Bringing Big Data to Bear on Supply Chain Optimization
In 2020, supply chain costs are projected to surpass labor as the greatest expense for the average hospital. That’s why the supply chain continues to be a main focus of cost-reduction efforts. Moving forward, however, hospitals are making strategic and data-driven supply chain changes to bring about more effective care delivery. Gone are the days of relegating supply chain to a cost-reduction target. In fact, larger hospital systems have elevated the supply chain leader’s role to a C-level position, reflecting the sophistication required for an optimized supply chain.
Data-driven Supply Chain Efficiencies
At its core, an optimized supply chain is about relationships — with vendors, clinicians and consultants. For community and rural hospitals — which are still more likely to have a materials management director than a chief procurement officer — the consultant relationship is key because consultants bring resources and capabilities to the table that smaller hospitals generally lack, including big data analytics. On behalf of hospital clients, CHC Supply Trust uses third-party platforms including Healthcare IQ and Valify to analyze product spend and utilization and to identify areas for improved efficiencies and compliance. It’s not always clear to staff which products are under contract, and they may even think they are ordering contracted products when, in fact, they aren’t. Ongoing data analysis brings transparency to the procurement process. The typical savings achieved by switching from a non-contracted product to a contracted product is 15 to 25 percent across all categories of supplies. Working with hospital clients, CHC Supply Trust measures procurement of contracted products and aims for 90 percent compliance for significant cost savings.
Support for Product Standardization
Data analysis not only identifies cost-saving opportunities, but it can also help win clinician support for product standardization and other supply chain initiatives. Many clinicians choose one med-surg item over another simply because they don’t have the data needed to embrace change. Data can demonstrate to clinicians that the hospital’s ultimate goal is also improved patient care. For example, a dashboard with product usage data by clinician, procedure and patient outcome can show clinicians that product standardization can improve efficiency and reduce delivery costs, all while improving patient care.
Supply chain’s focus on patient care is evident in the rise of upfront value analysis procedures, which evaluate product requests. New technologies are attractive to physicians, but not every new one warrants its cost. A value analysis committee vets products not just on the basis of cost and contract compliance, but also assesses whether a requested product or technology will have a positive downstream effect, such as shortened length of stay or reduced readmission.
While supply chain increasingly (and necessarily) focuses on clinical outcomes, at the same time, it must shine a light on a previously overlooked area of spend. The focus is on purchased services performed by third parties — everything from laundry to landscaping. Though not necessarily related to healthcare products, these represent a significant expense — ranging from 30% up to 70% of the total supply chain spend for a hospital. More so than healthcare product related costs, purchased services procurement can be fragmented in a hospital and lacks the centralized checks and balances that keep other expenses in check. CHC Supply Trust’s GPO includes these types of services, governing pricing and resulting in significant savings.
Although standalone community hospitals lack the resources to engage in big data analysis on their own, in partnership with a consultant such as CHC Supply Trust, smaller hospitals are bringing this sophisticated tool to bear on supply chain optimization. The goal is not only to reduce costs but also to improve patient care delivery and outcomes — an objective that raises the stature of supply chain to hospital operations.