The Healthcare Hub

GHX provides a wide range of perspectives on how greater collaboration and visibility across the supply chain can improve both clinical and financial performance in healthcare.

Monday, December 6, 2010

The Gartner Healthcare Supply Chain Top 25: Do You have What it Takes?

I had the opportunity to attend the Gartner Healthcare Exchange in Boston recently, where the second annual Healthcare Supply Chain Top 25 was announced. For those of you who could not make the event, I invite you to register for a free webinar on Tuesday, December 14 from 12:30-1:30 pm EASTERN time , during which Gartner analyst Wayne McDonnell will discuss the program, while two of this year’s recipients will talk about how they are leveraging their supply chains to drive both clinical and business performance.

Gartner instituted the Healthcare Supply Chain Top 25 program last year, modeling it after the successful cross-industry Supply Chain Top 25 recognition program begun by AMR (now part of Gartner) six years ago. While the overarching theme for this year’s ranking is the same as last year: the use of supply chain excellence in the pursuit of “high-quality patient care at optimal cost,” Gartner has adjusted some of the criteria upon which organizations are evaluated. Most notably, Gartner has added “patient focus” as one of five characteristics that define supply chain excellence in healthcare. The way Gartner sees it, the patient is the one common factor all participants in the healthcare supply chain share and should serve as the foundation for developing “value chain” strategies, from product development to partner collaboration.

On that note, I was pleased that Gartner took the time at this year’s meeting to define the difference between “value chain” and “supply chain.” Too often, I have sat in meetings where the Gartner/AMR Healthcare & Life Sciences team has talked about the concept of the healthcare “value chain,” only to have members of the audience – mostly healthcare supply chain professionals from supplier and provider organizations– chalk the term up to “analyst-ease.” In reality, just that slight shift in perspective is sometimes all it takes to change the nature of the dialogue and in turn the relationship between providers and suppliers. Here’s how Gartner defines the difference:

The Supply Chain

  • Traditional View: manufacturer ‘pushes product’ toward the customer\
  • Definition: inside-out planning, sourcing, making, and delivery of products to customers

The Value Chain

  • Present View: collaborative relationships between trading partners seeking value for the end customer
  • Definition: translation of outside-in demand from the customer into profitable perfect orders for trading partners

For some, this may still seem like an exercise in semantics, but those who made this year’s Top 25 list are demonstrating how that shift can translate into measureable results. Take Intermountain Healthcare, one of the organizations participating in the webinar, as an example. President Obama, in a joint session to Congress, noted that Intermountain offers high quality care at a cost below the national average. The supply chain has played a role in that success; Intermountain Healthcare has saved tens of millions of dollars, in part by centralizing its supply chain and introducing best practices from other industries. The other organization to be featured in the webinar is Boston Scientific Corporation, which Gartner recognized as “one of a few medical device manufacturers blazing new trails for collaboration with health systems.” At the same time, Gartner says the supply chain is gaining a reputation within Boston Scientific as a growth strategy, as opposed to a cost center.

I applaud Gartner for adding more rigor to the selection process this year. For example, instead of just relying on peer review for evaluating healthcare providers as it did last year, Gartner also looked at bond ratings as a measure of operational efficiency and quality rankings from Thomson Reuters to differentiate systems based on patient outcomes. The methodology for ranking manufacturers, distributors and retail pharmacies remained relatively the same: a combination of peer review and publicly available financial data on factors such as return on assets and inventory turns. Going forward, I hope Gartner can find a way to also evaluate companies without public financials, as there are a number of privately held companies - Cook Medical comes to mind - that are making great strides in the areas Gartner considers key: collaboration for joint value creation and continuous, end-to-end cost improvements.

Register for the webinar.

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Karen Conway

Vice President, Healthcare Value