By John Strong, Co-Founder and Chief Consulting Officer, Access Strategy Partners Inc
Supply chain operations were getting more difficult even before the global pandemic hit in March 2020. It is hard to believe we are still seeing the fallout from it and having to make tough sourcing and logistics decisions across all healthcare supply chains.
With more healthcare providers taking on greater payment risk (and becoming “payviders”) it is logical to assume that more attention is going to be focused on value-based contracting strategies from both the insurance and supply chain sides of the table. This means a shift in strategy for supply chain sourcing from price to a host of other “values” that must be examined in the future. It means that both the value analysis committee and supply chain will be required to consider a myriad of factors that are sometimes difficult to sort through.
The problem?
The first question for a would-be supplier to answer for a provider is: “What problem are you solving for me?” Provider here can be defined as the physician, clinician, facility, or some combination of these. The sales answer here often gets overshadowed by features, benefits, and the cool technology without a focus on its over-arching value to the buyer and patient.
Typically, there is a clinical value proposition tied to new technology, and we see more and more providers adding physician and clinician input to their supply chain decisions. With value analysis committee decision making, it is vital.
Some large hospitals and systems process more than 100 value analysis/new product requests per month. With that sort of throughput, getting to the point quickly is a requirement. Suppliers need to consider this and focus on a few pages of succinct information – not reams of information they expect committee members to read, understand, then relate back to the product or technology.
Clinical benefit
Next, there needs to be a focus on the clinical benefit from the physician or clinician point of view. While it has been in vogue for years for suppliers to locate and sell “physician champions,” physicians now need a brief, rational explanation for the purchases they want to make, especially if they are employed by the provider. It is imperative to also remember that value analysis committees are multi-disciplinary, and there are a variety of backgrounds and education of committee members.
For example, physicians want to know the clinical context for the problem being solved. This often requires evidence. Sometimes the evidence comes from clinical trials, and it can be mined. Often manufacturers help support the research. We wonder whether hospitals’ views that such research is tainted can be an all-encompassing view in the future. To effectively evaluate new technology, there is likely going to need to be closer buyer/seller collaboration, at least a dialog about why something new might be beneficial.
Patient benefit
Why would any provider look at something if their ultimate customer – the patient – did not benefit? Product line extensions might be fine, but the question becomes what kind of incremental patient-value is provided. Therefore, new and succinct explanations of the reality of the care being delivered – and how it changes patient outcomes – is essential.
Again, trials and research may be required. It also takes contextualization of where outcomes and readmissions for certain procedures are today – and how the new technology advances and benefits better patient outcomes. As we know, reduced readmissions and improved outcomes have a distinct patient care and economic benefit. This is especially true as providers assume more economic risk for patient care from almost all payors.
Impact on revenue
Most healthcare providers never make product decisions based on impact to their revenue – or at least they shouldn’t. With many providers under continuing or growing financial stress, reimbursement cannot be ignored and products need to be considered – not selected – based on revenue cycle management input.
Correct coding is every provider’s concern. It cannot be completely ignored, however, when choosing to modify procedures with new technology. While everyone agrees that product selection must always be in the interest of the patient, you must consider old vs. new when it comes to both cost and revenue and understand the impact on your bottom line.
Cost savings
Cost savings is not price savings. It comes from changes in procedure (such as a real reduction of staff time or length of stay), a reduction in readmissions when a provider assumes risk for reimbursement, a reduction in the use of ancillary products (sometimes called “opportunity costs”) or other quality-oriented costs that result in a patient receiving additional care that is not readmission classified.
If the provider supply chain of the future is to remain relevant and be a gateway and team member in value analysis, there needs to be a consideration of all these items and less focus on price alone. While price is important, it is imperative that purchasing departments understand and compare like-to-like products and their outcomes. Unfortunately, many automated specification and contracting systems overlook subtle product differences that may skew one or more new products or technologies in their favor.
Conclusion
Strategically, are supply chains aligned with the goals of your organization? Are you evaluating products and technology with a broad view of what is best for patients, or simply considering price without a complete understanding of all the factors that the new healthcare environment demands?
If you are relying on others, such as a third party or outsourced contracting (such as a GPO), you need to be asking them these questions as well. The healthcare supply chain demonstrated its time has come during the pandemic – now let’s take it into the new realities of the environment we find ourselves operating in.