All posts by Jim & Gene

Our previous blogs introduced the research underway at ASU into Fully Integrated Supply Chain Organizations (FISCOs).  These organizations are emerging as leading healthcare systems see the great value in a single, integrated SCM organization.  Such organizations have complete procure to pay to deliver processes managed by a single team that has visibility and insight into all of the dynamics and trade-offs in comprehensive SCM decision-making.

These FISCOs …

• Create value otherwise unattainable
• Transforms supply chain from an cost center to an asset
• Address business and clinical challenges directly
• Create a governed autonomous supply chain organization
• Links supply chain to overall system goals

Our research into FISCOs has led us to identify 17 dimensions to these entities.  They are divided among three categories:

• Business Processes
• Technology Tools
• Governance Mechanisms

The adoption and inclusion of these dimensions within the supply chain organization varies among systems.  Those systems that are able to manage the maximum number of dimensions generate high performance levels in the key metrics that define effective SCM.  The dimensions that we consider relevant for a FISCO are:

Which of these functions are not part of your supply chain organization?  What value could you create if they were?  What will it take for your organization to adopt these?

The goal for leading healthcare supply chain organizations is a design where the supply chain management team becomes clinically and technologically driven in all their activities.  Such designs shift the focus from traditional administrative compliance towards the patient’s needs and to the clinical requirements for meeting them.  A change such as this requires a different way of thinking for supply chain professionals as well as the stakeholders that they serve.  As in any business transformation we need to meet  four conditions:

• A clear, well articulated vision and strategy with a description of the value to be accrued to the multiple stakeholders
• The leadership & organizational will to change
• High quality data management and integrated applications for SCM decision-making
• Comprehensive business processes that support the strategy

Organizations that possess these characteristics are positioned to succeed.  We have seen several healthcare organizations that are on this path to such change.  Many are also adopting the FISCO model that we introduced in last month’s blog.  As part of our research we have also identified the four core capabilities that these organizations must develop in order to succeed.

• Value from standardized product identification such as GS1 /GTIN/GUDID
• Access to data from sources such as IoT, Visual/Voice Capture, Clinical Evidence
• Decision making through analytic tools such as cognitive computing, artificial intelligence, and descriptive/predictive/prescriptive analytics
• Information integrity through digital ledgers and possibly blockchain

Developing these capabilities may require investments in information technology, organizational expertise, and external partnerships.  With these four core capabilities in place, supply chain management organizations can leverage and effectively operate highly valued SCM business processes such as:

• Value based selection to ensure that clinical needs are directly connected to sourcing decisions
• Sourcing by category managers possessing expert market knowledge
• Efficient product/order fulfillment to meet clinical needs
• Risk management programs (recall management)
• Dashboards/Control Towers for operational excellence

By following these practices, healthcare systems can develop fully integrated supply chain organizations (FISCOs) that are clinically and technologically driven.  Evidence has shown that this leads to a high performing healthcare system.   Interested to find out.  Stay tuned to these blogs or give us a call.

A team of researchers at Arizona State University have depicted supply chain teams in the most advanced health care systems in the US as Fully Integrated Supply Chain Organizations (FISCOs).  These organizations are characterized by strong clinical engagement where product standardization programs are part of the culture.  This requires a clinical and administrative staff who are fully aware of, appreciate, and are committed to the process and recognize the connection of the value of the process to their mission.  This is more than just a clinically focused supply chain;  this becomes a clinically DRIVEN supply chain.

FISCOs are characterized by standardization working groups where evaluation is made, based in large part, on impact on clinical pathways and market research, evaluation of vendor/sources, evaluation of vendor products, risk management review, product decision, contracting if applicable; compliance metrics gathered and reported.  In the most progressive of these organizations, patient outcomes are monitored, and compliance or deviation form clinical pathway is determined.  If warranted a re-evaluation of the clinical pathway is made and modified as necessary.

Achieving this state of performance is not an easy task.  It requires not just the mission and vision for a clinically integrated organization but investments in the key human resources and technologies critical for success.  On the human resource side, one finds, as discussed previously in this blog, a very strong role for physician engagement, leadership, and guidance for the supply chain staff.

While it is not necessary (but desirable) for physicians and other senior clinicians to have a direct employment link to the supply chain effort, a corporate governance system that recognizes and rewards such efforts is critical.  More complex is the technology needed to progress to a mature FISCO – which can include an organization’s utilization of machine learning and artificial intelligence to assess the key relationships between clinical practice and the materials environment.  In future blogs we will examine a number of these technologies and their deployment.

Attention Supply Chain Managers:  Do you suffer from your organization’s lack of awareness of your supply chain management role?  Here’s a short blog for you to share with your colleagues that will give them a better understanding of your role and the drivers of your day to day activities.  Share this post with others in your organization.

 

Supply chain management (SCM) executives are driven individuals … and ones typically with a very thick skin to deal the wide range of roles and interests of the people that he or she faces on a daily basis.  But in the simplest terms, they are driven by five basic objectives, which are known as the ‘five rights of supply chain management’.

Do whatever is needed to get:

• The right product
• At the right time
• In the right condition
• To the right place
• At the right

In the healthcare field, this is further challenged by the need to deliver support for:

• Best cost
• Best quality of care
• Highest patient outcomes

… and in alignment with the overall goals of the hospital system.

