Are healthcare facilities prepared for the surge or behind the curve?
by Rick Dana Barlow
terrorists flew passenger jets into sky-scrapers and the Pentagon and
allegedly targeted other prominent federal buildings back on 9/11, such
acts were confined to the creatively fertile imaginations of Hollywood
and fiction publishing houses.
Now in the post-9/11 world, with credulity stretched to
the limits, the mind’s eye blinders are gone. Healthcare facilities are
preparing for, if not at least talking incessantly about, heretofore
unfathomable worst-case scenarios that involve hundreds, if not
thousands, of bacterially or virally infected patients that will quickly
drain finite resources instigated by management efficiency efforts.
Imagine if the terrorist acts on lower Manhattan,
Washington, D.C., and what turned out to be a Pennsylvania field had
resulted in the release of a lethal virus? Or imagine if the floodwaters
of the Hurricane Katrina-battered Gulf Coast in late 2005 distributed
something toxic to residents and relief workers in the region, which
quickly radiated outward to other parts of the country? Or what if
something less dramatic occurred? Like disease-infected geese defecating
in public soccer fields and parklands in a given geographic area?
Following weekend games and other recreational activities, scores of
kids and their parents and friends track geese droppings on their shoes
and bicycle and car tires home. This can happen.
Shortly after the terrorist attacks on the twin towers
of the World Trade Center authorities closed lower Manhattan to
vehicular traffic to prevent transportation logjams. In the event of a
viral pandemic, they would have had to quarantine the area. And
authorities would have to do the same in those areas affected by the
Katrina floodwaters or the geese droppings. But they also would have to
control and corral an infected patient population crowding hospital
emergency rooms and medical clinics.
Because many hospitals have followed the long-standing
advice of manufacturers, distributors and supply chain consultants who
emphasize lean inventory measures for efficiency, their just-in-time
stock quickly would be depleted by the disease-ravaged public. With
vendor supply routes cut off, hospital inventories running on fumes and
the Strategic National Stockpile in continual development, how does a
materials manager keep product pipelines flexible, fluid and open during
a major catastrophe or crisis?
Owens & Minor Inc. readies deliveries to
Gulf Coast customers in Hurricane Katrina’s
wake in late 2005.
Photos courtesy of Owens & Minor
With experts warning against panic-driven stockpiling
and JIT benefits quickly becoming obsolete in the face of unexpected
demand, materials management professionals seemingly are caught between
a rock and a hard place in dealing with a pandemic that escalates
consumption and depletes coffers. Are there rational – and realistic –
solutions for materials managers? Should they trust the system and their
To a certain degree, yes, but with careful planning,
according to Michael Lortie, corporate director of materials management
at Carondelet Healthcare Network,
Tucson, AZ. Lortie and Carondelet’s warehouse manager Randy Corn have
been involved in community-wide disaster planning in Tucson for years.
"We have boosted inventories on masks, gowns and gloves
for our four-hospital system, but we do not have what can be called a
huge stockpile," Lortie said. "The bottom line from our point of view is
that just as in Y2K, being prudent is one thing, over-reacting is
another. But no matter how much you build inventory, you just don’t know
what the magic number is. If there is an outbreak here, we would call on
our distributors up in Phoenix, and run our own trucks up there if need
"We will put our trust in the inventory we have built
up, and then in our supply chain partners, and then in the federal
response," he continued. "Tucson is home to a huge Air Force base, with
a huge Army base nearby, and we have been involved in a drill involving
actually flying in the National Stockpile. Therefore, we do not feel
hoarding supplies is a good use of the organization’s money."
Jim Rush, corporate director of disaster preparedness at
San-I-Pak Inc., an
onsite medical waste treatment firm, and president of
MEDLOG Inc., a disaster
preparedness services firm, recognizes the conundrum. Rush acknowledged
that healthcare inventories have been reduced as both product demand
forecasting capabilities improved and healthcare financial resources
became strained, noting that even the Department of Defense switched to
a JIT supply management system more than a decade ago. "So what is wrong
with lean distributor and hospital inventories and just-in-time
distribution? Nothing … as long as a long-duration natural or
man-made disaster doesn’t occur," he said.
"If demand for medical products spikes by more than a
few percentage points above average consumption, the lean supply chain
is emptied and manufacturing plants will not be able to catch up to
demand for months if not a year or more. That means widespread
supply-outs and long backorders just like we see in anti-viral
medications today," he continued. "There is no difference between
medical products and any other commodity like the gasoline outages we
America when demand outstrips supply. However, there are
significant differences between an event which affects one city or even
one state and an event like a pandemic which will affect the entire
country and all industries, including healthcare."
