Better supply chain efficiency, more savings: How leaders are reexamining implant procurement practices as elective surgeries grow

During COVID-19 pandemic, implant procedures slowed as elective surgeries were put on hold. Now, demand is ramping back up. With the resumption of demand, many hospitals, health systems and ambulatory surgery centers are encountering unique challenges related to ordering and distributing implants.

Since physician preference items (PPI) and implants represent 40 to 60 percent of total supply spend for many providers, it’s important that healthcare organizations utilize efficient and effective purchasing processes.1 To learn more about implant procurement best practices, Becker’s Hospital Review recently spoke with Chris Luoma, chief strategy officer at Global Healthcare Exchange (GHX).

Implants pose unique challenges to inventory management

The demand for implants isn’t always clear. Many organizations haven’t linked surgery schedules to procurement, fulfilment processes and everything downstream from an order-to-cash perspective.

In addition to this visibility challenge, implant information tends to be very siloed. It often resides on paper or in disparate systems, like manufacturer field sales systems, EMRs, ERP systems or inventory management systems.

“It’s not unusual for implant information to be written down on sticky notes or on implant log sheets that sit on the back table of an OR,” Mr. Luoma said. “That disparate data creates a lack of visibility, which makes it challenging to optimize the procurement and distribution of implantable devices.”

Coming out of the pandemic, some providers, manufacturers and distributors have sought greater supply chain resilience and have moved away from just-in-time inventory models. As a result, many healthcare organizations may now maintain higher levels of inventory. This can create issues with implants, since these products have expiration dates. In addition, organizations must be ready to manage product recalls, if and when they arise.

Inventory management practices differ by type of implantable device. For example, the orchestration of supplies for cardiac procedures differs from the approach used for orthopedic, spine or endoscopic procedures.

“Implants is an umbrella term,” Mr. Luoma said. “In some service lines, a perpetual inventory model might be used, while in others, inventory might be consigned or bill-only. It’s challenging to manage the variation manually. A well-run, clinically integrated supply chain and a technology platform can help get your arms around it.”

Automation + data lay the foundation for better supply chain efficiency

Waste related to implants and PPI is a big problem for healthcare organizations. Experts believe that a significant amount of total supply spend on these items is lost due to contract compliance issues or missed savings. Annually, billions of dollars of those implants in inventory are wasted due to product expirations or surgeons’ decisions not to use an implant during an active case.

“If the goal is to get the right product to the right patient, at the right location and at the right point in time, one thing you should understand is what’s flowing through your system today,” Mr. Luoma said. “Automation is one way to create data that can be aggregated to generate insights.”

A best practice that GHX recommends to providers and manufacturers is to automate the order-to-invoice process. This creates data points about what organizations have purchased and whether they purchased products at the right price.

“You can build off that and move further into the point of care,” Mr. Luoma said. “Look at utilization data to help see if your organization is using the right set of devices for the right patient cohorts and care settings. From there, you can improve preference card optimization and manage categories of spend to help reduce costs and eliminate waste.”

Improving the procurement process for implants begins with a solid foundation of data that extends to supply chain partners. Eliminating data silos is essential, as aligned information can shed light on several key areas.

“Are you managing your item master inside your ERP to support inventory and ordering? And are you extending that into your EMR, so you can link clinical utilization to cost data?” Mr. Luoma said. “That will help show whether you are maximizing your contracts by using the right, clinically-approved devices and the right care pathways.”

When implants aren’t ordered, invoiced and paid appropriately, it creates a lot of extraneous work for healthcare organizations. “If a product is ordered at the wrong price, it can cost up to $30 in human capital effort to resolve that error,” Mr. Luoma said.2 “When you talk about thousands of orders per day across multiple sites of care and ORs, the dollars can really add up.”

Best-in-class organizations have addressed this challenge by aligning product and price data with the right clinical decisions on the front end, and then driving that across the enterprise. Making this happen requires a technology infrastructure.