Due to the wide breadth of influence over almost all of the organization’s functions, the supply chain executive must confront some very significant challenges.

1. Sourcing literally thousands and thousands of products
2. Negotiating the best prices for these products
3. Ensuring clinician access to all products subject to a set of usage rules
4. Complying with commercial contract terms
5. Complying with regulatory terms
6. Forecasting the correct demand for all products
7. Assuring that sufficient inventory is in place to satisfy the demands of clinicians (and not too much inventory nor too little)
8. Physically distributing the products from the suppliers to the hospital cart
9. Complying with hospital policies
10. Fully understanding and providing for the clinical needs for all products
11. Assuring appropriate transparency of actions with:
    • Clinicians
    • Finance
    • Suppliers
12. Paying suppliers’ invoices
13. Assuring high product quality
14. Managing product shortages and product recalls
15. Accessing new products

While some could add other challenges, this list alone is daunting.  It encompasses physical operations, commercial relationships, clinical relationships, financial operations, planning, people development, and advanced information systems.

While it’s not a competition as to who has the most demanding role in an organization, the supply chain manager’s role is one of the most challenging administrative roles in healthcare.  He/She serves and responds to almost every hospital stakeholder.  Often in the background, but critical to the successful operation of the entire hospital, the SCM professional is always at the forefront and ready to help when a crisis emerges.

Without a well-functioning SCM group, much of what occurs in the hospital grinds to a halt.  Given the crucial role that medical supplies, devices, and pharmaceuticals play in today’s healthcare environment (about 25% of a hospital’s total budget), clinicians need to know what challenges SCM managers and what drives them.  Consequently understanding SCM and supporting its efforts will contribute greatly to the effectiveness and efficiency of a modern hospital.  So next time that you see a supply chain manager, say hello or, even better, give them a big handshake!

Since early last year we have issued monthly blogs presenting issues and approaches to solutions in the healthcare supply chain management field.  This month we are turning the table and asking you to think of specific issues and approaches to solutions in your own organization.  In other words, a personal plan for your program this year.

1. What are the key Supply Chain Management (SCM) issues that you and your organization are facing this year?
   1. How will these be resolved?
   2. What are the major barriers to resolution?
   3. What role will you play in this process?
   4. What tools and resources will you need to be successful?
   5. What collaborative programs can you leverage to engage both administrative and clinical supply chain leaders in the resolution of these issues?
2. In our April 2018 blog [https://hscxi.comthe-12-keys/] we identified 12 keys to leadership in SCM.  What is your organization doing to advance these?  How are you supporting this?
3. How is your organization elevating SCM within the clinical leadership teams?  See our July blog [https://hscxi.comelevating-scm-with-clinical-leadership/]

If you have interesting approaches to these issues, we we’d like to hear about them.  We could, if you wish, post them on our site for others to hear about and comment.  Or you might just want to ask us for our thoughts about some of these issues.  We’d be glad to comment.  But bottom line, have a most successful year in 2019 and may your supply chains be prosperous and value-creating.

In the past few blogs we addressed product standardization initiatives within healthcare systems.  This is an important and very current topic among healthcare supply chain professionals.  This month’s blog provides a backgrounder into this practice and the rationale for its use.

In almost every industry, business managers establish and prescribe the use of optimal products, protocols, processes, designs and practices aiming to yield maximum performance.  These are standards.  They are chosen through a variety of means but generally follow an engineered approval process within the business and by the business.  While some latitude for deviation from the prescribed product is permitted, it is only done if the financial, operational, or outcomes are not materially affected.

Notably different in this practice is the field of medicine and in particular, the large integrated healthcare providers.  In this case, independent physicians make material decisions regarding the use and non-use of individual devices, supplies and equipment.  These decisions typically are based on personal, independent views of efficacy and comfort.  Amongst physicians, they are referred to as “physician preference items (PPI)”.  For many physicians, these preferences are determined early in their career, often during their training under the supervision of other doctors.

As a result of these strong preferences, healthcare system leaders, whose job is to ensure that both quality care is provided and that the system operates in a sustainable form, are severely limited in implementing standard practices designed to keep costs in line and to assure quality practice.  This is important and significant.  In most hospitals, physician preference items represent close to 30% of the hospital’s medical supplies budget.  Saving just 10% of that spend by applying best practice standardization programs can save 3% of the total hospital budget.

In our advisory practice at HSCX, we regularly find hundreds of thousands of dollars of savings accessible through standardization initiatives.  But even more importantly, the quality of medical practice is improved as the use of standardized products leads to increased patient safety.  To capture these benefits, physicians, other clinicians, and program managers must work together to agree on the right products, processes, practices, and protocols.  The value capture can be astounding.

And it is important to remember that this does not translate into cheaper care.  It translates into better managed care.  In today’s hyper inflationary medical environment, all systems have an obligation to actively pursue standardization.  It’s for the better of the patient and for the better of the system.

Watch for next month’s blog where we will examine the special approaches to standardization in the healthcare industry.  As well, we’ll look how healthcare standardization applies to the episode of care or what has been described as a “Design to Cost”.  In the meantime, think about your system’s approach to standardization.  What do you need to make it more successful?  How can you create more value through standardization?