One of the hallmarks – central tenets even – of managed care is reducing costs within the service to patients and the community.
For its part in that barely evolving four-decade-old process, Healthcare Supply Chain performs five fundamental routines to control the bottom line and assist in generating revenue.
- Manage/oversee inventory and consumption/usage patterns of products and services.
- Store less in smaller areas (versus storing way more in larger warehouses).
- Have products delivered in lower units of measure more frequently (e.g., just-in-time, stockless, modified stockless distribution).
- Keep online, open-ended communications with suppliers flexible and fluid so that when something happens they can tap into the vast array of emergency stock the suppliers miraculously store in their big warehouses (similar to cost-shifting, this is storage-shifting).
- Rely on computer software algorithms to predict what happens to demand when a crisis or disaster hits – like a pandemic.
But in light of COVID-19, especially the Delta variant – its deadly reprise – does that model still work?
Many Supply Chain leaders have been reviewing the recent past and are ready to take on big changes for the future. The complex sets of variables involved when global trade and a global pandemic converge, they say, have revealed that diversity and fluidity are sorely lacking in our system.
Some of those leaders spoke with Healthcare Purchasing News and shared their thoughts.
Clinical connections needed
“Having experienced the critical shortages and challenges that were caused by COVID-19, the Supply Chain should be re-evaluated at most organizations, and they should respond to the lessons learned during this crisis,” Pate said. “It is important to have an alternate plan for situations when the entire nation is depending on the same set of resources. It may be beneficial for organizations to obtain warehouses for storing additional supplies, but this can be extremely costly. Additionally, supplies may expire or deteriorate so a plan must be in place to address these issues.”
Healthcare organizations need to collaborate more cohesively with government agencies, too, Pate argued.
“A unified approach for organizations with state and local health departments should be developed,” she indicated. “This should be done in conjunction with the federal government and large manufacturers to develop future strategic planning.”
The current pandemic response should encourage a deeper and more meaningful relationship between Supply Chain and infection preventionists, Pate insists.
“As a previous Director of Infection Prevention I understand the relationship that you need to maintain with the Supply Chain,” she told HPN. Many times they have been so helpful obtaining needed supplies and investigating replacement supplies. Our relationship made it seamless when implementing new products and during supply shortages. They trusted me to give them accurate information, and I knew they would work diligently to assist me, if needed. This experience was invaluable.
“In the future, I think it will be realized by leadership and other key departments that a working relationship with the Supply Chain is vital,” Pate continued. “Perhaps in the future, the Supply Chain will be able to get representation from key departments to participate on committees and planning sessions which will give those departments experience and knowledge related to Supply Chains and needed resources. In turn, this may assist supply chains with the support they need to provide essential services for organizations.”
Clearly, Supply Chain must have a strategic vision and plan to address pandemics, according to Mark Campbell, FACHE, CMRP, Vice President, Supply Chain, Tampa General Hospital.
“ A reactive supply chain will never fully meet the demands of its customers,” he said.
Campbell advocates for “a real-time predictive model that helps monitor the burn rate of supplies and projects what will be needed to manage through a time of high demand.”
“To be fair, it would be hard to predict such an outlier event that produced so much demand on the supply chain in such a short time. The reliance on off-shore sourcing added to delays and lacked visibility into true product availability.
“Conversely, we should have learned from SARS, Ebola, and other recent events that a global event can happen and we must be prepared. All trauma centers, at all levels, should have pandemic supplies on-hand. How much to keep on-hand will depend on local factors. COVID-19 has reminded all of us of the need to invest in domestic production and supply preparation.”
“Certainly, many supply chain operators have a renewed appreciation for contingency planning and risk management,” he said.
Think outside the chain
I would encourage organizations to expand the participants beyond their own four walls. Include other regional health systems, distributors, manufacturers, solution providers, GPOs, community business leaders, government leadership, analytical teams, insurance providers – and determine the BEST approach for a specific region. We need to look at ALL the ‘novel’ events that can occur and do risk mitigation and planning to the best of our ability.”