Distributors may be able to shift resources rather
quickly in the event of a natural disaster, realigning medical product
supply capabilities so that facilities in an affected area can keep
healthcare delivery "reasonably intact," such strategies may be
stretched in the wake of a man-made disaster, he indicated.
Cardinal Health’s Robert Hankins completes a
delivery to a major teaching hospital customer.
Photos courtesy of Cardinal Health
"If a city should be attacked with a nuclear weapon –
not a dirty bomb but a nuclear detonation – the demand for radiation
antidotes, trauma supplies, blood and tissue products, pain medicines,
burn ointments and dressings, IV fluids and a host of other life
saving supplies and equipment will be so great that such an event would
likely deplete distributors inventories across America," he said.
Rush questioned the suggested strategy of healthcare
facilities "stocking up" with a two-week supply of items for a
bioterrorism event or for a forecasted avian influenza pandemic.
"Where is the healthcare organization going to get supplies after the
two-week supply is exhausted?" he asked. "The inference is that the
supply chain will catch up to demand, but those words are never in
the way, is that two weeks of normal usage? Or is that two weeks of
supply at levels of consumption associated with a disaster?"
Rush emphasized that facilities should be calculating
the individual line items and quantities of medical products that will
be required in a disaster
and identified in the jurisdiction’s Hazard Vulnerability Assessment.
Otherwise, healthcare facilities are just "talking around" the issue, he
Planning for pandemic pandemonium
While the private sector is encouraged to be cautious
and prudent, the federal government has been fortifying its
Strategic National Stockpile
(SNS) with items such as N95 respirators, isolation gowns, exam
gloves and other relevant products.
In fact, Health and Human
Services Secretary Mike Leavitt reassured the public that the
government has stored enough vaccine to inoculate roughly three million
people against bird flu and plans to increase its capacity by another
five million treatment courses this year. Additionally, Leavitt told the
media that the feds have purchased and stored 16 million treatment
courses of antiviral drugs for the H5N1 virus with another 20 million
due by March; 73.1 million N95 respirators with another 31.8 million on
order; and 37.4 million surgical masks with another 14.1 million on
Leavitt also reported that a number of states have
implemented pandemic flu exercises and that a team of "pandemic flu
experts and communicators" will conduct an exercise early this year to
test and improve pandemic information reporting capabilities.
"Hospitals need to establish contact with the
appropriate government organizations – local, state and federal – and
advise them of their supply chain situation," said Larry Dooley, vice
president of contract and program services at
Novation, "especially if they
have JIT or stockless types of supply chain." That way each hospital can
ensure access to supplies that the government is stockpiling in 15 to 20
locations around the country, he added.
Careful planning also keeps transportation routes fluid,
particularly during restrictive government cordons or quarantines.
"Supplies need to move freely from suppliers to
hospitals and from hospitals to other hospitals," Dooley said. "By
notifying the government you can set up plans for moving these supplies
safely with the necessary police protection. As we know,
nothing is foolproof or 100 percent secure, but maximum pre-planning
can ensure maximum protection."
But Rush questioned how private healthcare facilities
will gain access to the public Stockpile and how those facilities will
participate in a federally driven supply chain effort where private and
public healthcare facilities will have to rotate and share supplies. For
example, can the Stockpile serve the public health organizations as well
as the private healthcare industry and vice versa? Another detail that
still needs to be addressed and planned includes actual order processing
and fulfillment during a crisis.
"There is no practical way for cities or states to build
inventories large enough to sustain their jurisdictions throughout a
long-duration or ‘material-intensive’ disasters like a nuclear
detonation or multiple-target attacks with explosives," Rush said.
"Also, the mission of the SNS has not been clearly articulated to the
healthcare industry in terms of what the SNS will and will not provide
to healthcare organizations during disasters. This leads to very
dangerous assumptions that the SNS is going to sustain all
disaster-related healthcare. It will not."
Craig Raben, vice president, environmental health and
safety, Cardinal Health Inc.’s Supply Chain Services and Medical
Products Manufacturing business, noted that any successful planning and
implementation efforts hinge on open lines of communication.
"To prepare for a possible pandemic, the most important
thing that healthcare providers can do is set up various means of
communications and to establish communication channels that will remain
open in any crisis," he said. These channels must be comprehensive,
widespread and regularly evaluated. "Channels need to set up with
employees, the communities they serve, suppliers, public health
agencies, other governmental agencies, emergency responders and other
healthcare providers," he advised. "Communication channels and response
arrangements should be routinely tested and providers should ensure
there are backups to everything and everyone."
But that doesn’t alleviate the distributor’s
responsibility to ensure product delivery to customers, he added.
