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Data is king for hospitals to save money in the supply chain

Control the supply chain by structuring content, creating a supply chain formulary and establishing a mechanism for providing compliance.

Jeff Lagasse, Associate Editor

Data is king when it comes to saving money on hospital supplies.

Whether it's small items such as surgical gloves or big-ticket prizes like top-of-the-line pacemakers, the key to unlocking savings is often hidden in the data.

Health systems already know to target the low hanging fruit, but when it comes to devices such as high-dollar implants, there's a middle ground, said Scott Pruyn, director of channel management at medical supplies and pharmaceutical distribution giant McKesson.

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Manufacturers are churning out effective products in a range of difference prices, but only with the right data philosophy can hospitals and health systems understand the cost of variability.

"It's difficult to do some of that with the data we've got in hospitals," said Pruyn. "When you look at the various constituents -- getting it from distributors, group purchasing organizations, etc. -- trying to triangulate all that information can be very daunting. A lot of organizations simply can't do it, or they're doing a portion of it. What we need to have is a constant process for normalizing data and structuring supply chain content to get us to where we need to go."

That structured content, and what to do with it, is the key, said Pruyn. It's about setting up the workflow to make the best use of the data.

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"If I've got 3,200 requisitioners and a staff of 30 people, the numbers don't work, as far as the number of requests that we have to get through and verify so we're sourcing properly," said Pruyn. "We need to move more of that to the front end. If you don't control costs, you're going to have difficulty."

Some systems limit the items that appear in the item master, but this is only minimally effective, because if a person can't find an item they're looking for, they're stuck with a still-unaddressed need for that item. The goal should be to open up the supply chain to the items people are using, but to control it across the board by structuring content, creating a supply chain formulary and establishing a mechanism for providing compliance information. That way, if non-compliant requisitions come through, the supply chain can examine that and make an appropriate choice.

With the content structured, the supply chain can then easily look at where price variability exists, whether it be for gloves or implants.

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"Everybody is finding savings in different areas because they've gone through different methods of standardization already," said Pruyn. "The biggest change at these organizations is that more of their spend is controlled spend. They know what that product is -- it's a defined product coming through the system. They're getting a lot less pushback from customers … because they're making it very easy for them to find that particular item."

One area in which a hospital can tighten up its supply chain processes is physician preference items -- those items earmarked by doctors as being particularly valuable or effective.

James Spann, global practice leader, supply chain and logistics at Simpler Consulting, part of IBM Watson health, said most hospitals have adopted automated processes for standardizing supplies, but that this approach is largely ineffective when it comes to the physician preference items, r PPIs.

"When you look at PPI, there's a lot of clinical variation in how doctors and clinicians are using supplies," said Spann. "You might have a patient with the same comorbidity, and they may use the products differently. With that type of complexity, when you have clinicians ordering and managing the supplies … certainly makes it challenging in the supply chain."

Effectively managing PPI, said Spann, starts with having processes and consistencies within the organization around how and what to order. Inventory challenges often arise from purchase orders coming in from multiple users within the department, or not knowing what's being ordered within various departments. In some cases the executive team, wanting to make sure they keep their doctors satisfied, will order what they believe the doctors need as long as they have good patient outcomes -- when oftentimes those outcomes may stay the same,or even improve, by switching to a more cost effective item.

"Another problem is that when you bring in multiple products like that, you either have too much inventory, or you have inventory that's going to expire," said Spann.

"Hospitals will either do it on their own and hire their own team, or some will hire companies like Simpler," he said. "But regardless of whether they do it on their own, to achieve success, first they have to identify the shared pain points in the supply chain and then come up with a strategy to mitigate some of the waste. We've got to look across that shared pain as the crux of the problem and make sure it's where we also see the opportunity going forward. … Then, when you get technical and understand the gaps, you start looking for solutions."

While most hospitals seem to have a pretty good handle on standardizing the ordering and distribution process, the next step is to reduce the number of suppliers who are doing the processing. This is where a processing organization or procurement team can bridge the aps in sourcing expertise across the organization.

It's important, said Spann, to align the physicians and staff into the process.

"You really need to integrate with physicians up front," he said. "It becomes a part of your standard operating mode. Then it eliminates a lot of downstream process when you have physicians completely aligned, making decisions. Then you have standard operating procedures."

A hospital using a standardized, physician-centric approach can often see savings of between 10 and 20 percent. Pruyn said it pays to be nimble in an ever-changing environment.

"The healthcare supply chain is not a set organism -- it's constantly dynamic," said Pruyn. "The benefits that are out there are somewhat endless. Physicians are very data oriented. Most successful systems are presenting data to physicians and getting them involved, and not making that a unilateral decision."

Twitter: @JELagasse