Casting a remote care net for pandemic-driven logistics expansion

April 21, 2022
Casting a remote care net for pandemic-driven logistics expansion

Healthcare’s operational response to the COVID-19 pandemic intensified interest in what Healthcare Purchasing News calls “remote care,” or anything outside of a hospital setting in much the same way that “remote work” represents anything outside of the office.

This migration also has been enabled by automation, electronics and information technology, including telemedicine. If anything, in healthcare, the “remote” designation serves as something of a respectful update to the worn-out “alternate care” title of the 1990s and even its “nonacute” successor.

Although healthcare in general has been migrating slowly out of the hospital setting for decades, the pandemic arguably accelerated the exodus, save only for the most critical, serious and triage-worthy of cases, including surgeries.

With the market-driven rise of retail and urgent care outlets and IT-related convenience (e.g., telemedicine) that were reinforced by pandemic protocols, healthcare as an industry has shown that delivering care remotely, while not yet perfected, may very well represent the future of general healthcare delivery, save for the most critical, serious and triage-worthy of cases.

This “new era” raises curious questions:

  • How does this development affect the supply chain when the standard customer base now includes more ambulatory surgery centers, physician offices, retail and urgent care outlets, imaging centers, mobile surgical suites and even the patient’s home?
  • How do the larger distributors handle the influx of many smaller delivery points involving lower units of measure at lower price points than the old class of trade argument enabled?
  • How do the smaller and specialty distributors and third-party logistics service companies gain credibility?
  • How does Amazon Business fit into the mix from a price point and service level view?
  • Lastly, what about the hospital-based supply chain executive/leader who must oversee product and service flow within his or her own facility and affiliated sites within the system or integrated delivery network (IDN) that now must incorporate myriad patient homes?

“I think the fundamental question, as healthcare takes its ‘last mile’ journey into the home, is how do we make the right decisions on who provides the clinical services, who provides the technology to best replicate traditional brick-and-mortar care, and who has the logistics infrastructure to support an almost infinite number of delivery points?” posed Shaun Clinton, CMRP, Senior Vice President, Supply Chain Management, Texas Health Resources. “It’s not a simple question to answer. Even if someone answers this question, the provision of care has always been dependent on the most variable of machines, the human body. A model static enough to deliver reliable and safe care must also be flexible enough to account for this ambiguity. No matter, more and more care will be offered in the home thanks to all these advancements, the key is how to do it right.”

Homeward boundaries

Looking at the distribution, inventory and logistics product and service opportunities beyond the hospital that have emerged during the COVID-19 pandemic for the last two years, one might be surprised at which remote care segment attracted the most buzz and zooming interest. In fact, the traditional “non-acute” class-of-trade pricing arguments really didn’t factor into this area – yet – as it did for the ambulatory surgery center/outpatient segment and physician practice segment.

Some think this relatively new segment of interest might spur innovation among those preceding it.

“What’s noteworthy is how quickly clinicians, patients and insurers have become more comfortable with hospital-at-home (HaH) programs during the past two years,” observed Chris Luoma, Senior Vice President, Global Product Management, GHX. “In fact, a recent report from Forrester anticipates that the number of hospitals that deliver care at home will triple this year alone.”

But Luoma sees the hospital-at-home segment adding a new layer of complexity to supply chain logistics.

“The challenge is finding ways to provide products and services in real time across distributed care environments,” he indicated. “This will require supply chain teams to think differently, beyond acute care supply management, and instead stock all the required supplies for a specific episode of care.”

Healthcare providers view bulk vs. low-unit-of-measure distribution and inventory a bit differently, too.

“Another noteworthy change is that most healthcare systems are managing a larger inventory of products,” Luoma continued. “Rather than two or three weeks of supply, most are stocking three to four months of supply. This creates new challenges in managing the product lifecycle, including product expiration and cross-facility allocation, just to name a couple. Both hospital at home and inventory management are areas ripe for innovation. Success requires up-to-date supply chain data (e.g., inventory, on-hand and utilization data) that can be fed into other internal systems and facilitate cross-functional collaboration.”

Telemedicine and virtual capabilities, empowered by the growth in electronic health and medical record usage, fostered by quarantines and viral spreading and reinforced by consumer-directed health planning is beginning to upend traditional market dynamics.

