Supply chain leaders discuss keys to successful industry partnerships, challenges in 2024 and beyond.
May 2024 – The Journal of Healthcare Contracting
The beauty and challenge of the healthcare supply industry is that it’s built almost entirely off of relationships. The upside to this is that by building these relationships between suppliers, manufacturers, distributors, and IDNs, you can partner together to facilitate better business arrangements and, most importantly, create better outcomes for patients. The challenge is that it can be hard to build these relationships without an “in”, especially when you’re trying to connect with IDNs.
Last fall, The Journal of Healthcare Contracting hosted IDN Insights West in Marina Del Rey, California, highlighting some of the most progressive, largest healthcare systems in the West region of the United State. Sponsored by Allergan Aesthetics, speakers at this event covered how large health systems measure successful contracts, the challenges these health systems are dealing with, what successful supplier/provider relationships look like, and how to best partner with a GPO. These are some of the highlights from the sessions at IDN Insights West.
Driving value
In the United States, there are approximately 1,100 Integrated Delivery Networks (IDNs), 6,100 hospitals, 8,500 ambulatory surgery centers, 15,000 skilled nursing facilities, 123,000 physician groups and 1,000,000 physicians. How can you make it so that your value proposition captures the attention of just a fraction of these entities? It’s all about driving value.
Igor Uman, Associate Principal, Sg2, Consulting, Vizient, held a workshop where he walked all the attendees through the value of segmenting and prioritizing your distinct customer base. Additionally, the Vizient team walked through various demonstrations for how you can better deliver value propositions and manage these relationships.
Segmentation is a critical component to driving value within your distinct customer base by helping you to prioritize and group customers based on similar attributes. From there, you can develop segment-specific messaging and value propositions for your solutions that will be tailored to what those customer segments are looking for. It’s important to remember that segmentation shouldn’t be based on sales or the total patient size – segmentation should only be informed by really specific parameters related to the business of your customers.
Uman said, “Segmentation really helps you answer three broad questions. One is, which customers should I be going after? The second question is for customers that I should be going after, how do I group those customers into common attributes that tells me something about how they prioritize, how they make purchasing decisions or some sort of key insight that can help orient your value proposition around? And it’s really the third question that segmentation helps answer. What value proposition should I be delivering to those unique segments? And within those segments, how might that value proposition change depending on who I’m talking to?”
This is an incredibly useful and viable way to drive value for your customers and the industry at large. You cannot drive value without providing value, which is where the value analysis team comes in. With value analysis, hospitals are working to better understand the value of each product that is purchased to ensure that money is wisely spent across the organization.
During the presentation, the Vizient team took the time to review some mission statements of popular IDNs in an effort to get to the heart of what these networks are really looking for. Common responses include “Improve human welfare, advance the world of health, shaping healthcare, profoundly shaping the trajectory of health for humanity, driven by passion to help patients, making better health possible for people around the world, uniting to save and sustain lives.”
What’s the common denominator in all those mission statements? A patient. At the end of one of your devices is a patient. Think about that the next time that you’re having a conversation with somebody in an organization. The end of every device is a patient, and that’s why you want to become a healthcare company.
Putting COVID in the rearview mirror
Even though we are almost four years removed from the onset of the COVID-19 pandemic, the ripple effects and ramifications are still being felt in the healthcare industry today. Staffing shortages and burnout are only some of the effects still felt by the human resource of the healthcare supply chain – but what other ways are organizations still grappling with the effects of the pandemic?
Issam Abouzahr, Sr. Director, Supply Chain Optimization at HealthTrust Performance Group, said, “This is just the new normal now. We’re dealing with labor shortages, raw material shortages, labor cost increases, volumes have changed significantly. We’ve seen a big shift towards outpatient volumes. We try to make sure that our folks in the hospitals and that our members understand that too. It’s always a two-way street between the vendor relations and the hospitals. I think everybody’s feeling the pain from this and we’re trying to get creative about how we can support costs.”
One of the opportunities that an event like the pandemic has afforded IDNs is the potential to renegotiate contracts. Nestor Jarquin, Supply Chain Services, Strategic Sourcing, Manager Surgical at Kaiser Permanente said, “We’re saying that pandemic events are no longer an act of God. It’s going to happen. Here’s what you need to do in terms of pandemic events. So again, learnings from the supply chain and how we are adjusting and how we see the supply chain with the market today.”
Part of the challenge of being in the post-COVID era is that it can still be hard to plan ahead and move forward with all of the chaos that the world just endured. For Cecile Hozouri, VP of Supply Chain at Scripps Health, 2023 was all about cleaning up from the pandemic. She said, “This coming year we need to reimagine; we need to get back on our innovation track. We need to get our suppliers in and start talking about different ways in which to partner. Because we haven’t been able to have those conversations strategically these past few years due to our teams efforts were focused on supporting patient care during a global pandemic. Now that we’ve been able to clear up the supply disruptions, we can focus on our cost reduction and reimagine initiatives with our partners.”
Developing partnerships
The most important skill for success in healthcare is your ability to build relationships and develop partnerships. The challenge with building relationships in the healthcare industry is access to the right people. Several of the sessions at IDN West 2023 were all about what those IDNs are looking for in their partnerships and how vendors and distributors can successfully approach and build relationships with these networks.
Transparency and honesty are a key part of the equation, especially for organizations like Kaiser Permanente. Jarquin said, “When you’re working with Kaiser Permanente and you have a contract with us and you have a supply chain back order, we’re going to ask you for transparency. There’s reciprocity there in making sure that you’re honoring your commitment and sending products.”
Others are looking at what can be added and drive value for the whole system. Efficiency is such an important component of healthcare, and anyone who can provide tools and resources that make a hospital more efficient is a valuable partner. Hozouri said, “We’re looking at what it is that’s going to drive us better. It is not about the lowest cost. It really means that we need to be looking at making ourselves more efficient. It might not be about cost. Believe me, we add a lot of new cost to the organization, but I’m not interested in adding more stuff.”
Finally, many IDNs are looking for an organization that they can build a genuine partnership with – an organization where the number one priority matches up with the IDN. At the end of the day, it’s all about patient care. Abouzahr said, “For our public and private partnerships – as we look at self-distribution, as we look at working with our local and government entities, it’s no longer just a siloed operation. We all must work together. We’ve seen a lot of mergers and acquisitions across the industry, both within the hospitals, regional GPOs, consulting services, all those things partnering to try and make the best ultimate solution to support patient care.”