As hospital executives across the country work to adapt their organizations to meet the transformational changes taking place in healthcare, the majority are focusing on three strategies to improve efficiency and reduce costs:
- 80 percent are exploring partnerships1
- 50 percent plan to increase GPO contract use2
- 53 percent rank physician alignment as a top goal toward financial improvement3
What these strategies have in common is their reliance on the supply chain function for success. Never before has there been more opportunity for supply chain leaders to assert themselves as a valuable resource for insights and solutions to key clinical and administrative leaders.
We know that supply chain managers typically meet regularly with the leaders in value analysis, revenue cycle and service line, as well as the OR director and the chief financial officer. However, the most successful supply chain leaders are changing the usual conversations into more meaningful collaboration by offering new, actionable insights through the use of business analytics.
If you want to expand the conversations you are currently having, here are the types of information and insights you will need to bring:
Value analysis leader
This leader is primarily concerned with balancing patient safety and outcomes with cost. They will value market-based product performance information that can be used to unbalance supplier negotiation strategies around price.
What to bring to the meeting:
- Stack-ranking of supply chain performance comparing the facility to other, similar-sized facilities in main clinical areas;
- Examples of cost shifting by vendors;
- Data and suggested tactics to use with suppliers in cost reduction negotiations.
Revenue cycle leader
With the reimbursement model changing and growing demand for price transparency by consumers, it’s important for the revenue cycle leader to be able to establish clear connections between the cost of supplies and what shows up on the patient’s bill. They will value information on coding of supplies for reimbursements and to inform other revenue cycle decisions.
What to bring to the meeting:
- Workflow documents that illustrate responsibility, accountability and process for supply coding;
- Dashboard that shows how many items in the item master have level two HCSPCS attributes.
Service line leaders
This group is already focused on physician engagement and on using evidence-based guidelines to drive supply choices in their service lines. What they will value is information on cost per case when compared to peers.
What to bring to the meeting:
- Stack-ranking of pricing performance of service line suppliers by manufacturer across similar-sized facilities with similar and dissimilar market shares;
- A comprehensive view of their cost per case and where opportunities exist to reduce costs.
Chief Financial Officer
This leader looks at a range of data relating to how the hospital is performing financially with an eye toward understanding how costs are being managed or reduced year over year. What the supply chain leader can offer is data that shows the financial benefit of cost avoidance.
What to bring to the meeting:
- Metrics that demonstrate how sustained price performance equates to cost avoidance, which is an additional way to measure supply chain success and as important as cost savings;
- Monetized savings from cost avoidance;
- A process to “hard wire” price performance into product evaluations.
OR director
This leader’s primary concern is properly managing the materials and supplies that come into the operating room. That includes understanding supply utilization, how their usage stacks up when compared to other health systems and how that translates to a value-based purchasing model. The insight the supply chain leader can offer is data that gives undeniable market transparency and ammunition to fight supplier myths.
What to bring to the meeting:
- Market pricing data and examples of “price creep,” where the list price for an item has dropped below their negotiated price;
- Examples of “product creep” which are new, higher-priced, less-discounted, non-contracted products introduced into the formulary by a supplier;
- Strategies and tactics for partnership with the OR director when meeting with suppliers.
Taking the initiative to develop and share valuable, actionable information in your regular meetings is a true win-win opportunity. The department leaders will be better equipped to effectively manage their areas of responsibility and you will be demonstrating why the supply chain function is a hub for great insights based on business intelligence and collaboration around product choices, contracting and vendor management.
NOTES
1. Kaufman Hall Report: “new Partnerships 2.0,” Summer 2013
2. Modern Healthcare: “Breaking the Chain,” 8/17/13
3. Industry Survey 2014: “Forging Healthcare’s New Financial Foundation,” January 2014