Welcome to 2013 and the era of reform…
We recently hosted three symposiums that brought together Supply Chain leaders with Supplier and Distribution representatives to explore the state of affairs in today’s healthcare supply chain, and how the intended and unintended effects of reform are impacting businesses. We had meetings in Philadelphia, Orlando and Southern California, and included insightful leaders from great organizations such as Bon Secours, Kaiser Permanente, UPMC, Adventist, Orlando Regional, Broward Health, Scripps, Sharp Memorial and St. Joseph’s, as well as most of the major GPOs. In total, we had well over $100 billion in Supply Chain spend represented.
Some of the themes were not so new but more urgent than ever. The need for cost savings is certainly critical, and Supply Chain leaders are implementing measures to attain additional savings. As hospitals are anticipating great cuts in reimbursement as the Affordable Care Act is implemented, every dollar saved is truly a dollar earned. The pressure being exerted on supplier’s day in day out will not disappear anytime soon. In fact, drastic measures like self-distribution, standardization, utilization analysis and formularies were top of mind to many of our speakers. It wasn’t long ago that these initiatives would seem progressive or maybe even extreme; today it seems everything is under review and consideration.
There was also discussion of how purchasing products and services will start to include evaluation and vetting on how they will contribute to improving clinical outcomes and enhancing patient experience. Recently, Medicare disclosed bonuses and penalties based on quality measurements. The maximum amount of reimbursement a hospital could gain or lose was 1 percent, and it was split pretty much down the middle with 1,557 hospitals receiving more money and 1,427 receiving less. Seventy percent of the quality measurement is calculated on how well a hospital performed 12 clinical standards, and 30 percent is derived from patient survey responses. The lowest ranking hospital in New York found the first line of improvement was to outsource the food and replace all castors on carts going up and down the hallway, as the biggest complaints were about the food and hallway noise. Pretty simple to fix, but surprisingly it took a financial penalty to induce this action.
As we progress down the curve of seeing reimbursement affected by quality and patient experience, it will be interesting to see how Supply Chain leaders engrain this into value analysis and product vetting. Is the era of reform the time to seek out innovative, high quality and lifesaving products that may cost more? Or are innovation, higher quality and better outcomes only a goal we can attain if the price is the same or better?
I’d love to hear your thoughts!
Thanks for reading this issue of The Journal of Healthcare Contracting.
John Pritchard
