- Supply chain management and revenue cycle management are generally approached as independent entities within the healthcare realm. Is this necessarily the best approach? As RevCycleIntelligence.com reported, although enhanced cost-to-cost charge transparency and increased reimbursement accuracy are directly associated with a hearty supply chain focus, hospitals are not yet open to the widespread implementation of supply chain optimization strategies due to their cumbersome and complicated nature. What untapped visibility opportunities will allow for better acquisition of needed actionable revenue data and how can supply chain goals be effectively achieved so a bottom line can remain resilient?
To help answer this question, James Spann, Practice Leader of Supply Chain & Logistics at Simpler Healthcare, spoke with RevCycleIntelligence.com about why more widespread benchmarking promotes greater savings, the importance of physician price engagement, and why standardization is the key to cost reduction.
The following conversation with Spann is the second of a two-part interview.
RevCycleIntelligence.com: What are some of the greatest opportunities that exist within the supply chain realm?
James Spann: The biggest opportunity is visibility to data, which allows for greater integration. And qualitatively looking at the voice of the customer of what they’re doing, how they’re using the products, how they’re taking care of patients to obtain information about greater savings opportunities. Hospitals do a great job of collecting data and benchmarking against themselves, hospital to hospital, but there could be greater work benchmarking within a hospital’s four walls.
Regarding the four quadrants, physicians have to be engaged in the first two quadrants. They have to be engaged with product price options and standardization options, but it takes transparency with the physician to start that conversation.
You have to have transparency with physicians, starting with product price and standardization and get them engaged, otherwise they’ll dig their heels in and say, “This is how I was trained. This is the product I’ve always used and I’m going to continue to use it.” Unless you have specific data and information to share with them, to drive down the total cost of ownership, they may lack interest. Even if you have good data to share with them, they still may not be interested in making the change. That’s where the hospital executive leadership, and the clinical leadership need to be involved.
For the most part, doctors are reasonable. They’re using a product because of its efficacy and quality, or because that’s what they’ve been trained to use. If they understand the total cost of ownership, doctors will be open to making different choices for the overall organization based on data and information. But if you don’t have that, and you’re just looking at price without having the data to go and share it specifically with the clinician of what’s happening, you’re not going to get their attention.
RevCycleIntelligence.com: How do you best optimize the supply chain to drive out waste?
JS: A few of the factors that breed unnecessary costs in healthcare supply chains: Nonstandard ordering and delivery methods, varying drug formulary across pharmacies, clinicians hoarding supplies, drug diversion, and a lack of intelligence and visibility surrounding what inventory is redundant, what can be repaired, and what needs to be upgraded. CFOs and COOs need to understand it’s not just about reducing cost, reducing product price, standardizing, consolidating. You need a methodology and approach to improve the supply chain and overall team performance.
We’ve got to standardize operations focus to reduce costs. If you’re giving a product to the clinicians when they need it, and they know it’s going to be there, then they’re not going to put stuff in drawers or in their pockets, because they know it’s going be there. Having that operating model and the management system that drives that is extremely important. Hospital executives need to focus on that as much as they do cost. A broken operating model directly impacts costs.
One big expense is how hospitals are integrating, merging, acquiring, so you must keep in mind that supply chain touches every department within the hospital. You must look at the people in the organization, and how you can get synergy and maximum productivity out of your clinical and supply chain staffer’s to achieve your supply chain goals.
The goal for executives should be to build a Lean Supply Chain – which will help you advance up the profit curve. Having the right amount of the right supplies, at the right time and place at the lowest possible cost – can actually increase patient care quality as well as clinician satisfaction. Lean can uncover more improvements along the patient-provider continuum all the way back to the manufacturer, thus having an impact on patient satisfaction – because when the supply is right, the patient is not adversely affected.