From Standard Practices to Value Delivered

March 23, 2021

For those of you who have read this column regularly, you may have noticed the new name –  Value. Delivered. If you are worried that the focus has turned away from standards or standard practices, I promise you, both remain critical as we explore what delivers value. The question will begin with value for patients, as that should always be our common guiding star. But the column will also consider how we can deliver value to each of the participants upon which a value-based healthcare system depends, as that is the only way we can sustain the system. 

Value and systems thinking

For aficionados of systems thinking, you know we need to design the system to achieve the results we want – optimal health for individuals and societies. That requires understanding the inputs and outputs of the system not only as a whole, but also at each node in the system. It begins with asking what supports the effective operation and output of each node, i.e., the ability of patients to get the kind of care they need or manufacturers to be able to discover, develop and deliver life-enhancing therapies.  But it cannot end there. We must also understand how each node impacts the others. For example, it does no good for manufacturers to develop innovative new products if they cannot be effectively delivered where and when they are needed, if the patient cannot afford the therapy or if the hospital where the therapy will be delivered cannot stay in business. 

I’d like to begin with a closer look at the AHRMM Cost, Quality, Outcomes (CQO) Movement and the pursuit of a clinically integrated supply chain. I had the honor of serving on the board of the Association for Healthcare Resource and Materials Management (AHRMM) when we launched the CQO movement in early 2013, and as the chair of the association when we created the first clinically integrated supply chain task force. The movement, in many ways, was designed to introduce systems thinking to supply chain professionals. It highlights how more traditional (and narrow) measurements of hospital supply chain performance, e.g., the ability to purchase products and operate at the lowest possible cost, cannot effectively gauge and improve supply chain’s role in delivering value to patients. We’ve seen that clearly with the pandemic. While cost-based metrics might provide short-term financial benefits to a hospital, they contributed to the design of a system that was unable to respond effectively in a pandemic. 

Today, both public and private sector leaders are actively exploring how to redesign the system such that it can deliver quality and affordable care in both normal and extraordinary times. This requires coordination across not only numerous sectors, e.g., independent clinicians, healthcare delivery organizations, payers, manufacturers, distributors, etc., but also numerous functions within each.  Unfortunately, even in a single sector, there can be misaligned incentives across the functions, e.g., hospital finance, clinical, operations, etc. 

Clinical-Supply Chain integration

Here is where the topic of the clinically integrated supply chain emerges, as it is commonly described as a collaborative relationship in which clinical evidence is used to select and source the most appropriate products for use in patient care. When I recently asked both clinical and supply chain professionals what is keeping us from achieving more clinical-supply chain integration, the most common response was: misaligned incentives. I would add a lack of understanding. There are still clinicians who think supply chain cares only (or at least primarily) about the price paid for products, while some in supply chain think clinicians put their individual preferences far and above any cost considerations. As with most extremes, neither is true. 

Better understanding, I believe, comes from a mutual appreciation for the intricacies and expertise of each discipline and better access to information. The vast majority of clinicians want what is best for their patients, which includes the ability to make decisions as to what will deliver the best clinical outcomes. Increasingly, clinicians also care about the cost to patients for the therapies they prescribe, and many are frustrated that they have little to no visibility to those costs. Many physicians are also still primarily compensated based on productivity versus savings, which makes it harder to change practice at scale given the very real impact on their livelihood.

I can confidently say that many of the supply chain professionals I know also put patient care at the top of their lists, but most are still measured primarily on their ability to control supply expenses for the benefit of the institutions for which they work. In other words, their compensation is impacted by supply costs versus their ability to support clinical integration. They also often lack the expertise and training to know if and why a particular product will deliver better outcomes for a specific patient or procedure. 

This is why we need more clinical-supply chain integration. Clinicians do not need to know how to do the supply chain’s work, but they should appreciate the contributions and implications of supply chain decisions. In turn, supply chain professionals do not need to know how to use a particular product or service in patient care, but they do need to understand why the evidence and the clinician supports its use.

These factors have never been more evident than during the pandemic, as supply chain and clinicians worked closer than ever to source the best products available to meet critical demand. It will be interesting to see if the pandemic accelerates the move to a more clinically integrated supply chain. Will clinicians and supply chain professionals continue to collaborate on sourcing decisions for the most preferred products as well as alternatives? Will the move to value-based payment programs, such as bundled payments, increase physician consideration and access to information on the costs of care? Will hospital leaders turn their newfound appreciation for the criticality of supply chain invest in tools to support resiliency and clinical integration?

These are just some of the questions we will explore in Value.Delivered.  I hope you will join me on the journey.