The United States spends more on healthcare than any other industrialized nation, and the continued growth in healthcare spending is creating economic pressures not only for the industry, but also business and consumers.
In response, the industry is undergoing a fundamental shift in how it conducts business, moving from volume to value. This move is driving a focus not just on the care delivered, but the overall health of the patient. This requires an understanding of all the services and products used to care for patients and balance the outcomes achieved with the costs. This balance must encompass the entire continuum of care.
The rising costs, historic spending and declining reimbursements are forcing this new approach to patient care, specifically building and maintaining a healthier population. These are just a few of the new questions healthcare leaders are asking:
- What steps can we take to improve wellness from birth until death?
- How can we prevent chronic diseases or improve the management of them?
- How do we address social determinants of health, such as food insecurity, access to post-care services and transportation?
The overriding premise is that if we can serve the population better across the continuum of care, outcomes will improve and costs will decrease. To achieve these goals, care will have to extend beyond traditional hospital walls to outpatient facilities, as well as patients’ homes.
As care moves beyond the traditional walls, supply chain logistics will become more complex. Products will be delivered to multiple facilities with limited storage across towns and counties, rather than a large hospital or centralized warehouse. Different services and procedures will take place at various sites, requiring a different set of products per site and changing how demand is interpreted. Services and processes that connect the points of care throughout an episode will become critical and fall under the operation of providers.
The industry’s supply chain teams—experts in sourcing, contracting, logistics and delivery—are perfectly suited to solve the challenge of supporting this kind of expanded healthcare universe.
Supply chain leaders have spent more than a decade focused on reducing complexity. The improvements in efficiency and cost savings the industry has achieved are due in large part to supply chain teams driving industry-wide best practices and incorporating modern technology to support daily operations.
Contracting, which has been the centerpiece of the healthcare supply chain’s transformation, is a prime example. Procurement best practices enable a hospital to negotiate stronger contracts, reduce off-contract spending, and keep future spending under control.
For years, the healthcare supply chain industry was beleaguered by under-utilization of contracts and a lack of product standardization. This drove up costs and resulted in significant waste. Improving the process required supply chain leaders to gain consensus from clinicians and other healthcare stakeholders on preferred products to support standardization efforts.
At the same time, technology systems, such as ERPs and procurement tools, were put in place to provide the necessary controls. Today, these systems not only provide control, but also generate significant data that helps power strategic sourcing across hospitals, health networks and the industry at large.
The new business of healthcare will only increase this supply chain complexity. One thing won’t change. Cost and efficiency will remain paramount. Without them, this new health-centric model will fail.
That said, supply chain professionals will need to think differently. It will no longer be about acute care inventory management. The challenge will be finding ways to provide products and services in real time across a distributed environment. This is an area ripe for innovation. Strong procurement practices, which served as the centerpiece for the healthcare supply chain’s first transformation, can be a key to continued evolution.
Success in this new environment will require up-to-date supply chain data that can be fed into other internal systems, allowing cross-functional teams to align, and ultimately, conduct deep analysis.
For example, supply chain leaders must understand which products are being purchased across the various points of care and how to take advantage of volume or aggregation. Clinicians must continue to be involved in the process to determine which products and services create the best outcome for the patient. And of course, it must be easy for large numbers of users to find and buy the right products in order to produce this data in the first place.
One way to smooth the transition is to establish a modern item data core alongside web-based, user-friendly tools. Placing easy-to-use systems at the point of care that are powered by a known, current and updated item data core will maximize user adoption. This adoption is a critical component to achieving the data and insight required by executives guiding the new business of healthcare.
Moving care beyond the walls of hospitals provides an opportunity to deliver a higher level of patient-focused care that will improve outcomes while at the same time reduce the overall costs of that care. Yet, a larger, more distributed care environment doesn’t come without its challenges.
Supply chain leaders have played an integral role in healthcare’s transformation to date. They are well positioned to take a leadership role in mitigating those challenges and help the industry extend its reach beyond traditional walls to improve outcomes and reduce the cost of delivering care in a modern healthcare environment.
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