Are today's hospitals underinvesting in their ability to transform data into actionable information?

Insight from the top performers on Gartner's Healthcare Supply Chain 25.

In today's changing healthcare landscape, hospitals and health systems are facing more financial risk than ever before. At the same time, they must identify new ways to improve patient outcomes while reducing the cost of care.

As the entire industry moves toward a value-based model, providers also need to find new methods of understanding their true costs — per case and per episode of care.

That's why it's now more important than ever for hospital leaders to view their supply chains as valuable assets for mining data and transforming it into action that can help them address each of these strategic priorities.

Here, Bruce Mairose, vice chair of supply chain at Mayo Clinic, and Mike Duffy, president of hospital solutions and global supply chain at Dublin, Ohio-based Cardinal Health (the two organizations that command the No. 1 and No. 2 spots in Gartner's Annual Healthcare Supply Chain Top 25) answer questions for Becker's Hospital Review

What's possible and what's next?

Bruce Mairose: In today's healthcare market supply chain management, organizations are expected to drive waste and expense out of the system while reducing supply chain operations expense. As a result, there are simply not enough resources — human, technological or information — across many competing priorities. 

Most SCM organizations segment their customers based on spend, complexity and opportunity. Clinical areas such as cardiology and surgery hold a favored position on the high end of that continuum due primarily to implantable devices. Departments such as ophthalmology, cardiopulmonary and the gastrointestinal lab often land on the low end of the scale with respect to opportunity. It is an issue of limited resources. 

Investment in EMRs over the past decade has provided limited insight for high spend areas and has propelled data capture forward for both clinical and business functions. However, investment in transforming data into actionable insights lags significantly.  

Finally, investment in automated data capture will enable accurate collection of usage by ICD10 or diagnosis related groups. There is functionality available within some EMRs that allow clinicians in procedural areas to identify products that are used or wasted, and then that data is incorporated into the clinical documentation. This can be difficult to report from unless product information from the clinical arena is interfaced to a data warehouse or robust reporting system. The use of barcode or RFID-enabled scanning for this data capture can accelerate the transformation of quality data to information. Imagine for a moment, the ability for a surgeon to be able to walk out of a surgical suite knowing exactly what it cost to perform a procedure and using ICD10/11 data to compare to his or her peers. This is actually occurring in pockets today.

Mike Duffy: We know that supplies can make up as much as 30 percent of a hospital's annual operating budgets. Contributing to the high spend percentage is the more than $5 billion of waste trapped in the device and implantable supply chain. This is due, in large part, to a lack of inventory visibility across the extended supply chain. This opaqueness drives manual, redundant, and inefficient practices in managing the supply chain which adversely impacts clinician time and workflow — ultimately affecting the patient experience.

An efficient, transparent supply chain that connects data from the point of use all the way back through the entire value chain to the point of manufacture is our goal. This ensures we are making manufacturing and purchasing decisions based on actual usage, and not simply forecasts. Additionally, we must move beyond capturing data by providing the right analytics to support better decision-making and patient care. It's a "must" in today's world of value-based reimbursement. Having deep insight into supply expense is key to truly understanding total cost of care. As supply chain leaders in other industries (such as retail or automotive) know, the answer to creating this "patient-driven supply network" lies in the adoption and use of connected technological solutions throughout the value chain.

Capturing data at the point of use is the key enabler to creating transparency. With an RFID-enabled inventory management solution that integrates with EMRs and materials management information systems, hospitals, distributors and manufacturers will have the right information for predictive planning and supply chain optimization, benefitting all stakeholders. Usage information, by case or physician, can also be used to reduce product variation and support additional cost reductions. Expiration can be eliminated and charge capture improved. Importantly, patient safety and enhanced patient experience are better supported by reduced administrative workload for clinicians and the ability to track devices by patients.

What kinds of investments are needed for hospitals to transform data into insights in a powerful way?

