Unlike Supply Chain’s ventures with Surgical Services during the last few decades the department’s extension into the Clinical Laboratory has been spotty and sporadic at best.
For many Supply Chain professionals, the Lab represents a frontier yet to reach to offer cost management consulting, contractual negotiation expertise and supplier facilitation and relationship know-how, issues typically absent from most clinical mindsets.
But some are making headway in grinding out inefficient and wasteful spending to help the Lab professionals concentrate on the clinical and patient work for which they are recognized.
Clinical Lab and Surgical Services may be two of the primary revenue generators for a healthcare organization but their patient care functions require considerable costs to carry out.
The OR recognized this as far back as the 1980s when the debut of managed care-based reimbursement clashed with the emergence of high-tech, high-cost minimally invasive surgical devices and equipment. The OR learned that advancements in patient care delivery don’t come cheap, so they needed some “external” cost management expertise to help them focus on the product decisions affecting the service they delivered.
When it comes to cost management processes and supply chain issues, the Laboratory, just like its fellow clinical department Surgical Services, most likely needs some help, whether they know it, acknowledge it or even want it.
To some degree, the Clinical Lab recognizes the need for value analysis but debate whether Supply Chain can deliver it based on the scientific complexity of their devices and equipment, which span sensitive assays and data-intensive testing equipment that can sport gilded price tags.
Scale the wall
Supply Chain’s desire or mission to help the Clinical Lab improve its cost management for devices and equipment shouldn’t be dissuaded by any departmental pushback, according to Ryan Cox, Vice President of Sales, Laboratory Products, Cardinal Health Inc.
“The Laboratory is a complex and nuanced department due to its technical nature and validation intensive requirements,” Cox said. “That being said, relationships between Laboratory and Supply Chain departments are evolving to help identify and achieve savings, reduce SKU complexity, and optimize contracting to ensure the laboratory is able to achieve service levels related to patient care, such as optimal test menus, reducing turnaround times, etc.”
Cox acknowledges that Lab budgets are feeling pressure nationally, which calls for Labs to concentrate on implementing overall expense reductions.
“Some Laboratory teams have broad spectrum savings initiatives, whereas others have a more specific focus on their outreach programs,” he noted. “With the reimbursement rates paid on the Clinical Lab Fee Schedule (CLFS) being significantly reduced due to PAMA, Laboratory outreach programs are feeling a financial pinch. Therefore, these programs are looking at streamlining their purchasing to reduce the number of SKUs, as well as evaluating private label offerings, which can present a savings opportunity. In addition, other departments, such as chemistry, streamline workflows and free up resources through automation to focus on activities within the lab.”
Cox encourages Supply Chain and Lab to focus together on sourcing, contracting and fulfillment of lab supplies as well as the technical performance requirements of the products purchased.
“In many cases, the Laboratory is still an area that the Supply Chain team doesn’t have full oversight on largely due to the type and complexity of the products involved,” he said. “Typically, when there is not a relationship with Supply Chain and the Laboratory, Supply Chain is told what the Lab team has chosen and then they step-in to source. This reduces competitiveness and the ultimate effectiveness of the supply chain. Strong systems have integral supply chain participation and they – Lab and Supply Chain – work in tandem to select and negotiate throughout the buying process.”
Working together will help the Lab reduce the number of SKUs required to order and maintain standardization of supplies, which ultimately helps ensure consistency and cost savings across the organization, according to Cox.
Targeting areas
Pinpointing specific product, service or operational processes in the Laboratory that may need cost management facilitation can be a challenge for Supply Chain.
Still, Akiva Faerber, Senior Principal, Vizient Inc., listed a number of areas worth exploring, including, blood sourcing, therapeutic apheresis, lab distribution, lab linen, lab biohazardous waste, lab courier services, phlebotomy supplies including tubes, needles, butterflies, lancet collection containers, water purification, contracting for new (automated) testing platforms, front-end automation, maintenance of testing platforms, refrigeration, selection lab information systems and training.
“The reason so many categories and processes can benefit from stronger collaboration with the supply chain team is that the lab industry has very few published price and process benchmarks,” Faerber said. “Historically, Laboratory leaders only know what vendor representatives tell them and what they can glean from public data. By engaging with their supply chain colleagues, they may be able to pull data from their GPO.”
Brent Bolton, CPSM, Regional Director, Supply Chain, Accumen Inc., grouped lab products into categories for Supply Chain to recognize as opportunities for managing costs. They include distribution (tubes, needles, quality control); microbiology (blood cultures, plated media, molecular infectious disease testing); chemistry/immuno-chemistry (immuno assays, routine testing, blood gas, point-of-care (cardiac/glucose)); cytology/women’s health (molecular HPV, ThinPrep); hemostasis (hematology, coagulation); anatomic pathology (immune-histo-chemical stains (IHC), special stains, H&E); reference testing (primary and secondary labs, toxicology, other third-party billing laboratories); blood bank (blood products and reference testing, blood distributor) and even courier optimization services (in-house and third party).
“We have found opportunities to reduce costs in every laboratory department and product category above and beyond the great work most labs have already done with their in-house supply chain team,” Bolton said. “Because the laboratory is complex and is only 4 percent to 5 percent of total health system spend, there is minimal cost-savings focus and expertise in laboratory supply chain at the health system level. Thus, the opportunity for most health systems is untapped.”
Faerber indicates that Vizient maintains pricing and performance data and benchmarks based on engagements with hundreds of labs. “Using information from our consulting team and a market intelligence tool, we are able to benchmark competitive fees and the reputation of distributors,” she continued. “From there, we work with the supply and lab teams to negotiate best price with best in class terms and conditions so the manufacturer or distributor meets expected standards.”
New technologies entering the market generally means the market has yet to be fully defined, Cox insisted. “Competitive comparisons are not easily available, and test menu decisions have to be made on partial solutions,” he noted. “Evaluating new technologies through a different set of criteria and finding creative contracting solutions may help the Laboratory implement new technologies sooner, thus enhancing their level of patient care.”
Supply Chain can offer Laboratory sound consulting in standardization and product consolidation and conversions, according to Suzanne Meinert, JD, MT (ASCP), Contract Manager, Laboratory, ROi.
“Supply Chain can assist the Laboratory department by identifying areas where either standardization has not yet occurred, or where a standard has been selected but there may be locations that are not complying with the chosen standard,” she told Healthcare Purchasing News. “Through the use of analytics, Supply Chain is able to identify areas of leakage so that spend can be redirected to the standardized product and savings can be recognized.”
“Supply Chain also can work with contracted suppliers and distributors to identify opportunities in which simple product conversions or consolidation of SKUs provides significant savings opportunities for a facility or IDN,” Meinert continued. “Often these opportunities require a simple change in product-use that would be readily accepted by end users and result in significant cost savings.”
But the primary aim should be that regular and timely interactions provides an opportunity for facilities to identify areas in which Supply Chain can play a key role in solving problems the Labs are facing, Meinert insisted.
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Rick Dana Barlow | Senior Editor
Rick Dana Barlow is Senior Editor for Healthcare Purchasing News, an Endeavor Business Media publication. He can be reached at [email protected].
