Acute observations about non-acute care sourcing

Out of sight doesn’t translate to out of mind — and shouldn’t

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One of the latest outgrowths of healthcare reform demands centers on the “continuum of care” concept. This represents a clinical trend where the healthcare organization tracks patient attitudes, behaviors and physiology throughout his or her medical/surgical experience — from the home to the physicians practice to the imaging center, surgery center, hospital and back.

Under the spirit and letter of accountable care, reimbursement for services provided hinges on outcomes throughout the patient experience.

In theory, the philosophy remains strikingly similar to supply chain operations where executives, managers and staff can track and trace a product’s progress from raw material through purchase, delivery, use and disposal.

Yet supply chain should not dismiss the idea of continuum of care as just another industry fad or recoil from the increased responsibilities. Why? The continuum of care concept has drawn in supply chain for years as they must support a variety of healthcare facilities with different demands and usage patterns.

In fact, Healthcare Purchasing News’ annual salary surveys have shown that around 80 percent of supply chain managers provide supply chain services to a variety of non-acute facilities, such as clinics, surgery centers and physician offices, among others. Further, 51.5 percent service more than six non-acute care facilities, while nearly 10 percent cover one or two facilities, more than 10 percent three or four facilities and more than 8 percent five or six.

Such a breadth and depth of service line coverage and influence can be fraught with possibilities and uncertainties. How can a hospital-based supply chain professional effectively (at core) and efficiently (one hopes) balance the disparate product and service sourcing needs with non-acute care facilities?

Nest of nuances

After all, supply chain is supply chain, regardless of location right? Maybe not so much.

William Stitt
William Stitt

William Stitt, CMRP, FAHRMM, Principal and Chief Operating Officer, Credibility Healthcare, LLC, agreed that general supply chain tactics may be universal throughout healthcare organizations, non-acute care entities do have their specific differences.

“First of all, there is sometimes not a clear understanding of their actual utilization/demand/need,” said Stitt, a former healthcare supply chain executive who served as Chair of the Association for Healthcare Resource and Materials Management in 2011. “Since many of these organizations do not have systems to track usage and they don’t always practice high-level inventory/PAR level management, you can see requests for too much product which in turn leads to excessive waste, expiration, etc.

“Secondly,” Stitt continued, “this lack of insight leads to immediate and urgent requests, which stresses the supply chain internally, and does not allow procurement groups to adequately source products to get the best supplier and price because the time element — or urgency — takes that ability away because we can’t negatively affect patient care or throughput. Finally, I think there is sometimes a mindset that non-acute entities think all of their products are unique — and perhaps some of them are — which leads to preferred or single vendor selection, without regards to GPO or other contract affiliations that the greater organization might have. There is a way to work collaboratively to meet all the required needs for the good of all and most importantly the patient.”

Eric Tritch
Eric Tritch

Eric Tritch, Executie Director, Strategic Sourcing, University of Chicago Medicine, acknowledged that his organization maintains the same basic expectation for all of its customers, regardless of facility type — the “5 Rs of Right Product, Right Place, Right Time, Right Quality, Right Cost.” The way they deliver on that expectation, however, can vary.

“Supply Chain staffing at non-acute facilities does not mirror that of our acute care settings, so we have to develop models that allow for a consistent experience but rely on systems and service providers that can help us achieve it,” Tritch told HPN. “If we can’t have trained supply chain professionals on-site managing inventory, replenishment, and supply room physical changes, we develop processes to make it easy to follow the same standard work that we do in our acute care sites so that a clinician has the same experience and has the same standard products in all settings.”

Tritch quickly dispatched the idea that they were training nurses to be “supply techs,” which would draw them away from direct patient care. A number of healthcare industry surveys have highlighted nursing’s dismay with performing supply chain tasks at the expense of being with patients.

“We aren’t training them to be supply techs,” Tritch assured. “We are building systems that allow for easy automated reordering based on needs. No special training required. We certainly promote Supply Chain staff to do supply chain work, but in a two-physician office clinic you can never support the cost of a supply chain professional and be competitive.”