Organizational alignment on implant procurement drives standardization of care and reduces costs

Leading healthcare organizations collaborate across finance, supply chain and clinical teams to make the right purchasing decisions. This approach worked well for Oregon Health & Science University (Portland, Ore.) as it evaluated the best implantable devices for its shoulder arthroplasty service line patients.

“We helped facilitate a partnership between OHSU’;s administrators, supply chain team and physicians,” Mr. Luoma said. “By leveraging GHX solutions, the organization saw a 20 percent savings in implant costs across its surgeons performing shoulder arthroplasty procedures. The organization can reinvest every one of those dollars into more clinical staff, a better patient experience and reducing staff burnout.”3

Reductions in variation lead to standardization, higher levels of contract compliance and significant savings. Danville, Pa.- based Geisinger worked with GHX to implement a streamlined procurement process around its procedure-driven items. “Geisinger saw a significant reduction in new product requests and approvals, enabling the organization to drive material savings into the supply chain,” Mr. Luoma said.

The importance of upfront physician engagement can’t be underestimated

To generate physician buy-in for implant contracts, early collaboration between the supply chain and clinical teams is critical. “Even if the supply chain team negotiates the best contract, if you don’t engage and educate the physicians upfront, it won’t be implemented,” Mr. Luoma said. “Physicians may refuse to change their care pathways or device utilization.”

Mr. Luoma explained that post-implementation conversations with physicians will fail, too, if the supply chain doesn’t have access to comprehensive data showing variation among peers or how similar devices create similar outcomes at a lower cost. Without that information, dialogues dissolve into subjective discussions.

In today’s world, using analytics to drive decision-making is incredibly important, and utilization data captured at the point of care can play a central role. As hospitals and health systems shift to value-based care, data-driven conversations about the best set of supplies for different patient cohorts are occurring more often.

Technology: a key factor in better implant procurement + supply chain strategies

Many organizations are using implantable devices in nonacute care settings, as procedures move to ASCs and other outpatient locations. Cloud-based technologies are helping to facilitate that shift. “We are seeing a huge number of providers move to cloud ERP so they can utilize those capabilities more widely,” Mr. Luoma said. “Deploying core systems like the EMR and ERP to ASCs in the cloud creates the foundation of data needed to drive automation and efficiency in the implant procurement process.”

One of the unique aspects of implants is that the key stakeholders change throughout the product life cycle. Without a strong data and technology infrastructure to manage handoffs, healthcare organizations often see high inventory carrying costs and waste due to product expirations, as well as overpayments or underpayments for implants. Manually reconciling these issues leads to burnout on the clinical side, in the back office and even at the manufacturer. It creates a domino effect of negative impacts.

“With GHX, teams understand what implants and supplies will be needed once a case is scheduled,” Mr. Luoma said. “We can automate from scheduling through utilization, as well as the procurement cycle of requisition to order, order to invoice and invoice to cash. This drives efficiency by helping ensure that the parties involved along the way are aligned and looking at the same data.”

Now is the time for the industry to transform implant procurement and materially impact care delivery costs. Among providers, manufacturers, distributors and purchasing organizations, GHX has seen a groundswell of enthusiasm for automating implant procurement. Last year, GHX convened customers to create an implant consignment specification related to electronic data interchange.4

“Over 200 providers have gone through the certification process, and so have most major manufacturers,” Mr. Luoma said. “By automating the implant supply chain, leading organizations recognize that they can eliminate data silos and create information to drive better decisions.”

 

1 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5768327/

2 Numbers are based on GHX’s internal statistics.

3 https://www.ghx.com/ohsu-saves-on-shoulder-devices/

4 https://www.ghx.com/news-releases/2023/ghx-takes-industry-lead-in-releasing-community-guidelines-for-implant-order-automation-to-streamline-efficiency-and-clinical-productivity/

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