How hospitals in contingency mode can leverage time to improve their supply chain

April 30, 2020
By Kristin Stitt, DNP, APRN, Chief Nursing Officer at TractManager.

Hospitals that are fortunate enough to not be in crisis mode during the COVID-19 pandemic are presented with a unique opportunity — time. Rather than looking at time as an impediment, turn it into an occasion to take care of business processes that need improvement — processes that have historically been placed on the back burner because staff were too busy. Consider, for example, the supply chain.

Long before coronavirus, it was well known that supply chains are broken as evidenced by the volume of waste. How providers source product — lack of standardization, poor visibility, “dirty” data, and a less-than-rigorous set of policies — are key contributors to waste. Plagued by new requests, back-order refills, and day-to-day management, staff are left with little time to focus efforts on improving supply chain inefficiencies.

Hospitals in contingency mode may be able to leverage this time to improve inventory management and, ultimately, rein in unnecessary costs. Historic estimates suggest hospitals have the potential to save up to 60 percent of their waste by focusing on utilization efforts like waste avoidance, standardization, and process improvement.

Whether as a slow drip or a rapid influx, cases will return, and the opportunity of time will be gone. For those who have the chance to use this time and want to improve supply chain efficiencies before the spigot turns back on and cases resume, here’s what can be done now.

Step 1: Analyze historic spend, evaluate data quality

Significant savings can be gained by analyzing your historic spend. Unfortunately, this requires data –clean data – to do so accurately. Data is a true enabler of change in supply chain, and probably the most challenging to manage. Do you have a long-term plan to address inaccurate, duplicate, and missing information? Now may be the time to understand and operationalize best practices to ensure clean data. Look for opportunities and, perhaps, partners to improve data integrity, including reinforcing daily tasks that will lead to sustained, improved processes.  

Decision makers need the ability to drill down into spend in order to manage it. Analyzing category spend can provide the potential for standardization prior to an expiring contract. Based upon the category, and your underlying policies for sourcing, a reduction in the number of suppliers may be possible. Evaluation of special orders or one-time use products, in addition to communicating any preferred products, can help manage spend to a higher level. Engage physician partners, perhaps sidelined from elective procedures, in these efforts; their buy-in is critical to long-term success.

Step 2: Understand your contracts

When keying up the supply chain for when cases do resume, a thorough review of contracts can unveil hidden opportunities. Look at what’s expiring and what clauses need to be reviewed. If four contracts are set to expire, do they need to be renewed? If yes, what are the renewal fees, and is there room for negotiation? Did the contracted level of products and services match the payments made? An audit can help identify gaps. If you’re unhappy with the terms, this is the time to consider other products. 

Getting a jump on evaluating expiring contracts will lighten the load for when business as usual resumes. It is also an opportunity to audit all contacts to ensure compliance and that all necessary Business Associate Agreements (BAAs) are in place.

Step 3: Evaluate Purchased Services

Some estimates suggest that waste attributed to Purchased Services can be 1–1.5 percent of total operating expenses. That’s a number worth exploring. However, analyzing spend can be challenging. Take the opportunity to look at the management of Purchased Services contracts, and the potential to centralize contracts, with management and oversight by Supply Chain. Analyze by category, evaluate spend in each category, and use benchmarking to start the process of identifying opportunities for savings. Select a partner to assist in these efforts. Once you understand the standard, it’s easier to negotiate and manage expectations. 

Additional Purchased Services savings are possible with development and implementation of a monthly cost management strategy. Pick a partner for this effort as well, one that can automate and track invoice variation in spend, including pricing errors and off-contract spend.

When the pandemic ends and cases resume, hospitals will have many hurdles to overcome as they work through the financial, staffing, and schedule implications resulting from COVID-19. Taking advantage of the time available to identify opportunities to improve the basic tenets of the supply chain is one way to lighten the load.  

More COVID-19 coverage HERE.

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