In Supply Chain’s current state, Pakieser said, “I am not so sure we could have prevented the COVID-related shortages.”
“There were too many factors, most beyond any individual organization’s control, involved in the domino effect of this event. The true gain will be in what we can do going forward. There will be reassessment across the board on how we handle our supply chains. Manufacturing organizations will, no doubt, make sure that they have backup plans and expanded sourcing to mitigate a catastrophic hit to their operations. Healthcare will look at alternate ways to manage their supply chains and this will result in transformative change. It has been a long time coming,” she said.
“Supply Chain is the weakest in overseeing appropriate use and reducing waste at the point of use in the customer’s hands,” he charged. “Often, Supply Chain doesn’t question whether the customer actually needs the product or if they are using it appropriately. Also, we need more emphasis on recycling and reprocessing, as well as Supply Chain involvement in conservation policies,” Chung said.
“I think there is a big difference between preparing supply chains for disasters based on actual need versus irrational panic buying (e.g. toilet paper). To some extent, we have to prepare for the waste created by panic, but more importantly, we need to have accurate predictive models that take into account delayed reactions and variations in human behavior, as well as ineffective leadership. We can’t take for granted that leaders will always react effectively to data.
“I think planners likely underestimated an emergency of this magnitude. A step healthcare facilities can take to increase their supply readiness for future disasters is to create relationships in their local market with non-traditional suppliers that have manufacturing capabilities,” Jackson said. “A non-traditional supplier in the local market will help hospitals in knowing exactly what they can expect and when to expect it in term of supplies,”he said.“A good example is Sweet Shop USA in Mount Pleasant, TX, making face shields. They are a chocolate shop that changed their production line from making chocolate to making face shields.”
Value in technology
COVID-19 took the strategy of a technology-enabled supply chain to a whole new level,” he noted. “Supply chains now must be empowered with software that overlays supply chain data with clinical surveillance. With providers’ needs and the health of our supply chain in mind, Premier has created a national surveillance system that enables this process. Our app offers real-time, automated surveillance; is EHR-agnostic; and already accesses the electronic health records of 200,000 physicians and healthcare providers across over 400 hospitals nationally, offering health systems a reliable COVID-19 early-warning system. With this intelligence, providers can see hotspots as they crop up, contain virus transmission, and direct supplies to areas of greatest need. Choosing not to tap into this type of national surveillance technology could hamper providers’ ability to alleviate or prevent shortages.”
Hargraves promotes predictive modeling and clinical surveillance for managing supply demand but he also sees renewed support for and commitments to domestic manufacturing, citing Premier’s investment in Prestige Ameritech as an example.
“Diversification of manufacturing and sourcing will help ensure supply chains are not overly reliant on one region for critical supplies,” he said. “Key to this is insight into where raw materials are sourced, and ensuring at least one domestic and three global manufacturers of the final form, ancillary products and raw materials for critical medical supplies and drugs.
“The pandemic also allowed the healthcare supply chain to set up systems and programs that we can easily ‘turn on’ in the case of a new surge or pandemic, such as the Exchange at Resilinc, which Premier helped found for providers and industry stakeholders to dynamically trade supplies,” Hargraves continued.
“Supply chain leaders will want to stay tuned in to opportunities like this one to collaborate with peers and across their networks, as they fine-tune their disaster preparedness plans.”
“When technology overlays predictive modeling with clinical surveillance and supply chain data, it creates a powerful projection for a provider’s supply utilization, based on the volume and severity of cases in the area.
“As an example, Premier used its comprehensive hospital data to develop a crisis forecasting and planning tool that predicts the number of disease cases over several days by county, and models the supply levels a healthcare provider will need based on estimated case volume and typical surge demand,” he said.