Hospitals should ask about and understand their chosen supplier’s
capabilities during a potential pandemic or other crisis, focusing on
specific plans and processes.
At the same time, hospitals must have established
business continuity plans in place that specialize in pandemic
preparedness, according to Raben. With proper communications, education,
training, a pandemic preparedness team, a documented process to be
followed, a list of mission-critical employees who must come to work and
a list of products acceptable for increased pandemic-motivated inventory
levels, hospitals have a workable battle plan to weather storms, he
Hospitals also need to establish local networking groups
and discuss how they are going to work collaboratively to address any
emergency situation, including establishing protocols for sharing
supplies and staff, according to Dooley.
What if the hospitals belong to different GPOs and
access different contracts? It doesn’t matter. "At times of crisis, all
this goes out the window," he added. "When 9/11 hit, suppliers and
hospitals did what they had to do to care for patients. These suppliers
were working with the hospitals out of community service, not what price
to charge. When the dust settles the impacted hospitals will work
collaboratively with their suppliers to reconcile product use and
Logistical lessons learned
Logistics strategies and tactics used by healthcare
suppliers or even in non-healthcare industries may not be applicable or
appropriate solutions for healthcare providers, experts noted. For
example, retail management of large stockpiles relies on minimum and
maximum replenishment cycles. "These replenishment cycles have no
significant correlation between daily hospital usage and order
quantities," Rush noted. "If stockpiling continues at the city, state
and hospital levels, the American healthcare supply chain may be damaged
for years to come. The result could be long unanticipated backorders on
critical items until the supply chain forecasting systems can be
Conceptually, JIT and stockless distribution and
inventory programs in hospitals were "intended to mirror those of other
industries," acknowledged Jamie Kowalski, managing director of business
development at Owens & Minor Inc., but they are merely similar. "In
manufacturing, the JIT process results in delivery of supplies,
literally, just before they are used," he said. "In a hospital, that
cannot work because of unforeseeable variables in demand on an immediate
basis, such as arrivals in the ED, spike in births, etc."
Kowalski urged hospitals to maintain enough stock in
their internal pipeline to satisfy at least two weeks of usage. "Most
supply chain practitioners and consultants would rarely recommend a
target inventory turns rate of more than 20 per year, hospital-wide," he
noted. "While individual items may turn more rapidly, in general, the
two-week ‘float’ would suffice until transportation infrastructure could
Kowalski cited the laborious, but ultimately successful,
supply chain activities after 9/11 and Hurricane Katrina. "While there
were individual hospitals and individual items that were running out,
the healthcare supply chain operated relatively smoothly, albeit, with
much effort," he added. "So the pipeline inventory helped."
Raben concurred that relatively recent disasters served
more as a valuable educational experience rather than an operational
"We learned a lot from 9/11 and natural disasters such
as Hurricanes Katrina and Rita, that will help Cardinal Health deal with
any catastrophe," Raben said. "Even though roads were closed in the
aftermath of the twin towers being hit, critical operations were not in
jeopardy. Cardinal Health drivers were escorted to restricted areas by
police, due to the vital nature of our roles in public health.
Helicopters landed at our facilities to pick up essential supplies."
Hospitals should have business partnerships with
suppliers that have comprehensive, documented and tested disaster plans,
and a record of performance in such situations, Kowalski urged.
Experience during and after 9/11 and Hurricane Katrina are prime
examples, he added.
Emergency protocols should be established with all key
suppliers that handle med/surg, drugs, laboratory products, food and MRO.
In fact, hospitals should negotiate such emergency protocols into their
contracts, Dooley noted. "For example, in Florida many hospitals have
negotiated tractor trailer loads of the most needed supplies they will
need during a hurricane," he said. "When a hurricane is predicted to
impact an area those hospitals notify their distributor to bring the
trailers to a secure area. The supplies are only used if necessary, and
only those supplies that are used or resalable are paid for. The
remaining supplies are returned to the distributors’ inventory. This
type of planning works."
However, Dooley doesn’t recommend including penalties
for non-compliance or unacceptable performance on part of the vendors to
support the facilities. "I am not a major proponent of penalties in
these cases," he said. "Time and time again, the distributors and other
suppliers have more than demonstrated their ability and willingness to
help. If they fail to supply it is because they can’t for legitimate
Despite the perceived risks during a crisis, Raben
insisted that "low inventory levels are good business." However, he
realizes that may create challenges when planning for a pandemic
response. "Higher inventory levels of specific products make sense for
pandemic preparedness," he advised. "It is crucial to define which
products need higher inventory levels and to determine the needed
increase. To overcome this challenge, the rationale to increase
inventory of specific products must be developed and presented to senior
ment for their understanding, approval and support."
