How can you significantly influence your supply chain performance without the help of additional resources?
Healthcare provider organizations are tasked with this dilemma daily and the goal to go beyond just managing costs, but to actually reduce costs while improving patient outcomes. Supply chain specifically goes after this challenge with an eye toward expanding automation, using data proactively and improving contract price alignment.
The underlying things going on in your supply chain, that you just can’t see without looking at the data, are where opportunities exist to move the needle. Everything may look good on the surface — you're automated from procure to invoice and following up on exceptions, have contracts loaded, etc. — but when you look deeper you get a different picture. This is your tuning point, when you move from “Everything is great” to “Uh-oh not so great — we’ve got problems” to “I don’t know where to even begin.”
How do you get the wheels turning? Where do you direct your focus?
“The check is in the mail.”
When it’s time to be paid, few refrains produce more unease than this one. For healthcare suppliers working to improve receivables performance, ambiguity in payment processing is problematic. As competition intensifies and interest rates rise, the pressure on suppliers to create more predictability around payment processes is climbing sharply, according to a recent study by Institutional Investor Custom Research Lab.
Managing contracts and compliance data is a challenge for healthcare organizations today. The process often involves people and departments across the organization requiring a secure but nimble system for tracking negotiations and approvals. Current regulations require healthcare providers to know more about who they are doing business with and to manage their vendor population with consistent scrutiny to maintain accurate data. Adding to the complexity, with mergers becoming more common, hospitals are seeing an increase in the number of local contracts along with contracts that fall outside of med-surg that need to be maintained as well. As a result, organizations need to interact with contracts in new ways, with more flexibility while maintaining even more data and security.
Mergers and acquisitions (M&As) have become the norm in our industry. Most health systems and hospitals have been, or will soon be, involved in an M&A as we move into the era of “super IDNs.” At the end of the day, none of us are going to stop this activity from occurring, so what can we do to be successful?
During a panel discussion at the 2017 Healthcare Supply Chain Summit entitled, “What provider supply chain executives should know about M&As: The Good, Bad and Ugly,” three seasoned experts in healthcare M&As shared their best practices and lessons learned -Nancy LeMaster, VP of Supply Chain Transformation at BJC HealthCare; John Berger Executive Director of Finance Shared Services at Piedmont Healthcare; and Karl Blomback, Corporate VP for Hackensack Meridian Health.
You have probably heard it said, “You had to be there,” meaning that the retelling of the story probably doesn’t do justice to the actual experience. There are many such instances at the GHX Supply Chain Summit where over 800 healthcare supply chain professionals gather each year for insightful and thought provoking presentations and conversations. So, while there are many experiences at the Summit that you have to “be there” for, here are some thoughts, ideas and statements heard at the 2017 Supply Chain Summit that pack a punch even in the retelling.
When it comes to payment options, the more choices the better right? Healthcare suppliers want to get paid fast, and healthcare providers want to take advantage of early pay discounts and rebates, and avoid late fees. So why not have a variety of payment methods in place: check, wire, credit card, Automated Clearing House (ACH), etc.?
But choice can add costs.
In healthcare we typically operate in silos, with the right hand blind to what the left hand is doing. Take for instance finance in both provider and supplier organizations. While accounting and accounts payable/collections might communicate regularly with treasury and engage in all-team meetings, their structures, business processes and policies are often disjointed. Without an integrated approach throughout its financial functions, an organization cannot fully assess its activities and identify opportunities for cost savings.
The healthcare industry is undergoing a transformation aimed at providing higher quality, more cost-effective care. Key to striking the balance between cost and quality is data.
At GHX, we know data can help organizations set strategic direction and direct critical business and care decisions. However, this only holds true when “bad data” does not serve as the foundation for efficient and effective value analysis efforts.
For instance, healthcare providers take advantage of their supply chain data to help reduce cost and improve standardized patient care. That data, coupled with predictive analytics, helps to better anticipate future product demand — which enables providers to avoid losing speed to patient care due to discontinued or backordered products.
