Clinical integration hinges on authentic partnerships with mutual respect and understanding.
By R. Dana Barlow
November 2024 – The Journal of Healthcare Contracting
Editor’s note: The following is part two of a two-part series. Look for the first story in the September digital issue of The Journal of Healthcare Contracting.
Physicians, surgeons and supply chain executives represent a different kind of circular economy that reinforces business, clinical and economic sustainability.
The round-robin process works something like this: Physicians and surgeons bring revenue into a healthcare organization – largely from payer reimbursement for procedures – but consume a tremendous number of resources in terms of costly devices, equipment and products. Supply chain executives, on the other hand, can rein in those costs through strategic sourcing, effective contracting, value analysis and facilitation and management consulting, but must equip and fortify physicians and surgeons to carry out their missions.
Without the proper, respectful and responsible balance between the two groups, everyone loses – particularly the patients.
The Journal of Healthcare Contracting reached out to three examples of these relatively new healthcare executives so they could shed some light on what they do and why they matter as well as share how their roles can be applied anywhere. They are:
Anand Joshi, M.D., MBA, senior vice president, Procurement and Strategic Sourcing, New York-Presbyterian Hospital
Jimmy Chung, M.D., MBA, FACS, FABQAURP, CMRP, Chief Medical Officer, Advantus Health Partners and Bon Secours Mercy Health;
Stacy Brethauer, M.D., MBA, Professor of Surgery, vice chair of Quality and Patient Safety, Department of Surgery, and medical director, Supply Chain Management, The Ohio State University Wexner Medical Center.
All three expressed optimism that more clinicians like them are emerging within forward-thinking hospitals and healthcare systems around the country, striving to achieve balance between physician influence and preference.
How much sense does it make to recruit and hire a doctor or surgeon on the supply chain staff to influence the business decisions of their colleagues and peers as well as promote relevant clinical intelligence to supply chain? Why?
BRETHAUER: It makes a lot of sense for a health system to invest in these positions. At OSUWMC, the medical director has 20% of their time paid for by the hospital, and I have two associate medical directors with 10% protected time. This investment by the hospital has a huge return on investment through the savings and variation reduction these leaders have achieved. Over the last five years, physician-led projects have saved more than $5 million annually for the system so supporting this effort makes great sense from a cultural and financial perspective. In addition to working on sourcing and new product decisions, we have redesigned our processes to make the value analysis and new product introduction more streamlined and easier for clinicians to navigate. This has built a lot of good will among the faculty toward these physician leaders and their roles in supply chain.
CHUNG: As long as there is a governance and executive structure in place to support the role, it makes complete sense to hire a physician leader for supply chain. The position can be supported by savings from appropriate utilization and contract compliance, as well as other sustainable resources such as rebates and admin fee sharebacks. It is critical that the right person is hired for this role; it would be more successful to recruit someone who has a strong commitment to improving the business of health care and is willing to be trained in supply chain. They should be considered an integral part of the supply chain management team, not just a ‘doc’ who is occasionally pulled in as needed.
JOSHI: I think it does make a lot of sense, and it likely wouldn’t have to be a full-time team member. I think a model where you have segmented portions of people’s time across a number of different subspecialties would work. For example, if there’s a specific electrophysiology issue, you’ll have office hours with an electrophysiologist once a week to talk through this. If there’s an issue with trocars and mechanical staplers, then you have time with a general surgeon when you need it. I think that model could work very well, and it might make the most sense because it’s not clear that surgeons or physicians are going to give up their entire livelihood to work in just supply chain. They still want to practice. The model of 10% engagement might work, but 20% may be too much, so 10% involvement may be enough for a number of subspecialists.
Why might appointing or employing a medical director of supply chain be appropriate or not appropriate for every facility? What are the characteristics of a facility that could use one vs. need one?
BRETHAUER: Most health systems across the country still do not have a physician leader in this role. In my opinion, every health system should have a physician leader in this role. Even in systems where physician preference dominates, there is a role for a medical director to start building a clinically integrated culture and to present data and opportunities to the faculty. In my experience, clinical groups respond well to data that shows they are outliers when it comes to utilization or pricing for specific procedures. Surgeons are competitive by nature and respond to data that shows they are underperforming their peers when it comes to bringing value to the system. For systems with a more mature culture of cost awareness, there will still be many opportunities for the medical director to lead sourcing projects to drive savings as pricing changes and new products enter the market.
CHUNG: If the goals of the role are clear, there is no reason that every facility shouldn’t have a physician leader in supply chain. A medical director of supply chain may take on different forms in different hospitals; for example, a 0.1 FTE role for a practicing surgeon, added responsibility for a pre-existing medical director, combined responsibility for a larger leadership role, shared responsibility between two or more clinicians, a dyad relationship with an operational leader, or a full-time executive role. In any case, they should be empowered with influential leadership and formally accountable for reducing waste and improving quality.
