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Achieving Value-Based Care Through the Supply Chain

Written by:
Jason Free
Executive Editor, HIT Leaders and News

Modern healthcare organizations have found a new strategy to improve patient care. Instead of investing the bulk of their budgets in clinical systems and talent/human capital, chief executives and clinicians are paying closer attention to what typically is a hospital’s second-highest priority in terms of resource costs: supply chain.

Some of that newfound interest stems from realizing their supply chains could operate much more effectively. Others are gaining newfound visibility into current inventory inefficiencies after integrating enterprise resource planning (ERP) and other software with an electronic health record (EHR) system. Underlying almost all of these strategic moves, however, is an ongoing shift in both mindset and practice from fee-for-service to value-based care models.

Such transference has organizations adopting technologies to help intelligently maintain stock in stockrooms and pharmacies. Better inventory control means more cost savings and more efficient use of space. They also are leveraging the analytical skills of scientists, mathematicians, economists and engineers to minimize stockouts while gaining or maintaining clinicians’ trust that they will have what they need, when and where they need it.

Efficient healthcare supply chain management strategies should include the right resources to engage clinicians, optimize inventory systems, improve product recall audits and deliver a cost-effective pharmacy.

Putting Value Before Volume.

Delivering quality care at the lowest possible cost is the top priority of every healthcare organization. This focus is due to an ongoing shift in which payers, like the federal government, want providers to move away from fee-for-service to fee-for-value reimbursement structures. The former gave providers incentives to measure care by volume – of tests, procedures and so on – because doing more for a patient meant being paid more. But under fee-for-value structure, or value-based care, providers are encouraged to deliver the best care at the lowest cost.

Such a paradigm shift is designed to ensure patients and their insurers gain the most value from their care. Hospital leaders must now focus on how to contain costs – from higher reimbursements for hospitals with high patient satisfaction rates to minimizing risks of penalties for Medicare and Medicaid patients readmitted within 30 days of discharge. As the adoption of new technologies increase within the supply-chain world, so do efficiency levels. Being able to be proactive in their decision-making capabilities is key for hospitals.

Cutting Down on Waste

In 2012, the National Academy of Medicine estimated the U.S. healthcare system “squandered” $765 billion annually…

Waste within healthcare is still a huge problem, especially within the supply-chain departments. In 2012, the National Academy of Medicine estimated the U.S. healthcare system “squandered” $765 billion annually, including products that went unused before they expired on shelves. Being able to track every item at every location and know when it is going to expire is where the right technology must be an integral part of the equation.

Part of that waste problem stems from stockpiling and “clinician hoarding” that results from a lack of trust in a hospital’s current supply-chain management process. That’s why it’s critical for supply-chain managers to find an effective way to partner with physicians, nurses and other caregivers to limit wasteful practices.

For many healthcare providers, this means automating processes and applying technology to maintain optimized stock levels based on the different needs of a hospital’s floor, care units and patients. It also means going well beyond baseline, reactive reporting to better forecasting through predictive analytics.

This also can help recalcitrant executives and physicians still struggling to adopt value based care models and find areas within the supply chain to save costs. Being able to spread this new idea through a healthcare organization takes an army of champions on both sides of the clinical world.

The latest in inventory intelligence technology can provide assurance that supplies are delivered in the right quantities to the right location, allowing for high levels of patient care while eliminating excess inventory that hurts hospitals’ bottom lines.

Paradigm word cloud concept

The pharmacy supply chain presents a huge optimization opportunity, with the potential to benefit considerably from data analytics and inventory intelligence. Specially designed software can analyze historical usage and ordering data for products maintained in an ERP, and recommend inventory levels that balance costs with medical objectives.

An efficient pharmacy supply chain can also help bring down the cost of pharmaceuticals by deploying intelligent bulk-buying purchases – which is particularly difficult with pharmaceuticals given their shorter shelf lives. The same technology can integrate with the National Recall Alert Center using an app that maps drug recalls to purchase orders, even which locations in a multi-facility health system the recalled products are located. Patient safety also improves when a medical facility can easily respond to the FDA or Joint Commission when queries are posed regarding recalls.

Evolving for the Future

The transition from fee-for-service to value-based care is still underway across the industry. Too many organizations are still making profits in the fee-for-service model, and the drive to move to value-based care is slow in being fully adopted. These organizations’ supply chains also are trying to better understand their evolving roles in a value-based care model.

True outcome-based models don’t look at one moment of time in care and the associated supply cost in that moment; they look at full episodes and the delivery of care across a continuum.

In order for healthcare IT leaders to get control of their supply chains and prepare to move to a more value based car model they need to make sure that they take time to truly understand the data being generated so everyone has confidence in it and the recommendations based upon it, and build strong relationships between the supply chain team and clinicians. The knowledge from clinicians, partnered with the item data from supply-chain professionals, results in the adoption of lower-cost items that are still clinically effective for the best outcomes.

As more health systems merge, or large ones continue to acquire smaller hospitals, a growing trend we see is our desire to move towards self-distribution that includes drastically changing the way healthcare supply chains source products. More and more, large health systems are looking at new ways to directly source products or leverage a supplier network, similar to what manufacturers have done for years. Either way, the supply-chain departments within a healthcare organization, and their ability to adapt to changes, will play a pivotal role in every aspect. Watch as efficiency levels increase with the adoption of new supply chain technologies and hospitals that are proactive in their decision-making capabilities succeed in the future.