6 ways health systems can drive revenue and reduce costs through strong supplier partnerships

Standalone hospitals are increasingly rare in today's healthcare landscape. Health systems are managing a broader portfolio of non-acute sites than ever before, with care settings ranging from physician offices and ambulatory service centers to urgent and long-term care.

 

This article is sponsored by McKesson.

As vertical consolidation among health systems ramps up, acute and non-acute healthcare facilities face significant pressure to improve patient outcomes and reduce costs. This article examines opportunities for providers to leverage partnerships with acute and non-acute suppliers and use supply chain and data analytics to identify cost savings opportunities, capitalize on new channels of revenue generation and improve patient care.

Overcoming data silos in acute care settings

Acute care facilities' greatest challenge with analytics programs is combining and aggregating data across disparate information systems to give physician and administrative decision-makers a holistic view of patient care.

"As the big continue to get bigger, it's become challenging for hospitals to pull analytics together to be able to make great decisions," says Mark Eastham, senior vice president and general manager of McKesson RxOTM. "It's no secret hospitals have tremendous amounts of data, but they're struggling at times to pull data together from different systems to make quality decisions from a financial and a patient outcome perspective."

Mr. Eastham recalls speaking with the director of pharmacy services at a single hospital system who expressed frustration in having to toggle between 16 disparate internal information systems to gather the data needed to inform pharma-related business decisions.

Furthermore, acute care leaders and clinicians lack the necessary time, resources and expertise to accomplish data-wrangling tasks, such as scrubbing and validating data, before they can begin using data to drive decision making.  

"Physicians and health care decision makers don't have a lot of time," Mr. Eastham says. "They need succinct data, like an executive summary that pops up on their hand-held device. In addition to pulling the data together, they need it analyzed in a way they can readily use to make the appropriate calls and possible changes to current treatment."

Here, Mr. Eastham discusses three benefits hospitals gain by partnering with their acute care suppliers to help bridge data silos between supply chain, clinical and pharmacy systems and deliver actionable information to acute care leaders.

1. Integrate purchasing and clinical data for operational cost savings. "Few hospitals have the expertise and or time to analyze their supply chain and clinical data and fully understand what their cost drivers are," Mr. Eastham says. "We've seen more people seeking outside consultants to analyze their data and come up with solutions that help them look at data and provide the right analytics on the purchasing side."

Technology platforms that integrate supply chain and pharmaceutical spend with utilization data and clinical outcomes exemplify the new collaborative relationship providers and suppliers share to drive evidence-based care delivery.

"Now, we're working to combine utilization data, purchasing data and outcomes data so supply chain and clinical leaders can have greater visibility into cost savings opportunities," Mr. Eastham says. "We're also factoring in the reimbursement side and pulling this info together for hospitals in a way that is fairly easy to understand and that they can then use to make the right decisions for the patient."

2. Prepare for regulatory complexity. Healthcare is one of our most highly regulated industries. Health systems must deliver medical products and services to patients in a complex environment driven by mounting regulatory scrutiny, fluid alliances and partnerships, active mergers and acquisitions, privacy rules and cybersecurity risks, escalating pricing pressures and eroding profit margins. To address these challenges and remain prepared, health systems are looking to their suppliers and medical product manufacturers for expertise and guidance on regulatory changes coming down the pike, Mr. Eastham says.

"Health system administrators are looking for help to understand what could be the potential impact [of regulatory changes] on their business," Mr. Eastham says. "Systems are coming to organizations like ours that are experts in supply chain to help them understand an increasingly complex regulatory environment, so then they can make decisions and try to get ahead, because that makes a huge difference in the profitability of the health system."

3. Capitalize on new pharmaceutical channels for revenue generation. Unlike five years ago, hospital CFOs today see pharmacies as opportunities to drive revenue by capitalizing on new distribution channels, such as specialty pharmaceuticals and infusion clinics. In fact, a moderately sized health system with $2 billion to $3 billion in annual revenue stands to gain $20 million to $30 million annually by operating its own specialty pharmacy, according to the National Association of Specialty Pharmacy.

