Lab should not be overlooked supply chain frontier

Mark Krhovsky, Vice President of Laboratory Sales, Medline Industries, calls the laboratory “one of the most critical departments in any hospital.” He further cites a commonly quoted statistic that 70% of medical decisions depend on lab results.

“That alone should put the lab at the top of every Supply Chain executive’s priority list, Krhovsky insisted. “Also consider that lab has historically been left to their own devices to navigate a complex market of contracts and sourcing initiatives. If I am a supply chain leader, I want to find the areas where my services and assistance can be most impactful. Undoubtedly, one of those areas is the lab, and if the lab runs well, in turn, the entire system has a much higher probability of functioning efficiently.”

Eric Jurinic, Vice President, Corporate Supply Chain, Accumen, refers to a similar statistic quoted in the peer-reviewed scientific journal, Annals of Clinical Biochemistry, 11 years ago. “Many people may not realize that lab results can be the majority of a patient’s electronic medical record – some estimate it at 70% to 80%,” he noted.

Jurinic points to the COVID-19 pandemic as a relevant and useful lesson reinforcing the need for Supply Chain and Lab to partner up.

“If the last year has taught us anything, we’ve realized that the Lab Supply Chain is somewhat fragile and challenging,” Jurinic observed. “Many products only have one or two vendor options on group purchasing organization (GPO) contracts. This is manageable by staying proactive and thinking out of the box. We’ve learned there are a lot of quality suppliers out there for the same item. You just need to hunt a bit [as] they’re not on GPO contracts. Supply Chain can help use their network to find other solutions, whether they be hard-to-find products or lower-cost alternatives of equal or better quality. (Editor’s Note: See Chart 1 for examples.)

“As a support function, a well-managed and proactive supply chain is foundational to ensure the lab produces a quality result at the right price,” he continued. “Quality, lower cost, continuous improvement are the three pillars of Supply Chain.”

Barbara Strain began her healthcare career in the late 1970s as a children’s hospital-based medical technologist before moving to the University of Virginia Health System for the next 34 years, first a microbiology manager, then overseeing Supply Chain analytics and then leading the system’s Value Management department. Strain retired from the system in mid-2019 to launch her eponymous consulting firm.

Strain, Principal, Barbara Strain Consulting LLC, posits that Supply Chain and the Lab should make beautiful music together from clinical, financial and operational perspectives.

“For the laboratory internal supply chain to function the provider supply chain operations and external supplier processes all need to align like a fine-tuned orchestra,” Strain told Healthcare Purchasing News. “For lack of a better term let’s envision this as the ‘Supply Chain Triad’ [where] each part must understand the other’s work streams to assure clinical decision making by relying on accurate verbal and electronic communication.”

Further, Supply Chain should help the Lab master three critical articulation points that form a successful equation, according to Strain: Supplier order receipt timing to assure delivery demand, provider order requisition deadline and lab inventory cycle to match the need. (Editor’s Note: See Chart 2 for examples.)

“Timing is everything, so transparency of needs and how best to tweak processes to match those needs along the Laboratory Supply  Chain is critical,” Strain insisted. “It starts with a Supply Chain automated and manual inventory management methodology review and alignment with leading practices to assure no links are broken and are monitored by mutually developed metrics that foster a reliable collaboration.”

For Jean Sargent, a veteran hospital supply chain executive-turned-consultant, the expertise of both supply chain and laboratory professionals should be inviolable and respected, particularly as genomics emerges as part of routine lab work.

“Supply Chain are the experts in supply chain, not clinical functions, and clinicians are experts in clinical functions, not supply chain – aside from the need to have clinicians at the table for Value Analysis, etc.,” said Sargent, Principal, Sargent Healthcare Strategies. “Supply Chain should be responsible for all supplies and purchases within an organization. The clinical lab annual spend is significant, and it is time for Supply Chain to step in and be the subject matter expert to support the clinical lab’s needs. This allows the staff to perform the duties/functions they were hired to do. As healthcare evolves, the use of genomics will expand and become a point of discussions when products specific to a patient’s needs are required. Developing that collaboration now, will set the foundation for the future conversations.”  

Closing the lab loop

While Supply Chain may see value in helping the Lab manage its supply chain expense stream, the Lab also must recognize it needs, could use and should value the assistance, according to lab supply chain experts.