This week Supply & Demand Chain Executive announced the recipients of its annual “Pros to Know” award, which recognizes the industry’s top supply chain professionals. It’s my pleasure to share that not one, but two GHX executives were chosen to receive this year’s recognition: Pete Nelson and Chris Louma.
It would appear that Democrats and Republicans can’t agree on anything if you are listening to the conversations or sound bites. In the recent HPN article, Amidst political turmoil, value is a bipartisan standard, Karen Conway finds there is something that both parties in Washington do agree on – better quality healthcare at a lower cost, which at a high level is the definition of value.
When you consider legislation passed in recent years, the Medicare Access and CHIP Reauthorization Act (MACRA) and the 21st Century Cures Act, it is clear that there is bipartisan support for better quality care at a lower cost regardless of the battle over ACA.
You don’t wake up one morning and just say, “I’m going to run a marathon today”. No, you have a plan to get ready. The winners of GHX Best 50 all started somewhere and developed a plan for getting where they wanted to be – on the stage receiving their award!
Changes in healthcare – from delivery to payment – are impacting leadership and the structure of healthcare organizations. These changes are driving the need for talent previously not seen as key components for successful healthcare organizations. As a result, leaders are beginning to include members with expertise outside of traditional roles such as social media, customer experience, marketing and change management. This shift in thinking is key to an industry experiencing a major transformation and we are seeing it play out in five key ways.
Healthcare organizations have traditionally worked to limit the product data held in item masters to the products used most commonly. Today, with expanded use of electronic health records, the item master is becoming more of a strategic asset and the single source of truth for item information in multiple systems. This evolution suggests that the item master may become more valuable by extending item data beyond routine stock and products.
Healthcare mergers and acquisitions caught fire in 2015 and are predicted to continue the trend. As noted in the recent article Hospital M&A is Heating Up co-authored by myself and Mike Gillespie, global management consulting firm Accenture forecasts acquisitions of non-acute providers to reach 84 percent of total acquisition volume by 2018. The M&A activity is fueled by efforts to cut cost, increase quality and gain economies of scale needed to survive in a value-based reimbursement environment. However, these goals may be compromised when provider organizations aren’t preparing adequately for the integration of technology systems and data that will impact clinical, business and financial performance.
GHX participates in and attends many healthcare industry conferences each year in addition to hosting the annual Healthcare Supply Chain Summit. In the course of attending these conferences, we typically see common themes that run from event to event. It would come as no surprise that the current environment finds healthcare providers continuing to look for opportunities where costs can be reduced and programs can be operationalized while still contributing to the quality of patient care.
Since 2013, Mount Sinai Health System has grown rapidly through M&A activity. As a result, we’ve had multiple hospitals with their own supply chain and accounts payable (AP) departments each using disparate technologies, including different enterprise resource planning (ERP) systems and item masters.
Healthcare suppliers and providers that have collaborated on supply chain improvement initiatives have reaped the rewards of greater efficiency and lower costs – but it requires a level of trust nonexistent in many trading partner relationships.
“In the traditional buy/sell relationship, each party is trying to outwit the other,” said Gene Kirtser, President and CEO of Resource Optimization & Innovation (ROi), Mercy Health’s supply chain division. “But we are at a point in our industry where that is simply not sustainable. Providers and suppliers must learn to work together to find ways to reduce costs. That’s the only way we will all survive.”
Most providers and suppliers recognize that Cost-to-Serve in healthcare is high but the day-to-day challenges in supply chain seem so overwhelming, they don’t know how to begin to address them. Here are four key steps from healthcare supply chain leaders to get you started.
While most providers and suppliers spend countless hours hashing out issues around product price, few have examined an area that presents a greater area of savings for both parties – the actual total delivered cost of a product. This includes direct and indirect costs required on both sides of the supply chain to deliver the right product to the right place at the right time.