JOSHI: I think any place that has significant spend in the ORs and in cardiac areas, such as catheterization and electrophysiology, those tend to be the most supply intensive areas where technical knowledge and engagement with physicians is most critical. If you’re a community hospital generally doing basic surgical care with lots of emergency room visits and labor and delivery and caring for patients in a nursing unit, then you probably don’t have as much of a need for a medical director of supply chain. Supply intensity in the OR, cardiology, neurosurgery and orthopedics spaces are the biggest drivers for a need for a medical director.
How does supply chain effectively state its case to the C-suite for the need to add a medical director of supply chain either on the payroll as a salaried employee or as a consultant via purchased services? Might anticipated smoother relations with clinicians, improved outcomes or cost savings be enough to establish a budget to support such an executive?
BRETHAUER: There is a clear return on investment for health systems to invest in physician leaders in supply chain. Through their influence, these physician leaders can drive millions of dollars of savings, cost avoidance and variation reduction every year, which is far more than the health system is spending for their time.
CHUNG: The medical director of supply chain is not a singular solution or a magic bullet. It is a key role in the overall supply chain strategy of clinical integration and value optimization. One would need to demonstrate the value of the clinically integrated supply chain and variability reduction to both patient outcomes and financial results, and then explain the value of a physician leader in this overall strategy. Patient safety and waste reduction are the primary goals of this strategy, and the medical director is accountable for reducing variability in product sourcing/utilization and clinically validated vendor/SKU reduction to reach the primary goals.
JOSHI: One relatively straightforward way would be to list out the various categories of spend – orthopedics, spine, interventional cardiology, electrophysiology, sutures, endomechanical staplers – just go through the categories and put the spend next to them and say, ‘listen, we’re probably going to get a 5% better outcome by having a clinician involved so here’s how much it could be worth if we get a physician in each of these areas.’ That would be my instinct. Would it be worth it if the money’s there? If the spend is there then the value will be there, but you have to get the right mindset and person into those roles. There’s dollars and cents to be saved, for sure, by having more truly engaged conversations with clinicians.
What are some of the biggest challenges that you face when trying to balance the needs vs. demands of clinicians vs. supply chain? How do you convince both groups that each is looking for the other to an extent in context of the organization being able to remain operational? How does the give-and-take work beyond “show me the data” and “gainsharing,” among other well-worn options? Is it a price vs. quality issue on the surface alone?
BRETHAUER: One of the biggest challenges we hear, especially from the chairs, is that they can’t recruit new faculty if they don’t let them use what they want. We deal with this by educating new faculty about our process and inviting them to the table to help with decision-making. While they may not always get their preference items when they start working here, they can participate in ongoing decisions that will determine the products their group uses. When there is a lot of turnover in a department, for example, we sometimes have to re-issue an RFP to meet the clinical demands of the new faculty. The medical director and commodity manager can manage these discussions and set expectations so that new faculty feel like they are part of the process and have meaningful input as the product landscape changes over time.
Gainsharing is not something we have pursued here. Our executive leadership has made it clear that variation reduction and participation in cost savings is an expectation of the faculty and won’t be directly rewarded. Having said that, we do make the argument to the faculty that cost savings from these projects do provide the system with more money for program development, recruitment and innovation, so there is still an incentive for them to participate.
When we hit barriers with specific physician or physician groups, we clearly state that the status quo is not sustainable and support this with data. It can take several meetings for them to come around to a reasonable decision, but in my experience, persistence and an engaged medical director make a big difference in getting these “hold outs” to change their behavior. Additionally, once a decision is made, we commit to providing these groups with utilization data to show them whether they are in compliance with a decision that was made. Setting expectations up front and providing utilization data updates can be powerful ways to drive adherence to changes.
CHUNG: In my opinion, the problem is mostly on the side of clinicians. We already know that unnecessary variations drive waste and harm patients. We have all the tools necessary to reduce variations to make health care safer and more affordable. Honestly, it is physician autonomy and the myth of the “art of medicine” that continue to drive the tolerance of variability in medicine. We assume that the “doctor knows best” and allow physicians to practice the way they want. The variability also originates way upstream, from residency and even medical school, where physicians are taught that medicine is a noble profession, and no one should violate the doctor-patient relationship. Ironically, it is this tenet that can get in the way of efforts to standardize care to best practice toward optimizing the patient experience.
