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Sentries scan the sky for threats so the sub has time to react. Why, in the healthcare supply chain, is the first sign of a threat usually the explosion of a torpedo? Hiring our own sentries to watch for upcoming opportunities and threats often can pay for itself in the long run. The three key requirements are knowing what to scan for, where to scan for it and what to do with the information gathered.

Horizon scanning is more an art than a science. It is the process of gathering information from multiple sources and using this information to anticipate threats and opportunities in time for the organization to react. These threats and opportunities usually fall into one of two different categories: Environmental shocks and competitive actions.

Environmental shocks are the mild to severe changes that occur in the market and the environment that we may or may not be able to anticipate. Healthcare supply chain managers are usually better informed about these types of events since many of them involve regulations that hospitals must adhere to. Examples of these are:

• FDA recall of a medical device

• New legislation that radically alters the profitability of a procedure or
  service line

• Environmental catastrophes such as a hurricane

• Supply line catastrophes such as the destruction of a manufacturing plant or
  flooding of a distributor warehouse

• Mild demand change such as a high-volume surgeon leaving for vacation

• Dramatic demand changes such as clinical practice changes, addition of a new
  service line or product substitution due either to recall or unavailability

Competitive actions are the changes brought about in the market and the environment by manufacturers, distributors, information technology vendors, insurers and other hospital systems – all of whom are positioning themselves for a better competitive position, such as greater revenues, greater market share, greater operating margin or greater admissions.

Most of the threat to a hospital comes from information asymmetry. Information asymmetry is an economics term describing where one party (usually the seller in a seller-buyer relationship) knows more than the other. This situation provides the knowledge holder with an advantage during any interaction and, as a result, they usually win. The key to scanning for insight into competitive actions is to look for clues in public sources of information.

With the bewildering volume of information available, especially on the Internet, where do you go to find information necessary for horizon scanning? It comes from a wide range of different sources, such as:

• Government: FDA.gov (particularly the Center for Device and Radiological Health
  database listing FDA approvals), CDC, CMS and the Federal Register

• Industry experts: Aspen Healthcare Metrics, Orthopedic Network News and
  others

• Industry magazines: Healthcare Purchasing News and others

• External financial sources: The Wall Street Journal, Yahoo! Finance, the SEC’s
  EDGAR database (particularly the 10-K annual filings and the 8-K current report
  filings), company annual reports, company Web sites (especially investor
  relations sections)

• Internal financial sources: Managed care contracting, data from the finance
  department/decision support department

• Internal clinical and operational sources: Direct relationships with physicians,
  surgical and procedural department schedules, regular meetings with department
  managers, every departments’ operations and accounting reports and many
  others

• Industry associations: AHRMM, AHVAP, HFMA, HIMSS, HIGPA, HIDA and many
  others

• Sources of functional equivalence: Product categories such as the GIC from
  Orthopedic Network News, the Aspen Category from Aspen Healthcare Metrics
  or UNSPSC

Turning the information gleaned from all of these sources into something useful requires curiosity, analytic skills, vision, out-of-the-box thinking and an ability to draw conclusions as well as infer meaning. The applications can be varied and almost limitless. Three simple examples are:

• Scanning the FDA’s Web site for new device approvals provides your new technology committee time to prepare the analysis, or at least raise awareness, before the vendor has a chance to slip the device through the back door of your organization.

• Discovering that the value of a vendor’s stock is dropping (especially if a stock market analyst has downgraded them to a "sell" rating) provides you a window of opportunity to approach the vendor to negotiate a better price in exchange for more business.

• Using FDA information, functional equivalence and internal clinical sources allows you to separate substantial product innovation from mere functional equivalence when a vendor wants to charge a premium for their newly released device.

Horizon scanning is not easy but the reward to your supply chain and organization can be significant. With a little creativity, luck and practice you, too, will dive to avoid the oncoming threat.