“This capability is critical to not only preparing for future waves, but also safely maintaining elective procedures – and, ultimately, financial solvency,” Hargraves said. “Armed with this information, decision-makers are better able to plan and allocate supplies, as well as receive an early indication of potential shortages that they may be able to work around.”
“Supply chain leaders are under a tremendous amount of pressure to provide value-added services while reducing overall costs for the organization,”
“The most important thing a Supply Chain leader can do is develop an infrastructure to handle surges in demand to protect the organization from operational and clinical risk. This doesn’t mean a large distribution center that may increase cost for the organization,” he said. “It is developing critical relationships with a broad base of manufacturers (primary, secondary and tertiary) and distributors as well as developing regional plans with other health systems. Having a multiple prong approach may not solve every scenario but it will provide a higher degree of support to enable supply chain resiliency.”
The question of JIT
“JIT and stockless models are still the best supply management options available to hospitals because the cash, labor and space constraints that made them necessary to begin with remain,” he said. “Going forward, providers need to have better visibility into their distributor’s and supplier’s materials stocking levels and forecasts. Regular reports on supply availability and operations contingencies that incorporate news (hurricanes, pandemics, etc.) will take on more importance. Pre-established contracts with non-traditional suppliers and even co-op type arrangements between manufacturers and other provider organizations, possibly orchestrated by GPOs, seem like another likely industry development to address sudden surges in demand.”
“I believe that what tripped up all of the planning models was the universal applicability of the PPE supplies,” he said. “Anyone can use them and everyone things they need them. The early and widespread requirement for virtually everyone in the hospital and nursing home to wear PPE not only exceeded the planning models but it fed the expectation that family members of hospital staff would also need PPE, which led to diversion and even more consumption.” He said.
Premier’s Hargraves imagines that Supply Chain’s reliance on the JIT inventory process certainly will change, due to federal guidelines, state regulations or more sophisticated supply chains. Much will depend on the nature of future government participation.
“Premier is advocating for enhancements to the Strategic National Stockpile (SNS) process that ensure a minimum 90-day supply of critical medical supplies and drugs, ease of access and better tracking of inventory levels,” Hargraves said. “Our recommendations include that the SNS work to ensure that critical medical supplies and drugs are located as close to the delivery of care as possible, and that health systems or regional buying groups be considered as potential stockpile operators. These organizations would be responsible for managing the stockpile for the providers in a region, allowing an efficient means to rotate inventory and assure accountability for the stockpile.”
Look to other industries
Pakieser says the learning process for Supply Chain leaders moving forward must encompass more than the healthcare industry.
“In the near-term, many organizations will overcompensate with stocking emergency supplies,” she said. “However, this will also be a time of reflection on what did/didn’t work, an analysis of go-forward options and then transformation. Based on where we are today I would anticipate lessons from other industries to provide guidance for healthcare.”
She lists five steps on the road to recovery.
- “Diversification of sourcing, and most likely a blend of a broader international network and a move to more domestic manufacturing to mitigate risk exposure.
- “Health systems will expand storage/warehousing capacity, with broad variation and a portion willing to move to a true Consolidated Service Center. I would anticipate that regional collectives will emerge, perhaps many at a state level, to manage and support pandemic supply needs for a specific population. This would spread the risk over many organizations. This may also include distributors as partners. It is time to be creative in our definitions and relationships!
- “Expansion of focus from acute care to the entire care continuum. This may be very organic as the recovery of COVID-19 patients moves into the home settings. The needs are different and there are various players in the market ready and willing to step in and fill the supply delivery void.
- “Data and analytics will continue to gain importance in preparing for future crisis events and supporting the shifting needs. Visibility of location and trends on usage will provide better management tools and enable a pivot when a novel event occurs. •Communication bridges will need to be developed to support the fluid environment. These do not exist today, but need to be mapped out and created. Coordination of strategy, resources, information and logistics will be key to a better response and needs to include all stakeholders – providers, suppliers, business partners, government – both state and federal, analysts, etc. Each constituency brings a critical perspective and skill set that contribute to the solution.”