Despite the wealth of evidence-based clinical guidelines available, recent surveys showed that only a minority of physicians actually follow them, because they believe they get better outcomes doing things their way. From the patient perspective, this leads to uncertainty and variable risk that is dependent on whom they might choose as their doctor. Patients want reliability and consistency built into the system. This is why we don’t have to choose a pilot when we fly on airlines.
That said, the needs and demands of clinicians are two different things that are managed very differently by supply chain. “Needs” can be determined with data and evidence. “Demands” are often based on preference and should be examined carefully to see what value they actually bring. Currently, the balance between clinicians and supply chain is heavily weighted on the clinician side. With a strong leadership commitment and physician leaders in supply chain, this imbalance could be better addressed, so that supply chain can actually recommend the appropriate product and evidence-based utilization to the clinicians. To “give” something to clinicians in exchange for “taking” something implies that we are misaligned on what each side thinks is the right thing to do. When we are aligned, there is no need for “give and take.” For example, at ASCs where the physicians have a financial stake, there often doesn’t seem to be any problem aligning and standardizing.
JOSHI: Maintaining that balance is the greatest challenge, weighing the needs and demands of the various constituents. We used to call some of our performance improvement teams that focused on non-labor spend the non-labor expense teams, but we’ve morphed them now into value-based management (VBM) teams. We take the classic value equation – outcomes over costs – and ask ourselves what are we doing to improve value? There are two ways to do it. You can reduce the denominator, or you increase or improve the numerator. In some instances, it’s sort of easy math. If you know that you’re going to keep the product the same, but you can lower the cost, then you’re clearly proving value. Or, if you’re going to keep the costs the same, and you know you’re going to get a better outcome, then you’re definitely increasing value, too.
It’s when there’s movement on both, cost is moving up and quality is going up, that it’s harder to weigh. Is quality going up enough to warrant the incremental costs? That’s where the math gets hard and where we have to have real transparent conversations with the physicians and surgeons. It can’t be a transactional relationship with physicians. It has to be true engagement and long-term, trust-based relationships that will allow the trade-off between costs, outcomes and quality to come to fruition. For example, something may cost 10% more but patients get out the door two days faster. It takes time for those opportunities to come across people’s radar. If you see this as a one-and-done interaction each time, then you won’t get the value of the relationship that it ultimately yields.
How do you achieve some semblance of balance between preference and influence in terms of product and service evaluation, selection and acquisition?
BRETHAUER: There has to be some give and take in these negotiations with the faculty. There are many cases where we “give in” to a specific request to build good will with a physician or group and, in return, expect them to work with us when larger decisions need to be made. We are fortunate at OSUWMC in that all of our physicians are employed by the system, and we don’t face the challenge of private physicians practicing in our hospitals.
At my previous institution though [Cleveland Clinic], we did have private surgeons working in our community hospitals and did face challenges in driving standardization. Ultimately, the medical director and supply chain relied on support from our executive team when difficult sourcing decisions needed to be made that upset the private surgeons. Having this “air cover” from the C-suite is critical to the success of the medical director as they try to reduce variation and drive savings, particularly in the high-cost, high preference areas of orthopedics, spine and electrophysiology and cardiology.
Ultimately, this is an iterative process. The medical directors and supply chain team have to decide which projects are achievable, how difficult they will be, and whether the potential savings is worth the effort required, so some projects are delayed until we feel the culture in those groups is ready for them. No matter what, the goal is to have the clinical groups feel that the decision is something being done by them and not to them. Empowering them with a robust process and reliable data goes a long way toward getting them to a reasonable decision in most cases.
CHUNG: Any balance between these two extremes has to be defined by organizational goals and data. That is, what is “balance?” Half and half? If the organization’s goal is to provide affordable, evidence-based care to all people in a diverse population, while serving as good stewards of limited resources, then “balance” might be 90% standardization based on data and evidence and 10% based on individual preference.
We have to be blatantly honest that this is not about “fairness” or compromising. The balance described in this question is not a balance at all, but the extent to which hospitals are willing to concede to physicians to keep them happy. This concession leads to safety risks and waste, which then forces operational leaders to create innovative workarounds that create even more costs and waste (think preference cards and block times). While hospital administrators can’t make overnight changes to address these challenges, supply chain can help drive the conversation and slowly make meaningful changes, such as developing the medical director role in supply chain.
JOSHI: As much as you can do things as transparently and consistently as possible – both on the price side but also on the quality and outcome side – and really press for that transparency, I think that helps. Ultimately, this would be an open book. That same methodology used this time will be expected next time. Transparency is really helpful to get folks to buy in that this is not a one-time thing but will continue. As much as we can get the parties to work together, the better off the entire organization is going to be, for sure.
Editor’s note: This story has been edited for clarity and length.