Products & Services
After the main story and a sequel or two finish their box office runs, Hollywood tends to follow up with a prequel, particularly if the “franchise” performs well among film goers. They simply contract for a product that looks back to show and tell a story about characters from the beginning as a way to squeeze out a little more cash from consumers.
Over the years, Healthcare Purchasing News has explored something of a niche franchise — the world of the clinical laboratory and its relationship to and need for supply chain expertise in the areas of contracting and product selection potentially.
HPN tagged the lab as the “final frontier” following the operating room and diagnostic imaging in terms of dollars expended on products and equipment as well as Supply Chain extending its contractual expertise, which clinicians tend to lack as a core competency.
While a small, but growing contingent of healthcare organizations have seen Supply Chain working with Laboratory on contracting and product management, many more have not.
So HPN reached out to a group of Laboratory supplier experts to gauge product demand and usage experience for Supply Chain professionals to extend an offer of service to help manage and reduce expenses via contracting and sourcing.
Where to start
“Before trying to identify specific products, Supply Chain must first be willing to work with key stakeholders — lab managers, clinicians impacted by test menu changes, etc. — to understand the patient population the laboratory is serving and what testing menu would both benefit the laboratory and its patients,” Wert said. Conducting some lab background homework gives Supply Chain efforts the necessary context on how to proceed.
Wert emphasizes three critical reasons for Supply Chain to gather lab intelligence.
First, laboratory testing plays a critical role in helping support patient care, particularly in the inpatient and emergency-care settings, with lab tests conducted on nearly all of hospital patients and more than half of emergency patients, according to Wert who cited a January 2017 article in The Journal of Applied Laboratory Medicine as his source.
Second, “producing test results quickly is increasingly challenging for laboratories,” Wert noted. “The growing number of patients, the greater impact of diseases and the increased availability of new tests means more samples are headed to the laboratory.”
Third, the lab industry currently is experiencing a shortage of staff to process the samples and keep up with the rising demand as noted by the Bureau of Labor Statistics analysis of medical and clinical laboratory technologists and technicians, he added.
“Conversations with these key stakeholders can help Supply Chain gain a better understanding of these challenges, and others unique to the institution the lab is supporting,” Wert emphasized. “Open communication with key stakeholders can also bring to light ways in which the laboratory can optimize its operations — via the equipment it uses — to accomplish goals, such as reducing turnaround time for emergency tests or increasing productivity by reducing downtime spent on instrument maintenance. Having this information will help Supply Chain to identify the most appropriate laboratory equipment for its institution’s unique setting and patients.”
Wert cites one example where a laboratory that receives a high percentage of specialty testing requests may wish to bring that type of testing in-house if it currently outsources those services because it does not have the required assays or instruments. Or the laboratory may wish to gain better control over the point-of-care testing devices used throughout the health system by implementing an open connectivity informatics solution, he continued. “The laboratory may even have goals of modernizing its operations by implementing an automation track,” he added.
Concentrating on processes and services for the lab can be just as effective — if not more — as Supply Chain focusing on products and equipment, according to several lab supplier experts.
Bowman also singled out two areas in the POC and central/hospital lab space that should be investigated: Lab connectivity and molecular testing. “These solutions can help an organization run more efficiently with better direct and indirect financial outcomes,” he added.
“Doing assessments of both centralized — capital equipment, bulk routine work with broad test menu —and decentralized lab testing — POC/waived testing — is important to be able to formulate a long-term strategy for sourcing and contracting,” she noted.
Chris Gormley, CEO, MedPricer, urges healthcare providers to hone in on purchased services, which comprise approximately 20 percent of a hospital’s total operating costs.
“U.S. hospitals are collectively overspending $39 billion each year on purchased services, which includes all outsourced contracts — both clinical and non-clinical,” Gormley stated. No matter the area, Supply Chain “simply can’t overlook purchased services anymore as it offers unmatched savings opportunities,” he added.
Products vs. processes
“When it comes to standalone product cost, equipment/instrumentation and reagents will most likely make up a disproportionate amount of the lab’s overall spend,” Krhovsky indicated. “If costs can be controlled on these particular items then you put yourself in an advantageous position to save money and/or decrease spend for the entire lab. Diagnostic instrumentation platforms — chemistry, hematology, immunoassay — and reagents are often purchased manufacturer-direct in today’s market, which means it is critical for Supply Chain teams to understand the brands that exist within their lab so they can build the proper relationships with those specific organizations and their sales leadership group. In some circumstances leveraging a distribution partner to help manage and oversee these product categories can help Supply Chain teams with overall organization and leverage.”
Krhovsky admits that Supply Chain historically has had limited oversight and responsibility for laboratory product procurement, which may be reflected in departmental economics in terms of managing expenses and pricing.
“With that being the case we often find that general lab pricing has remained quite high in comparison to other areas of the hospital, and contract compliance is often less consistent, he observed. “There is no doubt that Supply Chain teams can have a tremendous impact on general vendor negotiation and contract administration — whether that be directly with the manufacturing community or with the laboratory distributors in the market. In the recent past there have been several new players entering both lab distribution and manufacturing, which means new options and the ability to shop business if the facility is not feeling fully supported by its current partners.”
Krhovsky also singles out shipping and freight for certain high-touch items, such as hazmat chemicals and short-dated, refrigerated microbiology items, as opportunities to help drive down costs.
“By uncovering lab-related purchased services opportunities, sourcing teams and stakeholders alike stand to gain tighter control and improved transparency within laboratory operations,” he added.
Because of laboratory’s “enterprise-level impact on a health system’s operations, patient outcomes and financial outcomes,” Bowman recommends aligning and incorporating laboratory with a multidisciplinary committee that spans administration, clinical, finance and operations.
“[This] will ensure that all decisions or change considerations around a lab strategy will be properly vetted and all potential impacts — positive and negative — will be identified, mitigated if needed, and executed with fewer surprises,” he said.
Supply Chain should concentrate on reducing variation in the lab, according to Glass.
“Standardization of formulary, reduction in [stock-keeping units], bundling product to fewer manufacturers and vendors or test platforms and systems can provide clinical, financial and operational efficiencies,” she noted. “Utilizing MMS delivery and service model to the non-acute space versus self-distribution through the hospital and out to the non-acute space may provide faster delivery, smaller units of measure, elimination of multiple shipping and delivery steps to insure integrity of product and can ultimately reduce costs while providing operational efficiency.”
