VA Next Gen Healthcare Supply Chain Program Needs Work, GAO Says

December 06, 2017 - The Government Accountability Office (GAO) recently found several issues with the VA’s implementation of a next generation healthcare supply chain management program. The federal watchdog argued the implementation process failed to follow best practices of leading hospital networks that successfully optimized their supply chains.

The VA and its healthcare arm, the Veterans Health Administration (VHA), established the Medical Surgical Prime Vendor-Next Generation (MSPV-NG) program to reduce healthcare supply chain costs by $150 million in 2016. Officials intended to realize cost avoidance by leveraging the VA’s buying power to achieve supply chain discounts of up to 30 percent and standardizing supplies throughout the VHA.

During the transition period, the VHA was to develop a formulary of healthcare supplies from which medical centers would purchase supplies.

However, the VHA failed to achieve its cost avoidance goals because the MSPV-NG program launch did not have an overarching strategy, stable leadership and staffing, and clinician involvement to generate medical center buy-in and develop an adequate formulary, the GAO contended.

The federal watchdog’s investigation uncovered that no document existed at the start of the next generation supply chain management program that detailed an implementation strategy. Officials only provided GAO investigators with an October 2015 plan that had not been approved by VHA or VA leadership.

READ MORE: Exploring the Role of Supply Chain Management in Healthcare

Healthcare supply chain optimization best practices state that organizations should have well-documented plans and governance structures for initiatives and these plans should be clearly communicated to all organizations involved.

Leadership instability and an insufficient workforce also challenged the VHA with MSPV-NG program implementation, the report stated. As of January 2017, the MSPV-NG program office primarily tasked with implementing the healthcare supply chain management program only had 24 out of 40 positions filled. And office officials noted that the lack of staff impacted their ability to successfully implement the program within the given timeframes.

Notably, leadership positions were not permanently filled during the implementation process. Both the VHA’s Chief Procurement and Logistics Officer and the Deputy Chief Logistics Officer were in an acting capacity. The program office also went through four directors, two of whom were acting and two of whom were serving as director while taking responsibility for other duties.

Furthermore, the VA’s Chief Acquisition Officer, who oversees VA acquisition programs like the MSPV-NG, is currently in an acting capacity. The administration is required to appoint a “non-career employee” to fill the role, but instead has used an acting position since 2009 because of regulatory restraints.

Staffing shortages at VA medical centers also contributed to cost saving and implementation challenges. For example, the Chief Supply Chain Officer position was vacant at one of the VHA’s Veterans Integrated Service Network (VISN) for about four years.

READ MORE: Leveraging Group Purchasing for Hospital Supply Chain Management

An interviewee from the medical center explained that the office “suffered in the absence of a leader, leaving it poorly-equipped to execute the transition to MSPV-NG.”

Additionally, the GAO reported that the VA failed to follow healthcare supply chain optimization best practices by neglecting to gather clinician feedback. The office developed the supply formulary using historical purchasing orders to identify supplies to be put on the list and requirements for purchasing.

Officials believe that the historical data provided a “good representation of medical centers’ needs.” However, the approach is dramatically different from those used by leading hospital networks, which rely on clinicians to help select and standardize supplies.

Leading hospital networks also use clinician feedback to focus on individual supply categories for standardization, rather than attempting to address all categories at the same time. The VA neglected to use this method.

In the face of implementation challenges, healthcare supply chain formulary development encountered difficulties, the GAO found.

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

The lack of comprehensive strategy and tight timeline for cost savings in 2016 resulted in the VA failing to finalize competitively awarded contracts to supply vendors. By April 2016, the administration had only awarded contracts for just 3 percent of the items on the formulary.

Consequently, the VA could not save up to 30 percent on supply prices without competitive contracts. The purchasing agreements used in the absence of competitive contracts only discounted supplies by 5 percent or less on a sample of the 376 items covered by the agreements despite the VA’s large buying power.

Without clinician input, medical center buy-in for the new healthcare supply chain management program was lacking. The medical centers reported that staff were unable to find matches or substitutes for a significant number of supplies they frequently use.

While the VA aimed for medical centers to order 40 percent of their supplies from the MSPV-NG formulary, the nationwide average utilization rate was just 24 percent by May 2017.

Instead, medical centers purchased their preferred or needed items through purchase cards or new contracts awarded by their local contracting office. Medical centers also relied on emergency procurements to fulfill their healthcare supply chain needs in 2016 despite the orders not completely meeting emergency requirements.

The GAO acknowledged that the VA is working to improve the implementation plan during the second phase by acquiring clinician feedback. However, the federal watchdog pointed out that unrealistic contracting timeframes and the lack of comprehensive strategy continue to plague the healthcare supply chain optimization project.

To improve the MSPV-NG program implementation process, the GAO made the following recommendations to the VA:

• Establish, document, and distribute an overarching strategy for the supply chain management program, including how the program office will prioritize supply categories for future standardization and contracting

• Prioritize the hiring of a permanent MSPV-NG Director

• Assign the role of Chief Acquisition Officer to a non-career employee

• Create guidance to medical centers on matching supply items on the formulary

• Share with medical centers the requirements and processes for adding or removing items from the formulary

• Determine cost avoidance realized under the MSPV-NG program on a regular basis

• Develop a plan for mitigating potential risks for contract coverage gaps while the administration works to finalize competitive awards

• Use feedback from national clinical program offices to prioritize MSPV-NG requirements development and standardization efforts and focus supply categories for standardization and cost avoidance

• Direct VISN Network Contracting Offices to partner with medical centers to identify opportunities to strategically purchase supplies frequently acquired through the emergency procurement process

• Analyze data on supplies that are frequently purchased on an emergency basis and determine if such items should be added to the MSPV-NG formulary

The VA agreed with all of the GAO’s recommendations. Although, the administration noted that congressional action is needed to assign the role of Chief Acquisition Officer to a non-career employee.