'From box mover to value chain': Why it's time hospitals automate their supply chains to improve quality and revenue

Immense financial pressures, like declining reimbursements and a shift from inpatient to outpatient services, are forcing hospitals and health systems to accelerate efforts around driving cost efficiencies.

The supply chain is one of the first areas leaders turn to for cost reduction. The U.S. healthcare system loses $5 billion related to supply chain inefficiencies each year, with 10 to 30 percent of that loss tied to physician preference items. Inefficient supply chain management can also result in significant waste, inflating an organization's spend and dragging down the bottom line. Inefficient management contributes to an average 7 to 10 percent of clinical products that expire in hospitals per year. Add to this, indirect costs contributing to supply chain from time spent by clinicians on trivial tasks around managing supplies taking away from patient care, the regulatory risks of noncompliance and above all adverse patient events.

"Our traditional way for solving for these expenses has been focused on more labor and product costs," says Tapan Shah, director of supply chain solutions at Cardinal Health, during a Feb. 13 webinar hosted by Becker's Hospital Review. While hospital administrators have focused supply chain cuts on driving down labor expenses and squeezing cost out of product acquisition, Mr. Shah said there is a side of the equation administrators are missing: driving operational efficiencies in supply chain.

"We need to look at supply chain as a strategic asset instead of just a cost center," he said, meaning ditching unproductive ways of managing supplies. Yet this is no small feat. About 70 percent of hospitals still use inefficient manual and barcode processes to manage inventory, said Suzanne Champion, RN, director of clinical operations at Cardinal Health.

"Let's say a clinician is looking for one of those very important patient-specific items, and all of a sudden the item isn't there because someone put it away where it didn't belong. How do you track that? How do you manage that? How do you know when you need to reorder? " Ms. Champion said.

Hospitals transitioning their supply chains from manual inventory management systems to automated processes that support real-time visibility can answer these questions more timely and accurately. Automating the supply chain is critical, especially given up to 20 percent of clinicians' work weeks are spent on supply chain management, according to a Cardinal Health survey conducted by Sermo. Time spent on supply chain management may lead to less one-on-one time with patients, which could impact patient care or satisfaction. With reimbursement increasingly tied to patient satisfaction and quality measures, it is critical for clinicians to focus more time toward patient care.

"Clinicians should be focused on patient care. Not looking for products, not spending time doing documentation," Mr. Shah said. "Hospital leaders really feel that supply chain can solve these challenges. The supply chain represents a unique opportunity to address these challenges for the clinicians."

Cardinal Health conducted a case study of Los Angeles-based White Memorial Hospital's switch from a manual supply chain system to a radio-frequency identification-enabled supply chain system. RFID technology enables workflow automation for clinicians as well as supply chain teams, supports accurate usage capture, and gives visibility to real-time data analytics. After switching to the Cardinal Health automated inventory management solution using RFID technology, clinicians at White Memorial, an affiliate of Roseville, Calif.-based Adventist Health, saw a reduction in nonvalue-added activities, enhanced accuracy and visibility for optimized PAR levels.

White Memorial also reaped $42,000 in initial savings from improved charge capture, according to the 2017 study. The 353-bed hospital saved 176.8 hours in cycle counting per year and saw a 95 percent improvement in tracking expired products under the RFID system.

White Memorial's ability to capture missing revenue while decreasing clinicians' time spent on supply chain management exemplifies the significant financial opportunities in transitioning supply chain from a box mover to a value chain, Mr. Shah said.

An efficient value chain, enabling trust between clinicians and supply chain teams, while driving cost and workflow efficiencies, should support your health system's strategic initiatives around understanding and managing costs such as value analysis, product/process standardization efforts, strategic purchase, and more. Assessments and review are necessary to avoid returning to old, inefficient habits.

To view a recording of the webinar, click here.
To learn more about Cardinal Health, click here.

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