Supply Chain creates value by impacting three fundamental areas that most Laboratory department leaders deem important, Medline’s Krhovsky indicates.

First: The direct effect that the purchasing and materials management arm of supply chain can have on budget management. “Laboratory leaders usually have oversight of their budget, but with that responsibility comes executive-level pressure to ensure the department is spending responsibly while procuring the necessary supplies to function, Krhovsky said. “However, laboratory leaders often do not have formal supply chain management training. This is why hospitals and IDN systems in the U.S. have a purchasing/supply chain department.

“I truly believe that one of the defining characteristics of labs that operate well-balanced budgets is the presence of a symbiotic partnership between lab and supply chain,” he continued. “In these instances, lab leaders can lean on supply chain partners to create impactful purchasing habits that ultimately affect the bottom line of the lab.”

Second: Allocation of personnel and resources. “In today’s current labor climate, labs are also facing a workforce shortage while being asked to do more,” Krhovsky noted. “More testing, quicker turnaround times, additional shifts, implementation of new technology and automation—all while shorthanded, and in many instances, underfunded. With this staffing crisis as the backdrop, it is easy to understand why many lab leaders and their managers and supervisors are sensitive to spending too much time searching for items within their labs, negotiating contracts with suppliers and/or attempting to find out why a product hasn’t arrived in the lab on time.

“By working with Supply Chain executives and their subsequent partners, lab leaders can ensure they have sound supply chain strategies to drive workflow efficiencies, build processes for issue resolution regarding backorders and product availability, and most importantly, keep their staff at the bench leveraging every minute of their time to execute the critical work at-hand,” he added.

Third: Availability of product and access to technology. “If COVID exposed anything within the healthcare market, from both a provider and supplier standpoint, it was the availability of inventory on critical, pandemic-related supplies,” Krhovsky said. “In our world within laboratory, this was most apparent with swabs, VTM (Viral Transport Media) and COVID tests. With lab leadership absorbed with the day-to-day testing demands that erupted during COVID, there was little-to-no-time available to look at procuring new swab options or understanding the constantly moving target of new test technologies. Although equally overwhelmed during COVID, this is exactly why supply chain departments exist. I think it was evident that the hospitals that had the most active supply chain teams, with the deepest supplier relationships and networks, were inevitably the facilities that faired the best.”

The pandemic fostered a new healthcare environment where it’s now more critical than ever for Laboratories to have all the necessary supplies they need to perform the tests ordered in the time requested, according to Accumen’s Jurinic.

“As we have witnessed over the past year, not having the necessary supplies on hand can have an adverse effect on patient care,” he said. “Laboratories rely on Supply Chain to provide this support function, along with the associated heavy lift on the cost analytics, the tactical and strategic part of the supply chain. This allows laboratorians to focus and spend their time putting out quality tests that clinicians can rely on and appropriately diagnose. This makes timely lab results arguably one of the most important aspects of accurate diagnosis and ultimately treatment.  It’s no surprise quality lab results in a timely manner result in better patient outcomes.”

Strain emphasizes the importance of Laboratory’s processes that directly affect critical patient care outcomes as motivation alone for the department to partner with Supply Chain.

“A medical laboratory produces tens of thousands life-dependent results daily informing physician decisions that may alter short- or long-term outcomes,” Strain said. “Each result relies on a variety of chemicals, reagents, blood products, kits, specimen collection, quality control standards and other products and devices to accomplish this work without fail. 

“For decades, laboratories have used the concept of data-driven task assignments to ensure their in-lab supply chain is highly functioning – burn rate, expiration date, seasonality, inventory, lead times, order placement, labeling upon receipt, documentation, alerting section leads new reagents are available to quality control and other key laboratory operation steps centered around products and devices.” Supply Chain can – and should – consult with Lab on all of it and be welcomed by the Lab, she added.

Sargent concurs. “The clinical lab needs Supply Chain to create PAR locations with min/max, place orders, check on back orders, determine the quantities required for standing orders and blanket orders,” she said. “The next step is to understand usage due to consistent orders, reduce the number of standing or blanket orders, adjust PARs, get involved in the equipment needs, purchases and services to provide a methodology to track costs, savings and reliability.”