Supply Chain, Please? Going Up! | GHX

Karen Conway

Executive Director, Industry Relations
Thursday, November 18, 2010

Supply Chain, Please? Going Up!

About 18 months ago, a friend of mine – the director of procurement for a multi-hospital integrated delivery network – walked into the CEO’s office and said the system needed a supply chain leader on the executive team, adding “if that person is not me, then I suggest you hire someone who can fill that role.” My friend walked out a vice president.

The healthcare system he works for is part of a small but growing number of organizations that are recognizing the strategic role of the supply chain function. The Arizona State University Health Sector Research Consortium recently published a white paper on the topic: “Repositioning Supply Chain in Integrated Delivery Networks”. It makes some interesting points, and as with any good read, it also generates some additional questions.

Many of the systems that have elevated the supply chain role did so as the result of a direct recommendation from outside consultants, who pointed out to senior leadership that there is more opportunity than just lowering the price paid for supplies. At the same time, the paper points out that most of the IDNs studied view the supply chain as playing more of a role in improving business performance than in buffering the organization from clinical risk. I am hopeful that as more healthcare organizations attract the necessary talent to build a true supply chain function, they will have visibility to data that can demonstrate the role of the supply chain in reducing variation and contributing to key quality metrics required under healthcare reform, such as reducing hospital-acquired infections.

Those surveyed – including both senior and supply chain leaders - all agreed that relationship management is the most important function of the supply chain leader’s job. While the importance of external relationships – with suppliers, GPOs and distributors - are mentioned, most of the discussion focused on internal stakeholders, especially engaging physicians in product analysis to make decisions in the best interest of the physician, the hospital and the greater good of patient care.

What’s often undervalued is the role of the supply chain leader in engaging other clinicians, such as nursing staff. My aforementioned friend achieved his new position, in part, because of his ability to work with clinicians to make data-driven improvements. Using information from GHX and automated replenishment cabinets, he identified that the healthcare system was not charging for millions of dollars in supplies. By working with staff on the nursing floors, he was able to put procedures in place to capture usage at the point of care, cutting losses by 80 percent while ensuring the availability of critical supply levels.

Going forward, the most effective supply chain leaders will use their relationship management skills to craft more effective partnerships with suppliers– ones that focus less on price and more on redesigning systems and processes that help all involved deliver the most appropriate care at the most optimal cost.

As the paper points out, ”managing the broad materials environment, where suppliers and other trading partners can improve overall performance, can become a hospital’s competitive advantage in working with payors and patients seeking the best treatment at the best cost in an era of value based clinical purchasing.”