BM: Enterprise resource planning systems are very good at collecting data from all aspects of the business, answering basic questions as to how much, when and where resources were used. If healthcare systems wish to drive out waste and unnecessary costs, more complex questions must be addressed. The latest versions of EMRs capture some of this data and can assist in aggregating the right information to address these questions, but this information is difficult to normalize and is not well suited to address utilization, waste and cost per procedure. 

Clinicians must be the decision makers when it comes to determining what product or intervention is most appropriate for the patient. Today, leading organizations are investing in highly skilled allied health staff and using analytics to work collaboratively with their clinicians. These workers primarily focus on converting data to information. This process requires an ongoing investment in human capital. The key is to find the right mix of technology and staff skills to enable accurate capture, normalization and manipulation of data that can be integrated with clinical information to optimize both clinical and business outcomes.

Mayo Clinic is fortunate to have had a self-developed system for over 17 years that is capable of tracking products used or wasted, including costs by facility, by DRG, by clinical specialty and by physician. The technology was originally designed to manage preference cards and inventory within our surgical suites. The technology now scans manufacturer's bar codes to capture usage data for clinical documentation and business analytics. In recent years this information has been introduced into a data warehouse that allows a physician to receive a "hotel bill," which details what products were used, open and unused when she or he leaves the procedure room. 

On the other end of the customer segmentation continuum, monthly reports are often generated from the ERP to assist leaders in monitoring budgets and overall expenditures. These reports are typically constituted by data rather than information. Mayo SCM has develop technology and reporting that provides information and direction to the user at the outset. Today, clinical and administrative areas can open reports that illustrate the net budget change based on changes in utilization of a product, new technology that may have been introduced, and/or change in the cost of a product from the previous periods. The creation of actionable information allows for a more focused effort of expense management associated with consumable products. 

What's standing in the way? Why aren't more hospitals making those investments?

MD: Today's hospital system is facing significant challenges, and as Bruce noted, numerous competing priorities — reimbursement challenges, consolidation and integration, talent recruitment, etc.

Historically, technology investment has focused on medical technology — items that help retain physician talent and drive revenue. More recently, capital has been directed to EHR/EMR systems as a result of meaningful use initiatives.

Hospital C-suite executives are starting to recognize the value of an efficient, data-enabled supply chain and the operational insights it can generate. As a result, the supply chain agenda is elevating higher in the minds of hospital leadership.

However, there is still the challenge of needing to drive out cost today vs. investing in technology that can have sustainable benefit in the long run. Many administrators do not have a deep understanding of the complexity of the supply chain, nor do they understand how manual or outmoded business processes truly impact their organizations — from overinvesting or underinvesting in inventory; the amount of time nurses spend on supply chain or administrative tasks vs. patient care; cost of expiration and loss; potential risk of expired product use on patients; and uncaptured charges. Nor do they understand how quickly investment in this kind of technology can pay off — in many cases in less than a year.

What are the key steps hospital leaders can take to start moving in the right direction?


1. Investment in a clean, robust item master, accurate price and UOM data is foundational to analytics
2. Invest in human capital that can interpret information in a way that is meaningful to clinicians (speak their language)
3. Use experiences from 1 & 2 to construct automated reporting and analytics that supports decision making by the clinical practice
4. Use data, skilled staff, and analytics to build trust with clinical and administrative staff that SCM is not there to dictate actions but rather be an indispensable partner in meeting their goals and objectives.

As Benjamin Franklin said, "An investment in knowledge pays the best interest."

MD: When thinking about how to get started in building a data-enabled supply chain that delivers the most value, there are a few keys to success:

1. Assess your current state – understand and benchmark where you are today related to your supply chain processes.  Follow the “life of an order” and process map your value chain. Are there gaps in data that can be remedied by better technology?  Do you have a complete picture end to end of your value chain?
2. Build the vision, strategic plan and business case for investing in additional resources (technological or human) to drive the visibility and insights that can lead to significant reduction in waste.
3. Align goals and incentives with all constituents, inside and outside your organization, to ensure commitments to action plans, milestones, and business case realization.
4. Last but not least, drive the adoption of data standards – such as GS1 – across your extended supply chain to increase the visibility and transparency of the health care supply chain.

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