In a healthcare environment where everything has become digital, most medical-surgical product manufacturers have transitioned from manual data entry to electronic, automated processes for customer orders.
Are your customer service reps still physically keying in orders while your competitors and peers have put into place touch-less order processes? Do your customers consider your competitors and peers easier to do business with because their orders flow electronically via EDI? If so, consider this:
Within many healthcare organizations, the supply chain department operates in a silo disengaged from frontline caregivers. In the case of McLeod Health, this led to $3.2 million a year in lost revenue as a result of not capturing product usage at the point of care. To address this issue, McLeod’s senior leadership assembled a multidisciplinary team comprising administration, clinical leaders, finance, information systems and procurement, to analyze supply chain processes, identify points of revenue leakage and put processes and systems in place to address them.
Next week, nominations open for the 2016 GHXcellence Awards. The expanded array of awards reflect the evolving nature of supply chain and the role it plays in improving both costs and quality in healthcare. GHX still honors the Best 50 hospitals and healthcare systems for the work they are doing to automate processes and reduce costly exceptions. The value of automation and accuracy remains foundational and should never be taken for granted. After all, that alone led to GHX and its customers documenting more than $5 billion in savings in less than five years. Today, we continue to document savings, but now we are able to also take into account the addition of more mature supply chain practices, including those recognized in the expanded awards program.
For the last few years, the team at GHX has made yearly predictions for the healthcare supply chain – often anticipating major trends, challenges and opportunities for the industry. And, most times, I’m proud to say we’ve been fairly accurate with those predictions! In 2016, we’re continuing that tradition with the release of our top five trends for the year
At GHX, like many of you, we’ve been engaged in weeks of strategic planning for 2016. The opportunities in front of us and for our customers are significant. But before I get to how I see 2016 evolving for the healthcare supply chain industry, I want to reflect on the past 12 months and the major themes, events and changes that moved the healthcare industry in 2015.
The 2015 Canadian Industry Stakeholder Meeting (October, 2015 in Mississauga, ON) brought together over 150 participants from supplier, provider, GPO and distributor organizations to share experiences and learn from one another.
Meeting topics focused on contract management, price alignment and performance measurement. Throughout the day, presenters from both provider and supplier organizations shared the tools and processes they use to effectively track these core business functions. Following the presentations, participants broke into smaller groups for further discussion.
Strategies for cleaning up item masters, maintaining integrity over time through data synchronization and automation. Recently, I have been speaking with hospital supply chain executives about the Accountable Supply Chain Leader. What kinds of skills and leadership traits are needed to lead supply chain in a value-based world and what kinds of skills and traits should you look for in your team? I close the presentation with a quote from 19th Century English mathematician and author Lewis Carroll in Through the Looking Glass.
"Why, sometimes I have dreamed six impossible things before breakfast!"
As we come to the end of another National Healthcare Supply Chain Week, I want to share two more ways that GHX customers are using their supply chains to significantly improve patient outcomes. On Wednesday, I delved into the use of outcomes data, the creation of clinical/supply chain teams and the expansion of the supply chain outside the four walls of the hospital. Today’s themes touch on and leverage some of the most highly anticipated and buzzed-about technologies.
As I noted in my Monday blog post, this week is AHRMM’s National Healthcare Supply Chain Week. To honor this annual event, my team at GHX compiled the five biggest ways that healthcare organizations are leveraging their supply chains to improve patient outcomes on a daily basis. We are not exaggerating when we describe these projects as “revolutionary” for the healthcare industry. Rather than “talking the talk,” these organizations are “walking the walk” to create a more efficient and cost-effective healthcare system. Today I’m going to share the first three ways we see our customers doing just that:
Imagine. Later today, Lora Cecere’s Global Summit kicks off in Phoenix. This is the flag ship program for Supply Chain Insights (the analyst firm run by Lora Cecere) and it is absolutely a team effort, with lots of work by those who work for and with Lora. But I purposefully called it Lora Cecere’s Global Summit, because it is Lora’s unending energy and passion around supply chain that makes this event unique among the growing number of supply chain events being held around the globe.
