Looking Beyond Price in the Healthcare Supply Chain to Add Value

October 25, 2018 - Don’t equate value in the healthcare supply chain with just price, Premier, Inc’s Myla Maloney recently advised healthcare stakeholders at Xtelligent Healthcare Media’s Value-Based Care Summit in Boston.

“Price matters. It's a fundamental component of the word value, and if you look it up on Google, some people actually say that it is the definition of value,” said the Vice President of Strategic Supplier Engagement at the healthcare alliance of 4,000 hospitals and 165,000 other provider organizations across the country.

“But before you look at that, you have to look at what's the efficacy of this product. What is the outcome related to this product? What's the data? What's the safety,” she asked the audience.

Considering the outcomes, safety, and data requirements of a medical device or item in conjunction with its price will truly add value to the healthcare supply chain and ultimately reduce costs for the second most expensive department for hospitals.

Reviewing evidence-based literature, clinical reviews, and other non-price-related information allows hospitals and other provider organizations to work with manufacturers to contract for the right price of an item, Maloney explained.

READ MORE: Leveraging Group Purchasing for Hospital Supply Chain Management

But getting all the information to make an informed decision about buying a high-value device or item will be work for providers, she added.

Medical supply manufacturers are good at flexing their muscles, the former drug representative explained. And in her current supplier-facing role, Maloney sees all the materials manufacturers give to providers to convince them to purchase their specific items.

“I see all of the materials, and the majority of them do have a large component of evidence-based information in them. It is approved by the FDA or whatever other governing body should be approving it. There are legitimate studies with the right statistical significance,” she stated.

“But there have been a handful over the past couple of decades that did not do that, and it really shed a difficult light on the rest of the industry. It makes it tough because now if you're sitting in the seat of the person receiving that information, you don't know if they just flexing their muscles or if the data is really legitimate.”

Adding to the complexity of finding true value in the healthcare supply chain is the sheer volume of clinical trials coming out.

READ MORE: Data Analytics Add Value to Healthcare Supply Chain Management

Maloney reported that researchers conduct approximately 35,000 clinical trials every year. Healthcare supply chain leaders would need to sift through almost one hundred studies per day to get a complete grasp on the evidence.

Information is coming at supply chain leaders and providers so quickly that it can be difficult to understand the outcomes, safety, and data information needed to assess an item’s true value.

“You can make something look good, but that doesn't mean it is,” Maloney emphasized. “So, that's what we all have to solve together, and supply chain's a key component to doing that.”

Putting the pieces together to create a value-adding supply chain

Being proactive about purchasing medical devices and items is key to supplying a hospital with the highest value items, Maloney stated. Maintaining the traditional reactive healthcare supply chain cannot keep up with the flow of information and analysis needed to create value.

“You really have to think ahead and be predictable,” she said. “We recently conducted a focus group with one of our largest IDNs – a huge 60,000-employee IDN – and they shared with us that they have just hired 16 pharmacists to look at new drugs for anti-infectives and other interventions for anti-infectives before they even come out. Their job is to go ahead and look at what's coming and then create a plan for their hospital.”

READ MORE: Why Healthcare Needs Value-Based Supply Chain Management

Seeking new ways for product approvals within the supply chain is another proactive strategy for hospitals and provider organizations.

“You can't have these long, drawn-out processes for every single new thing that's coming out. Yet you need to learn about it and you need to figure out what's really going to move the needle in your system,” she elaborated. “What's going to have that impact? Is this new thing actually better?”

Data and automation will be critical to developing proactive healthcare supply chain strategies.

Provider organizations are sitting on a lot of supply chain data. But developing a proactive healthcare supply chain will require external data as well. “The trick is, how we marry that up together,” Maloney said.

Integrating a data analytics tool that works in the EHR can give providers and supply chain leaders access to internal and external information on everything from price to outcomes for a specific device or item. The tool should draw out chargemaster, cost, quality, and outcomes data and then benchmark the information against other provider organizations.

While giving healthcare stakeholders access to meaningful data will increase value in the healthcare supply chain, ultimately the work should be moving to a value analysis team.

“This is a more up-and-coming trend, and it all gets after everything we're talking about,” she explained. “Information is coming quickly, and decisions need to be made. Somehow you need to analyze all of that. So, what a lot of systems are doing is dedicating actual teams of people to do that work and help them consult to the rest of the organization.”

Additionally, provider organizations need to collaborate with their peers and other stakeholders to transform the supply chain, Maloney added.

Bringing like-minded stakeholders together to focus on how to add value to the supply chain will pave the way for higher quality, lower cost supply chain encounters.

For example, Premier facilitates a collaborative called Partnership for Advancement of Comparative Effectiveness (PACER). Hospitals and health systems used PACER to determine where they should go directionally based on clinical and financial data on healthcare supplies.

Through the collaborative, the hospitals and health systems actually entered a contract for cochlear implants, which were never in a group purchasing organization (GPO) contract before.

“Hearing loss is one of the top birth defects in the United States still today. So, cochlear implants are very important to think through,” Maloney said.

“Our systems felt disadvantaged because they did not get what they felt like were good prices on them, and so they weren't always using them,” she continued. “Sometimes they were using older technologies.”

“They came to us and said, ‘What if we did an entire analysis of outcomes, cost, and everything else, on what's in the market today, then went to the company that landed first place and asked if they are willing to take all of the spend of our system and aggregate it to one in exchange for a discount?’”

After reviewing the data and actually working with the manufacturers, Premier and the collaborative identified the companies with the highest value cochlear implants and presented their group purchasing idea to their leaders.

“They all came with great prices. We ended up taking the lowest one because we had already vetted all the data around it,” she stated. “We moved all of those members to that one cochlear implant, and it actually increased the number of cochlear implants being used at a better price for the system, and we saw improved outcomes with that group.”

The cochlear implant example shows how collaboration across the healthcare industry can drive better results for providers and suppliers, as well as the patient. The example also demonstrates the possibility of transforming the healthcare supply chain into a system that adds value to the industry.