“The pandemic served to accelerate the move to consumerism in healthcare, and provider margins are being attacked from all sides,” noted Michael DeLuca, Executive Vice President, Operations, Prodigo Solutions. “While this is not new to large IDNs and their vast continuums-of-care models, healthcare provider supply chains will need to dig a moat around their contribution to revenue (patients) by extending their services into non-acute and home health lines of business. Large IDNs will need to ensure they meet the patient where they live, and also supply the medical goods patients need to their homes. Distribution and inventory models perfected to supply acute care, physician offices and ambulatory surgery centers (ASC) will need to be extended to home health and contracts/items controlled by supply chain management must be extended to patients close to home or in their home.”

Philip Parks, M.D., MPH, Vice President, Healthcare Innovation, at-Home Solutions, Cardinal Health Inc., calls the movement of more care to the home as one of the most noteworthy opportunities and challenges, representing a significant shift in resources.

“More care in the home could mean as much as $265 billion of healthcare spend (or 25% of the total cost of care) occurring in the home by 2025,” Parks said, referencing a February 2022 McKinsey & Co. study (https://www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/from-facility-to-home-how-healthcare-could-shift-by-2025). “The goods and services that are needed for this delivery of care present new challenges for the supply chain related to service levels and response times that match the clinical needs of patients and people in their homes. Additionally, the need and expectation for transparent, near real-time information for supply chain stakeholders is a challenge that must be solved.”  

When Parks overlays the influence of consumerism, he and his team see a dramatic shift in expectations for three key areas:

  • Service levels
  • Near real-time data on order status and delivery
  • “Frictionless” customer experiences enabled by easy-to-use desktop and mobile-friendly interfaces, robotic process automation, and personalized services
MedSpeed CEO Jake Crampton sees the allure and the momentum happening, too.

“Consumerism and the pandemic created a seismic shift in the mindset of patients, furthering their transformation into consumers who demand low-cost, convenient care,” Crampton noted. “To meet this new patient mandate head-on, nearly every health system we encounter is hard at work addressing patient needs in non-acute settings.”

But Crampton may see a silver lining among this new market adventure. 

“While this expanding physical footprint of care delivery presents numerous challenges, one noteworthy opportunity for health systems is tapping into unrealized value through ‘systemness’,” he said. “Transitioning from a collection of ever-expanding facilities into a truly unified system often begins with clinical integration — and rightfully so. To maximize value as a single enterprise, especially with the added demands of operating in settings further removed from the four walls of the hospital, integration of the operational support infrastructure is imperative.”

These new healthcare enterprises need to create a strong logistics backbone that connects each of these new points of care, according to Crampton, so that health systems have the ability to share inventory, reducing the cost of goods and eliminating a source of waste. “To realize these potential gains, the network needs to be thoughtfully designed for proactive agility, as opposed to a reactive disconnected series of movements,” he added.

Meanwhile, Medline Industries has been prepping for this migration for a while, according to Zach Pocklington, Senior Vice President, Medline’s Post-Acute Care division.

“At Medline, we are always finding new ways to enhance shipping efficiencies outside the four walls of the hospital,” he said. “We have a private fleet of more than 1,300 MedTrans trucks to ensure healthcare providers have their supplies delivered when and where they need them. For customers with low units of measure (LUM) orders, like home health agencies, we evaluate ways to efficiently leverage our MedTrans parcel fleet and our third-party parcel logistics partners. For example, to ensure efficient on-time delivery, we coordinate multiple daily pick-ups directly from our distribution centers as part of our partner’s delivery routes. By leveraging our national footprint of 50+ distribution centers across the country and arranging multiple pick-ups a day, we can efficiently ship those LUM orders to customers the same day for next day delivery.”

Wall Street has leapt into the fray as well, observes Doug Heywood, Managing Partner, RDA, and a former hospital supply chain executive. “The equity markets are funding growth into the non-acute space and promoting growth by focusing on specialty parts of the healthcare market, (e.g., home health, mammography, hospice care and primary care),” he noted. “These are organizations that will have locations spread throughout the U.S. – maybe international – and not associated with any one hospital. They will have their own contracting, procurement and supply chain information systems separate from the hospitals.”

Information system connectivity poses a key challenge, according to Heywood.

“Often, not always, we are seeing different information systems between the acute and non-acute organizations,” he said. “Different data sets can be a challenge. However, the large distributors and manufacturers in the current acute and non-acute space follow GS1 data standards with UNSPSC.”