Rest assured, Cardinal heeds its own advice, according
to Raben. "We maintain detailed local disaster response plans for each
of our distribution facilities," he said. "As part of the plan, each
distribution facility has at least three backup locations, emergency
customer support and centralized command and control centers. We have
systems to track employees and the movements of our trucks.
Additionally, we have relationships with key suppliers to maintain fuel
supply in the event of a shortage. We also have strong relationships
with local, state and federal authorities."
The distributor also monitors the med/surg product
pipeline of its suppliers, too, in the event of a pandemic. It has
developed product guides to help healthcare providers prepare for avian
flu and a potential pandemic based on product formularies created by the
Association for Healthcare Resource and Materials Management (AHRMM),
the Health Industry Group Purchasing Association (HIGPA) and
Industry Distributors Association (HIDA), according to Raben.
In fact, company representatives work with customers on
ordering using the Centers for Disease Control & Prevention’s "FluSurge"
program, which enables hospitals to input demographic and other
information to determine they type and quantity of product needed. "We
are building ‘Pandemic Orders’ with customers and making a variety of
arrangements with them, including direct shipment from manufacturers to
setting up trailers, pods or off-site storage facilities," he added.
"For JIT or low unit of measure facilities, we are working with
customers to appropriately increase their par levels."
Meanwhile, Owens & Minor has developed similar plans and
processes to link internal business continuity with customers’ own
continuity, Kowalski indicated. Company employees communicate with each
other and with manufacturers so that distribution centers work
collaboratively in providing contingency coverage. Technology
facilitates identifying problem locations and items so that resources
can be redeployed as rapidly as possible, he noted.
Owens & Minor also works with customers to determine
pre-established product formularies so it recognizes hospital needs and
can forecast purchases, inventory levels and deliveries. What helps is
when the hospital’s information system can identify inventory on hand at
all times and locate products that are in the building, for internal
redeployment, as an immediate response, while waiting for the supplier
portion of the supply chain to respond, Kowalski said.
"Imagine the value of having pre-established, universal
care protocols along with standard product formularies and ‘bills of
materials’ for all cases and procedures," he said. "Managing disaster
situations would be greatly facilitated for both hospitals and
suppliers. Maybe disaster planning will move the industry in that
10 tips to bank
So what can healthcare materials management
professionals do to prepare his or her organization to function properly
during and after a natural or man-made disaster? Rush offered the
following suggestions on preparedness.
1. Establish a close relationship with the healthcare
organization’s disaster preparedness coordinator/manager. Obtain
information relating to the community hazard vulnerability assessment (HVA)
and the healthcare organization’s internal HVA.
2. Provide supply, equipment and ser-
vices subject matter expertise at plan
ning committees, exercises, and other hospital disaster-related meetings
3. Accompany the disaster coordinator to local disaster
coordination meetings and at meetings sponsored by the State Public
Health Department’s Bioterrorism Coordinator, especially pre-proposal
Federal Grant meetings. This will enable the materials manager
to include the hospital’s disaster preparedness medical material and
services requirements on hospital grant requests and proposal documents.
The materials manager can then expeditiously order and obligate
government approved and funded products and services.
4. Use the Association for Healthcare Resource &
Materials Management’s (AHRMM) disaster "Readiness Information" (members
www.ahrmm.org/ahrmm/news/disaster.html as a basis with which
to plan for events depicted in the community HVA.
5. Serve as the healthcare organization’s leader in
6. Become an advocate for healthcare preparedness at
local materials management planning work groups and at AHRMM state
chapter meetings and share strategies with the membership.
7. Consider supplier consignment inventories to enhance
the hospital inventory without adding to the cost of hospital-owned
inventories. Institute appropriate stringent management controls on all
8. Develop memoranda of agreements with DOD active duty
and reserve organizations for logistics support during disasters. Local
DOD elements may be able to offer helicopter or fixed wing assistance in
transporting supplies and equipment from distributors to hospitals when
roads are impassable. The same agreements should be explored with Air
Taxis within the jurisdiction or region and where feasible with law
enforcement agencies for supply convoy escorts.
9. Prepare pre-disaster purchase orders to be released
to distributors and suppliers, including out-of-state suppliers during
emergencies. The more redundancy in the supply chain the better it will
be for the hospital.
10. Establish out of state/out-of-region support
agreements with suppliers to
as the prime vendor when local distribution inventories are exhausted.
often be accomplished through the existing prime vendor
with distribution centers located across America.
"The time for separate planning committees is long
past, and mutual cooperation toward the common good is long overdue,"
For another acute perspective from
New York City, read Timothy Glennon’s
People & Opinions