Between fall 2020 and early 2022 the costs for energy, resins, cotton, and metals—critical elements in the medical supplies and devices used daily in hospitals—surged in excess of 30%. Health systems are seeking innovative ways to improve their bottom line as a result.
One promising avenue for significant cost savings is the integration of clinical systems into supply chain processes.
In hospital models that don’t integrate supply chain management within their clinical practices, purchasing decisions are largely divorced from the physicians using them. For example, for the most part physicians communicate with their supply chain function exclusively via product requests, with “product” defined as medical supplies or medical technologies. Once the requests are fulfilled, however, no data is collected regarding how they’re used or how effective they are.
This represents a loss of key information that could potentially inform business decisions. Specifically, a lack of data analytics that connects a hospital’s supply chain with the physicians who use the products means hospitals miss opportunities for substantial cost savings and patient outcomes improvements.
What happens when you leave physicians out of the supply chain?
A lack of physician involvement in product purchasing can result in stockpiling and/or overutilization of certain medical products. A survey of 503 surgeons representing major health systems found that only 20% were knowledgeable about the costs of the devices they were implanting. This surprising statistic illustrates how detached many physicians are from the purchasing process.
The purchase of additional unnecessary medical supplies and technologies not only diverts limited hospital funds away from valuable internal improvement projects, but also potentially results in additional spend because products with limited shelf lives must be disposed of and replenished.
Although stockpiling results from the underuse of products, a lack of physician involvement and clinical integration can also result in overutilization. Physicians, unaware of the financial implications of purchasing certain medical products, might then use the products excessively, even in scenarios where use doesn’t translate to improved patient outcomes. As a result, a lack of standardization around product utilization is a substantial drain on hospitals’ bottom lines and represents a large area of improvement for some health systems.
How does supply chain optimization support value-based care?
On the regulatory front, the Center for Medicaid Services’ (CMS) value-based care initiatives are reaching maturity. Hospitals now must place greater emphasis on improving patient outcomes, or face penalties. Failure to leverage clinicians’ insights about the effectiveness or safety of certain products can result in the purchase of faulty or ineffective medical products. This, in turn, could result in higher readmissions rates and other negative downstream effects.
In addition, under the Medicare Access CHIP Reauthorization Act (MACRA), hospitals could be penalized up to 9% depending on their performance. Further, they stand to miss out on substantial bonuses built into MACRA. But by involving clinicians at the beginning of the supply chain management process, health systems can better align the administrative and clinical functions that combine to achieve spend management and patient outcomes goals.
How leading health systems evolve their supply chains
Luckily, many health systems have seen substantial improvements in their bottom line by using data analytics and integrating the supply chain with clinical practices. According to an article published by the Healthcare Financial Management Association (HFMA), Main Line Health leveraged data analytics to connect its supply chain function with its clinical practices. As a result, the organization reduced the utilization of certain supplies by 80% while maintaining equivalent patient outcomes.
As another example, Johns Hopkins Health System adopted the “clinical supply chain integration movement,” and achieved $50 million in cost savings. Most illuminating is how the health system drove the savings. Johns Hopkins’ CFO Ron Werthman said, “Without the involvement of clinicians, we can only influence about 20% of the cost.” He added that with clinician involvement in standardization and utilization, something facilitated in large part through cloud-based technologies, “[We] can generate substantially greater savings.”
How to incorporate clinical integration into your supply chain
By using a centralized cloud-based technology to manage your entire process, you can immediately center your supply chain business units and clinical systems around agreed upon financial and clinical objectives. That structure enables your organization to:
- Make data-driven decisions around purchasing
- Align key stakeholders in real-time
- Drive standardization
Collectively, these achievements combine to substantially improve your bottom line. We’d love to demonstrate how symplr’s GreenLight Medical aligns supply chain needs with clinical objectives at health systems similar to yours.