"We've seen an explosion in the health system side of pharmacy being looked at as a revenue generator," Mr. Eastham says. "CFOs would typically look at pharmacy as a line item on the budget, but not anymore. Now it's a tremendous revenue driver that can also help them drive and improve patient care."

Many health systems see value in consulting their pharmaceutical suppliers for assistance in establishing new product distribution channels to best position themselves for financial success.

Part II: Opportunities for supply chain analytics in non-acute settings

Health systems nationwide are ramping up non-acute acquisitions and expanding their continuum of care for value-based medicine. Stakeholders expect vertical consolidation to increase as health systems diversify by integrating physician groups, urgent care centers, home health services, rehabilitation centers and other non-acute or post-acute settings. Hospitals' acquisitions of non-acute providers are expected to account for 84 percent of total provider acquisition volume in 2018, according to Accenture.

For many health systems, expanding non-acute networks across larger geographic footprints creates a decidedly more complicated supply chain. Disparate clinical and inventory management systems, geographic distance and varying clinical specialties can obscure purchasing trends and utilization habits and create process inefficiencies. Providers face challenges specific to managing and standardizing non-acute clinical spend. In short: The non-acute environment does not look like the acute-care world in which most supply chain executives have built their careers.

"Dissimilar outpatient settings aren't operating on the same care management platform or using procurement systems or platforms and for good reason," says Jacob Hookom, vice president, customer technology, information technology at McKesson. "A home care clinician isn't going to use the same procurement process as an outpatient surgery center."

Some health systems have attempted to gain visibility into and gain control over the non-acute supply chain by implementing centralized practices and inventory management systems across these ancillary sites. However, because each care environment has diverse products, technology and workflow requirements based on varying service models, this undertaking is often labor intensive and can create significant overhead without delivering much value.   

"Problems are generated when health systems look at trying to get a handle on the financials of non-acute settings,  as they try to enact or attempt to apply a one-type-fits-all [solution] to the non-acute procurement process. It only yields a great deal of expense and unnecessary overhead," Mr. Hookom says. "That's where working with your suppliers is the lowest common denominator in helping inform C-level visibility across your health systems," Mr. Hookom says.

As health systems acquire more ambulatory, non-acute and post-acute practices, health system leaders see value in partnering with their non-acute suppliers to gain visibility into non-acute spend and by using analytics to identify cost savings opportunities, all while positioning themselves to better manage population health.

Mr. Hookom described three ways non-acute suppliers can help health systems reduce complexity, drive down non-acute costs and generate revenue.

1. Leverage purchasing data for right-size procurement and waste reduction. “Working directly with suppliers and manufacturers to aggregate purchasing information allows health systems to achieve right-size procurement processes based on their non-acute affiliates' purchasing frequency and utilization rates without having to implement an expensive IT infrastructure across multiple sites”, Mr. Hookom says.

"The most critical aspect of driving cost savings through analytics is the procurement process," Mr. Hookom says. Having a robust procurement process involves developing quality standards, financing purchases, negotiating prices and disposing of waste products. When supply chain leaders gain visibility into procurement at individual facilities, they can appropriately source products and customize inventory according to quality, volume and price.

"By analyzing tertiary purchasing frequency and ambulatory management in these facilities, there could be a lot of waste going on," Mr. Hookom says. "In terms of analytics driving decision making, we are able to look at exhaust data from your clinical care data such as what lab tests are being run, what procedures are being scheduled, to ultimately automate the re-supply process completely for that facility."

2. Analyze inventory for SKU standardization. In addition to identifying opportunities for improved procurement, non-acute suppliers can help healthcare organizations take control of the non-acute continuum and achieve better operation outcomes by standardizing non-acute SKUs to yield cost savings and improve the quality of patient care.

SKU variation hinders both operational and clinical efficiency by driving up inventory costs and complicating workflows for clinicians. Since quality and utilization processes differ by product, greater variation creates more opportunity for human and clinical error, which threatens patient safety. By gaining insight into SKUs in partnership with non-acute suppliers, health systems can enhance care quality by ensuring all clinicians use only the same high-quality products.   

