other care settings. How can supply chain professionals even get visibility to what non-acute facilities are purchasing, let alone agree on a formulary and enforce its use?
At the Leadership Forum, hosted by McKesson Medical-Surgical, one participant pointed out that “[the non-acute facilities are] free to use what we do in the hospital space, but if they go offline, we’d never know about it. I mean, I really have no visibility in that space whatsoever.” It’s common for supply chain managers to have good visibility to the purchasing behavior of their hospital facilities, but little insight into non-acute purchasing behaviors. Having this visibility is the first step toward standardization, but it’s not always easy to get it.
“One way to close the visibility gap,” as Greg Colizzi, Vice President of Marketing at McKesson, pointed out, “is to convert all the non-acute sites to the existing enterprise ordering system, but that’s a costly and time-consuming project which may not be necessary. These systems are quite often designed for the hospital environment and can be cumbersome for a physician’s office. Before going down that path, start by talking with your primary distributor for the non-acute sites of care.”
Colizzi continues, “This distributor will likely have systems designed for these locations and the necessary data you need – what products the non-acute sites are buying, in what quantities and how often they are ordering. Some have even developed online dashboards which can integrate into existing ERP systems to display the non-acute facilities’ purchases over time, down to the category and item level, along with analytics to help put this data in perspective. Access to these non-acute ordering trends makes it possible to begin discussing standardizing to a formulary.”
When a formulary has been set, what’s the best way to ensure purchasers at non-acute facilities are complying with it? Simple technologies, such as online ordering systems, can make this possible. Most web-based ordering systems offer options to set up and enforce formulary compliance at the point of purchase, throughout the non-acute continuum of care. Purchasers choose from a catalog of items that have been selected in advance by a product selection team, making it simple for them and for the health system management.
A different, more high-touch option is to set up approval rules, where facilities can purchase freely but orders are sent to an administrator for approval before the order becomes final. This administrator can follow up with the facility about any off-formulary purchases, to recommend alternate products and approve or deny the order before it is placed.
Inventory management systems provide functionality that is a step beyond, with the ability to set up and enforce formularies, plus capture and allocate product usage, order from multiple vendors and set up custom reports. Inventory management systems can serve all the facilities within a care continuum to help standardize product choice throughout the health system. Focus on having the right products available in each care setting.
Once supply chain professionals have a way to see the products that non-acute facilities are purchasing, and a method for managing formularies going forward, that health system is positioned well for future growth. The pace of acquisitions and mergers in the industry is unlikely to slow down, but with the right processes in place – and some help from technology – future integrations may be easier to manage.