University of Chicago employs bar-code scanning Kanban systems as one popular method, according to Tritch. “[These] trigger low unit of measure orders to our distributor that are easy to put away for staff doing supply chain work only part of the time,” he said. “We are also exploring creative models with our distribution partner that can help us manage our supply chain in the non-acute setting if necessary.”

That doesn’t necessarily mean products are delivered in pre-packaged supply bins and bundles or distributors deploy their staff on-site.

“It’s less [vendor-managed inventory] and more supply chain services as we will still own the inventory, but we just may contract with them to help with replenishment more than they normally would,” he clarified.

Tim Bugg
Tim Bugg

For Tim Bugg, CMRP, President & CEO, Capstone Health Alliance, Asheville, NC, product mix and priority as well as quantity ordered and staffing delineate the differences between acute care and non-acute care facilities.

“In the nursing home environment, incontinence and advanced wound care products are critical to the well-being of that patient population,” Bugg said. “Not to say it’s any less important in the acute hospital, but in non-acute having the right mix and quality of product for a patient with a much longer stay is essential.”

Further, units of measure purchased in non-acute care facilities tends to be smaller, as in typically by the “each” or box as compared to by the case in hospital settings, he added. Consequently, distributors play a “major role” in non-acute supply chain settings.

Finally, a facility’s size can determine its supply chain staffing infrastructure, according to Bugg.

“The non-acute facility may not have a full team dedicated to the supply chain functions of the facility,” he said. “Great success can be gained from an integrated supply chain that covers all classes of trade including the reducing of variation in care as it relates to product mix and patient interaction.”

Leave the office

Allen Archer
Allen Archer

Whether you’re dealing with a hospital or a clinic or surgery center, Supply Chain ultimately needs to focus on managing the intersection of cost, quality and outcomes, insisted Allen Archer, CMRP, Director, System Supply Chain Management, Houston (pronounced “HOW-stun”) Healthcare, Warner Robins, GA.

“We as traditional hospital-based Supply Chain professionals must get out of the office and spend the time needed to understand the needs of the non-acute operations,” Archer said. “Yes, we can effectively and efficiently supply the products and services needed in the non-acute space but if we truly wish to be transformative we must understand the ‘how’s and why’s’ that can exist in the non-acute space that we do not see in the acute world. If we take the approach that ‘our processes work in the hospital, so why can’t it work here?’ then we will never get past traditional materials management and into true supply chain management.

“We must understand that in the non-acute space, efficiency, throughput and customer service are even more critical to success than in the acute world,” he noted. “Minutes matter and making supply chain processes that are user-friendly and efficient are critical.”

Archer pointed to supply availability and process management as key areas on which to focus.

“Off-site deliveries must be coordinated, and in some instances, even include Supply personnel putting the requested supply into supply rooms or even going into the space to place the orders and doing the inventory management,” he said. “This is a service that is customary for the acute space but is a new approach to the non-acute space that makes their operations more efficient.”

Houston recently changed its process for durable medical equipment (DME), according to Archer.

“Instead of the organization ordering, stocking and issuing DME items, such as crutches, braces, etc., to patients without reimbursement, we have outsourced this category to a local DME company who owns the supplies and the process,” he said. “The clinician is asked only to choose the supply needed. The order is set in the [electronic medical record], which alerts the DME company who charges the patient and triggers the replenishment. The clinic is spared the expense of the product, and the staff do not have to reorder replacement product.”

Randy Piper

Randy Piper, Vice President, Non-Acute Contracting Solutions, Intalere, argued that non-acute care facilities operate differently than acute care facilities and generally have fewer resources to dedicate to supply chain activities so the basic functions of ordering, replenishment and inventory management fall to employees with clinical responsibilities and no background or experience in supply chain operations.

As a result, “distributor relationships are strong in the non-acute facility, and the distributor is relied upon heavily as a supply chain partner, because those facilities may require a lower unit of measure for products based on lower usage and limited inventory space and additional deliveries per week, he said.