Standardization has also emerged as a valuable tool to drive efficiency, reduce costs and improve compliance in supply chain management. Specifying a limited group of vendors to provide a limited brand of supplies, for instance, enables organizations to take advantage of volume discounts, further driving down material costs.

From an analytics perspective, we can really support health systems and their non-acute settings by facilitating SKU standardization efforts, cost reductions, and helping achieve volume and leverage with manufacturers," Mr. Hookom says.

3. Establish adjacent distribution channels to generate revenue. Some health systems are leveraging the expertise of their non-acute suppliers to establish new distribution channels, such as durable medical equipment retail offerings.

This strategy is especially timely given the health needs and demands of the baby boomer generation and the fact that routine care is frequently completed at home — not in the acute care setting. Many health systems have reinforced their efforts for retail or cash sales to make up for lost reimbursement and to expand their overall revenue.

"On the revenue front in the non-acute setting, we're seeing something very similar [to acute settings]," Mr. Hookom says. "We're seeing additional channels of distribution to patients as part of that care continuum health systems are establishing, either in durable medical equipment or specialty pharmacy or home health or post-acute care. Health systems are seeking adjacent product categories or capabilities to achieve additional revenue streams."

Part III: Supply chain's role in population health management

Population health is driving the need for more patient-centered supply chains that support the delivery of care where and when patients need it, which is increasingly outside the acute care setting. By partnering with supplier organizations, health systems can best position themselves to combine supply chain, utilization and clinical data to understand population health needs and tailor clinical spend accordingly to help deliver better clinical outcomes.

Patients are increasingly treated outside of acute care facilities. Roughly 94 percent of patient interactions occurs outside the hospital setting, according to 2017 data from The Advisory Board. Consumerism and the premium patients place on convenience are further driving healthcare's migration into patients' homes. This shift in where patients receive care will spark a cascade of changes in how health systems approach supply strategies.

"Care conducted in the ASC setting is moving to physicians' offices, and services provided in physicians' offices are moving to the home," Mr. Hookom says. "So, the whole idea of where supplies are used is also migrating."

As a result, supply chain leaders are increasingly called on to deliver products, drugs and services to meet patients' clinical and social needs through new distribution channels, such as digital and remote care, and in less traditional locations, such as the home. 

"In the advent of telehealth and home health, medical products that are part of the traditional supply chain are being used more frequently by the patient in the home," Mr. Hookom says. "We see a great deal of care and concern from our customers in terms of what products they're putting in their patients' hands that are representative of the care their own staff provide."   

Healthcare organizations will increasingly tap into supply chain leaders' knowledge and data as they attempt to discover what clinical products are most effective for treating which populations of patients. In fact, nearly 90 percent of providers and suppliers said integrating supply chain data with clinical data was a strategic focus for their organization in the next year, according to 2017 Healthcare Supply Chain Trends Survey.

"To effectively analyze supply savings, one of the most innovative things we're seeing is supply chain working with the clinical analysts’ or patient population, which ultimately drives those supply expenses," Mr. Hookom says. "By establishing those data sets with your clinical analysts for comparison, and working with your suppliers to aggregate and analyze utilization data, you'll realize the benefits to quality of care and the application of those products across patient populations."

Conclusion

Health systems today need accurate and in-depth views into their business to find meaningful ways to remain competitive and profitable. This is especially the case when health systems acquire non-acute facilities. It takes flexibility, a willingness to change course and trusted expertise to take processes designed for acute-care hospitals and adjust them to the unique needs of ambulatory care or ancillary facilities.

Fortunately, health systems have willing and informed partners at their fingertips. Robust partnerships between health systems and their suppliers can integrate purchasing and clinical data for operational cost savings, leverage purchasing data for right-size procurement and waste reduction in non-acute settings, facilitate SKU standardization efforts and capitalize on new channels for revenue generation, among several other benefits.

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.

 

Featured Whitepapers

Featured Webinars