Editor’s Note: This is the first part of a two-part series.
It has been two years since Coronavirus was first declared a global pandemic. States were put under stay-at-home orders, people hoarded toilet paper, stimulus checks were distributed, major pop culture events were postponed – and that was all within the first eight weeks. Even though the COVID-19 vaccine has been available for over a year now, the future still remains uncertain as the new BA.4 and BA.5 variant begins to spread.
It is easy to remember the early days of the pandemic and how nervous the nation felt. One couldn’t go to a grocery store without seeing empty shelves and there were all the news reports about how overrun hospitals were with bodies. For weeks hospitals and other healthcare facilities were forced to reuse PPE because of “supply chain constraints,” and for the most part, nobody even knew what a supply chain was or what it did.
To put it simply, the supply chain is the process of how goods are distributed. Like healthcare, it is one of the only industries that touches every single person in the world. When the pandemic first began, there was an overwhelming demand of goods from all industries, and that caused the supply chain to bend – not break — under pressure for the first time in recent memory. However, the healthcare industry cannot afford to lose any momentum in times of crisis.
“COVID-19 has presented the healthcare industry with an opportunity to reset and build a better, more financially sound future,” Chris Luoma, senior vice president, global product management, GHX says. “For supply chain professionals, the near-term focus is the redesign of the healthcare supply chain, coupling proven supply chain approaches with advanced technology and automated processes. The goal is to create a resilient, agile supply chain system capable of successfully supporting a value-based care model: one that increasingly revolves around improved patient satisfaction, safety and outcomes. Modernizing the supply chain is a critical step in the healthcare industry’s ongoing transformation. Organizations that optimize their supply chains will realize greater revenue growth through improved reimbursement, better costs savings, and improved risk mitigation — while improving the patient experience.”
As demand began to outpace supply, the cost of goods began to increase. Historically, companies focus on items that make up 80 percent of the spending but only 20 percent of the impact, when in reality, managers should focus on the opposite. In order to accomplish this, there has to be a change in mindset that allows officials to target suppliers that offer the greatest potential to cut into the company’s topline. Despite the supply chain playing such an integral role in operations, companies are still unwilling to invest in the function. However, making these improvements can increase performance on all fronts.
“Traditionally, the cost of supplies was calculated in a vacuum by supply chain teams,” Kristen Miles, senior director, healthcare supply chain product strategy, Oracle says. “However, the ability to take into account the true cost of supplies, procedures, etc. has become the mantra for every healthcare organization. A cry for data aggregation across all systems involved in patient care has been heard, and technology vendors are answering that cry with solutions to marry data and expose and correlate costs of supplies, labor, and overhead with patient outcomes and reimbursements. As a result, hospitals are now able to calculate the true cost of a procedure, understand the cost related to the patient outcome, and then understand the revenue that was able to be captured.”
Collaboration is Key
The only way that supply chains can remain undisrupted is if there is consistent collaboration between every link of the chain. When something goes wrong, it immediately causes a chain reaction and impacts everyone else down the line, and that blame often gets placed on the end facility manager.
According to Eric O’Daffer, VP analyst of Gartner Supply Chain Practice, it is crucial that supply chains become one of the best collaborative partners for healthcare facilities managers. The function can help with capital allocation and product lifecycle management wherever applicable for facilities.
“The line is blurred between what facilities managers do and what supply chain does in some systems,” says O’Daffer. “In general, supply chain should partner with Facilities to help standardize the approach across a health system for services and supplies Facilities consumed. Facilities is the end user and supply chain's role should be listened, set specs, source, deliver and measure. In some cases, supply chain may help with the insource vs outsource decision across a health system or a segmented market. Supply chain growingly should have access to some benchmark data on what some services should cost and can help orchestrate third party partners that facilities rely on.”
Meanwhile, supply chain leaders and facilities managers can work together to ensure the right supplies and equipment are available so that operations run as smoothly as possible. Facilities managers have a duty to ensure that their operation complies with safety and infection control protocols. Supply chain teams work with quality and infection control teams to make sure the right supplies are available to support these initiatives while ensuring that decisions fall in line with the organization’s overall financial goals and cost containment initiatives, Luoma says.
“Healthcare supply chain managers must stay in lock-step with the facility managers they serve by providing metrics on supply costs and availability, educating the staff on alternative options when disruptions occur, and making sure that strong and swift procedures are in place to handle disruptions,” Miles says. “Additionally, they need to demand a seat at the table when performance metrics are being reviewed, as they are able to speak to whole acquisition costs of goods and identify trends, changes, and new options when they arise.”
Mackenna Moralez is the associate editor with Healthcare Facilities Today.