Piper also indicated that physician-preferred products “may be more prolific” outside of the acute care supply chain.

Chris Luoma
Chris Luoma

Product variety isn’t limited to acute vs. non-acute care either, according to Chris Luoma, Vice President, Global Product, GHX, Louisville, CO. In fact, variety can exist within non-acute care facilities, too.

“Physician offices focused more on preventive services will utilize a different set of products than ambulatory surgery centers that are increasingly focused on highly specific procedures,” Luoma noted.

Contracting can be complex, too, as “non-acute care facilities may order the same products as acute care facilities, but contract prices, terms and conditions are often different based on the class of trade,” he continued. “This adds to the complexity that already exists in the contracting space, with the proliferation of contracts for the same item, including those with national and/or regional GPOs, purchasing coalitions and direct with manufacturers.”

The bigger picture

The class of trade argument remains a hornet’s nest, admitted Howard Mann, Vice President, Supply Chain Management, Cardiovascular Care Group, Nashville, TN. He called “Class of Trade” or “COT” the “first hurdle” to face to supply non-acute care facilities as COT is “used to establish higher margins in distribution and legal issues regarding pharmaceuticals.”

“Once the legal and business definitions are clarified and understood, the second hurdle is the distribution channel used to support alternate COTs, such as ambulatory surgery centers, clinics, [retail] clinics, and retail or specialty pharmacies,” Mann continued. “If they are offsite and spread out in communities, decisions have to be made on how the distribution channel is developed and how low-unit-of-measure delivery costs are managed.”

The third hurdle involves defining and measuring appropriate key performance indicators as they will show “how to assess the cost of business and how to apply efficiencies across potentially disparate processes in alternate COTs,” he said. From there you can apply best practices, such as back office, purchasing, inventory management, vendor management and brand management to make the alternate COT network preserve value and effectively manage cost, he added.

Darryl Weatherford
Darryl Weatherford

Darryl Weatherford, Vice President, AdvantageTrust, Nashville, TN, also pointed to class-of-trade distinctions as a challenge within this market segment.

“Many suppliers charge different prices between acute and non-acute facilities for the exact same product,” he said. “This typically, but not always, results in a higher price paid by the non-acute site. To offset this, a non-acute facility may be able to utilize a lower grade of product than an acute-care setting might accept. An example might be ‘floor grade’ instruments as opposed to O.R. quality. While this provides opportunities for cost reductions it also can also complicate GPO sourcing efforts.

Sherman Curtis
Sherman Curtis

Still, Supply Chain executives can view non-acute care sourcing as a community outreach, according to Sherman Curtis, Strategic Relationship Manager, Intermountain Healthcare, Salt Lake City.

Acute care and non-acute care executives alike face the same reimbursement predicament — reductions under fee-for-service or per-case payment models — that motivates cost-reduction initiatives, but it also opens the door to community health initiatives, he indicated.

“Non-acute care executives are also being challenged by their aligned provider services within the health system to develop new community health strategies,” Curtis noted. “These may include development of community wellness through creative health outreach initiatives, new clinical practices focusing on reducing hospital admissions, expanding services through capital investments in buildings and technology, etc. All these developing services increase overhead and coordination with unclear projected returns.”

Curtis contended that Supply Chain can extend its reach beyond helping the hospital to providing services that connect more directly with the community, such as telemedicine, direct patient supply distribution and third-party durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) logistical services.

“Large strategic suppliers supporting the health system are now responding to requests to become more creative in key categories impacting the non-acute care environment,” he said, specifying respiratory care, wound care, medication administration and infusion therapy as examples.

“The supply chain professional also has the opportunity to introduce structure around supply chain practices for once independently run clinic or surgical center now falling under the influence of a community health strategy,” Curtis said. “Many non-acute care locations are still required to maintain some of the basic supply chain operations of procurement, logistics and ordering. Distributors are finding ways of playing a stronger more supporting role in some of these areas. Systemic approaches to supply chain principles are new to many non-acute operations, but executives are beginning to recognize the prospect of cost reduction while adhering to these opportunities.”

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