If you’re a reader of healthcare trades, you’ve likely seen the emergence of the acronym: JIT. This stands for “just-in-time” and it refers to just-in-time purchasing (as well as JIT buying or JIT inventory management) of products to keep supplies lean and costs low. As hospitals are challenged to reduce costs while dealing with major cuts in reimbursements, many of them are exploring JIT with keen interest.
In May 2014, the UK Department of Health published the NHS eProcurement Strategy. This comes nine months after the Department published Better Procurement, Better Value, Better Care, and which we wrote about here. The lead author, Mr Steve Graham, will be speaking at this year’s GHX Healthcare Supply Chain Summit on the NHS eProcurement Strategy and the drivers behind this policy. Many of the topics he will address are relevant to supply chain leaders in the U.S., Canada and across the globe.
During the past two months, the team at GHX conducted numerous interviews with some of our most forward-thinking provider and supplier customers. The topic of these interviews was the “Supply Chain of the Future.” We weren’t talking “future” in the sense of a year or two out, but rather 10-to-20 years in the future – when the healthcare industry will look very different than it does today.
The only way to fix what's broken in healthcare is through transformative change. Those hospitals and healthcare systems that have successfully cut costs and are generating greater revenue are the ones that have looked at the big picture, broken away from old practices and fundamentally changed the way they are doing business.
What do healthcare and professional football have in common? Perhaps more than you might think. Denver Broncos Quarterback Peyton Manning shared his perspective when he spoke to the American Hospital Association (AHA) Leadership Summit in San Diego. As he put it, football and healthcare both operate in environments with “clear boundaries, strict rules, and almost zero margin for error,” although I am not so sure about the clear boundaries any more (more on that later, along with some other Manning insights). Where I really see the similarity is what you do when conditions change – you call an audible. That’s what Manning does, and the team responds. I would say it’s time not only to call an audible in healthcare, but to change the nature of the game. While there is certainly a lot of talk about healthcare needing to change, some of the other commentary at the AHA Summit indicated there is a lot more talk than action...at least not the kind of action that those who pay for a large percentage of healthcare – America’s employers – want to see.
At the recent GHX 2014 Supply Chain Summit, I sat in the audience and listened to CEO Bruce Johnson and others describe the many challenges inherent in our healthcare system. Consumers will say the cost of care is too high. Economists will say the rapid rate at which the cost of delivering care is increasing is unsustainable. And healthcare business leaders will say that we must act fast to reduce costs while increasing quality and safety for successful outcomes. Johnson described this situation as the rebalancing of the cost/quality equation, and called healthcare leaders at the Summit to collaborate to help drive elimination of redundancy, variability and waste in our system.
At the recent GHX 2014 Supply Chain Summit, I sat in the audience and listened to CEO Bruce Johnson and others describe the many challenges inherent in our healthcare system. Consumers will say the cost of care is too high. Economists will say the rapid rate at which the cost of delivering care is increasing is unsustainable. And healthcare business leaders will say that we must act fast to reduce costs while increasing quality and safety for successful outcomes.
In my role at GHX, I spend a great deal of time thinking about our customers and prospects, and how to help them get the most out of the solutions GHX provides.
Wherever I go, everyone I meet seems to have the same goal: they intend to move their organization to be “best in class.” They are excited about the solutions GHX is bringing to the industry and understand the benefits they will realize. However, they are often too busy to engage resources on projects. So what I hear them saying is moving to ”best in class” must wait.
Folks may not know see the linkages clearly yet, but the supply chain connection to cost, quality and outcomes is all around….at the HIMSS 14 Conference in Orlando, within the halls of the FDA and the Office of the National Coordinator for Health IT (ONC), even in the Wall Street Journal.
I get to talk with a lot of people around the industry and based on these conversations, I want to share five goals you might consider to help you – and your company – drive transformational, end-to-end change across the healthcare supply chain: