Why the supply chain is a health system's most untapped resource and how to unlock its value

Supply chain leaders know the healthcare supply network plays a critical role in hospital operations. But how do other stakeholders view the supply chain? How do leaders know if their supply chain is meeting needs and expectations? And, most importantly, how does supply chain impact patient outcomes?

These are the pressing questions hospital leaders should ask, according to Shaden Marzouk, MD, MBA, chief medical officer, and Scott Nelson, senior vice president of supply chain, at Dublin, Ohio-based Cardinal Health.


Dr. Marzouk and Mr. Nelson spoke to Becker's Hospital Review about the hidden value of the hospital supply chain and shared insights from a recent survey conducted by Cardinal Health and SERMO, which polled more than 400 nurses, physicians, service line leaders and supply chain administrators.


Question: How do hospital decision makers perceive the value of supply chain?


Scott Nelson: Frontline clinicians, service line leaders and administrators weigh the importance of the supply chain differently because they face a different set of challenges. But, they generally agree that the supply chain is related to their hospitals' top priorities: managing costs and improving quality of care.


In a recent survey, respondents identified the healthcare supply chain as a key business tool and an essential element in ensuring quality patient care. More than three-fourths of respondents believed supply chain is critically important to addressing key challenges and achieving goals in their organizations. This consensus presents an opportunity for healthcare supply chain leaders to promote the shared value of supply chain in their organizations and connect seamless operations to better patient, safety and business outcomes. Technologies like automated inventory management and advanced data analytics can be used as enablers to elevate the true value of supply chain.


Shaden Marzouk: Physicians, nurses and other providers perceive the value of supply chain as a function of its ability to seamlessly deliver products and services that help improve patient care. Some physicians and nurses spend up to 20 percent of their time on supply chain tasks — like locating supplies — instead of caring for patients. Providers also experience situations where necessary items aren't available for a procedure or a desired product is expired. These situations can affect process flow and efficiency, job satisfaction and patient safety. These events highlight the importance of supply chain in supporting quality patient care, including the management of expired and recalled products. For providers who also have service line management responsibilities, the importance of good supply chain practices is further highlighted by the financial effects of these practices.


Even when supply chain processes work seamlessly with frontline patient care, there's still opportunity to take your supply chain beyond managing inventory volumes. Greater connectivity to organizational systems, real-time inventory visibility, more task automation and benchmarking capabilities are areas for potential growth. Having the right product, in the right place, at the right time is an important metric for the value of supply chain, but you also have to consider the processes involved in getting to this state and what can be enhanced.


Q: What are the most pressing challenges facing the supply chain today?


SM: The most pressing challenges facing supply chain today have to do with sustaining "right product, right place, right time" capabilities. Nearly 1 in 4 hospital staff (24 percent) have seen or heard about a recalled or expired product used on a patient. More than half (57 percent) recall a time when a physician didn't have a product required for a patient's procedure.


While many hospital stakeholders believe they have an efficient inventory management process that ensures products are available when needed, closer examination reveals a gap between the general perception and the reality of daily experiences in the hospital. This highlights the importance of collaboration between clinical and supply chain stakeholders to examine how improvements in inventory control and processes can support patient outcomes.


SN: I agree. If you step back and take an even broader look at the challenges facing hospitals, you'll see finances are the top priority. This isn't surprising, given the shift to value-based reimbursement. What's surprising is the degree to which finances are also top of mind for many clinicians — 45 percent of service line leaders and 39 percent of frontline clinicians ranked managing costs as the No. 1 element driving their organizations' success in the survey. For the supply chain, clinical collaboration is key. Delivering insights around cost-per-case and cost-per-physician will enable frontline leaders to better understand the value they're providing and, in turn, support better outcomes through evidence-based supply management. Currently, less than one-quarter of surveyed hospital leaders believe inventory management processes are "very good" at understanding these costs.


However, implementing improvements to these processes is another critical challenge for hospitals. Hospital decision makers cited the following barriers to addressing supply chain challenges and updated inventory systems: competing priorities, perceptions of high cost and creating buy-in. Our research also indicates many hospital stakeholders aren't familiar with all of the supply chain and inventory technologies available. Again, this points to a need to educate hospital stakeholders on the real return on investment of supply chain improvements. We're seeing progress in this area with increased participation in value analysis committees; however, everyone at the hospital plays a role in advocating for a healthier supply chain. Achieving total staff alignment will be critical for future supply chain success.


Q: What supply chain capabilities are most important?


SM: The most important supply chain capabilities help decrease the risk of human error and shift the focus toward a patient-centric supply chain. We know better supply chain management leads to better quality of care and supports patient safety. A patient-centered supply chain can facilitate reduction of medical errors, help standardize to the "best" set of products and decrease costs — all of which can positively impact patient care. In addition, a patient-centered supply chain helps providers spend less time on inventory and more time with patients.


SN: To Shaden's point, supply chain capabilities that enable frontline providers to spend less time on inventory and more time with patients are also helpful. We know the number one thing clinicians and administrators wish they didn't have to do in their jobs is supply and inventory tasks, and if given that time back, the majority (65 percent) would be with patients.


Automated solutions that save time and relieve burdens on the frontline satisfy this capability while optimizing efficiencies. Coupled with data analytics, automated inventory systems can also support patient safety, reduce costs and improve workflows. The key capability, here, is total visibility, which allows leaders to view the supply chain holistically from procurement to patient. The ability to understand the supply chain from end to end is a key enabler for favorable patient outcomes and a better bottom line.


Q: What steps can supply chain leaders take to position their supply chain as a vital business asset that supports patient care and safety?


SM: The biggest step is to eliminate the separation between supply chain and clinical stakeholders. It's essential to bring all hospital stakeholders together to understand options for improving supply chain processes and to quantify the tangible benefits of these improvements — not only for the bottom line, but for patients and employees, as well. When a hospital is looking for efficient and cost-conscious care delivery strategies that don't compromise quality or outcomes — or better yet, benefit quality and outcomes — these decisions must be collaborative. Decisions made "with" all stakeholders and not "for" them often result in a higher adherence to the final decision.


SN: First, change the way you think about the supply chain and your role in the organization. The healthcare supply chain is no longer just about distribution, manufacturing or transportation. The supply chain is cutting horizontally across various hospital departments and vertically into the C-suite, as hospital executives gain a deeper appreciation of a high-performing supply chain organization.


With this perspective, it's imperative supply chain leaders champion supply chain innovation in their facilities. This will take grit as we've observed a lack of urgency around updating the supply chain, often due to competing priorities and uncertainty in the industry. Explore using tools like automation, analytics software and Lean principles. These enablers will allow leaders to position supply chain as a strategic asset — differentiating activities that create value versus those that don't — and build insights that yield predictability, consistency and desired outcomes over time.


About Cardinal Health Hospital Supply Chain Survey

This study was fielded Oct. 19 - Nov. 4, 2016, using an online survey methodology. The samples were drawn from SERMO's Online Respondent Panel of Health Care Providers, which includes over 600,000 medical professionals in the United States. The study included 403 respondents total, including frontline healthcare providers in hospitals (n=201), service line leaders in hospitals (n=100), and hospital/supply chain administrators (n=102). All survey data on file at Cardinal Health.


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