Breaking old habits

Clearly, mainline traditional distributors, specialty product distributors, third-party logistics companies and direct medical equipment (DME) suppliers are adjusting to “the new nominal” shaping up as the future marketplace. But this should not surprise anyone in the industry, according to Medline’s Pocklington.

“It is natural for the industry to experience supply chain challenges, whether due to a global pandemic or natural disaster, so we must be willing to adapt and invest for the future,” he advised. “At Medline, we constantly evaluate our supply channels to ensure we are as diversified and redundant as possible. We also continue to invest in people, infrastructure and technology to stay ahead of supply chain challenges.”

One noteworthy area where Medline is making inroads, according to Pocklington, involves partnering with customers on insurance billing opportunities. “For example, Medline services a national home health agency, and we receive nearly 5,000 insurance orders per week from them,” he noted. “We work with this customer on third party billing opportunities to help save the home health agency out of pocket expenses as they would normally cover the cost.”

GHX’s Luoma homes in on the differing logistical complexities across care settings.

“Hospital at home necessitates all required supplies for the episode of care be delivered at the same time,” he said. “It’s not acceptable or convenient to have multiple boxes arriving to a patient’s home across several days. Few clinics or physician offices will have dedicated supply chain experts on hand so the challenge will be deploying web-based, user-friendly tools that won’t require significant staff training.”

This likely will add pressure to an organization’s IT framework, as it will become data-laden and data-reliant.

“As care environments expand, healthcare will need to rely on its data like never before,” Luoma insisted. “As an industry, we must do a better job of putting that data to work. For example, accurate forecasting data is essential to moving inventory to where it’s most needed. Moving forward, the healthcare industry must bring even greater levels of automation to its business processes. The first step is to establish a modern data strategy that integrates and normalizes data across multiple stakeholders and ensures it is clean, accurate and can flow easily across systems.”

New market dynamics appear to be challenging traditional norms, according to Crampton.

“Historically, distributor, logistics and supplier models have been built to serve acute care settings,” he said. “These models have already been challenged to serve the fixed site, non-acute environment, and in settings where even lower units of measure are required — like the home — the models will find even greater impediments. This demanding and ever-expanding healthcare landscape requires all of us to break our old habits and reimagine new ways to efficiently support care delivery.

“For example, in our world of logistics, supply cross docking at our hubs allows for distribution on scheduled routes,” Crampton continued. “This lets health systems benefit from the economies of scale of purchasing supplies in bulk while saving on shipping costs that would be incurred by shipping low-unit-of-measure supplies to individual locations.”

RDA’s Heywood highlights the growing non-acute service market that likely also will be challenged.

“There are several distributors that already service the non-acute markets effectively,” Heywood assured. “They have on-line capabilities to create order templates, complete with images of the products used, and create orders without the need for using a ‘hospital’ [materials management information system] application.

“The new ‘nationally’ based systems will change how manufacturers and distribution representatives’ interface with them,” he continued. “Their primary point of call may be at the corporate office, for example, but they will also need occasional support from local representatives in other parts of the country. These new models will also provide similar challenges for service providers – shredding, waste removal, etc. – by supporting 200-300 locations or more, not unlike large retail companies managing locations throughout the country.”

Prodigo Solutions’ DeLuca cites Amazon Care, CVS Health, which remains in the early phases of its home-centric approach, and the partnership between Amedisys Inc. and Walmart as demonstrating how large for-profit companies are strategizing to expand home health care access nationwide.

“What these companies have in common is that they are distribution and logistics juggernauts,” DeLuca said. “They have the network to succeed if patients choose to stay in their homes for care. However, I believe large IDNs can also leverage their expertise in sourcing and compliance to compete and win in these home care settings and ultimately retain this piece of the revenue pie. Most already have business lines dedicated to taking care of patients in their homes and have perfected their telemedicine approaches during the pandemic. And if they are able to handle the medical surgical supplies needed by the patient and deliver them using existing distribution or logistics carrier contracts, they are better positioned to handle the need. That spend would help them to continue to attack supply cost and their value analysis prowess would ensure the compliance and quality required in the healthcare industry.” 

Read on:
New logistics market modeling involves more clinical coordination between Supply Chain, providers, suppliers
Gazing ahead a decade at the new logistical order 

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