Abstract The Influence of the Supply Chain in Healthcare.

Mohammed Al Ayoubi, PhD Thesis (The influence of Supply Chain on the Patient Experience), Department of Decision Sciences, The George Washington
University.

For most people involved with healthcare delivery, the assortment of supply chain processes that brings the needed materials from
manufacturers to the point of patient care is a barely familiar activity tucked away in back rooms and basements.
Some clinicians and most patients would be hard-pressed to say what goes on there, or even where to find it. Too often, supply chain barely
registers among the priorities of institutional executives, let alone competing seriously for scarce resources and investment capital.
With such invisibility, it can hardly be a surprise that healthcare supply chain processes have lagged for decades and remain mired in confusion,
duplication, waste and inadequate technology. But for the heroic efforts of thousands of dedicated and long-serving healthcare supply chain
professionals, the system would collapse entirely.
It's not as if healthcare supply chains are a small target. A recent study by the Sisters of Mercy Health System's Resource Optimization &
Innovation supply chain division found that materials costs consume up to 40% of operating expense in hospitalssecond only to labor and
growing twice as fast.
Moreover, opportunities can be found everywhere to gain efficiency, save cost, and enhance quality and patient safety. As important, coming
reforms in how healthcare is organized and paid for will soon elevate supply chains to critical roles in shaping, tracking and validating the care
delivered.
Innovation within hospital supply chains is finally beginning to accelerate. A growing number of focused enhancements are under way with the
spread of Lean-Six Sigma methods for process re-engineering. These tools are ideal for small-scale projects targeting incremental change in
particular settings.
Significant and sustained progress can be achieved on many issues. Still, results are limited by design to the target environment. System wide
solutions are unlikely to be spawned. So where to go next?

The focus for the healthcare organization will likely move from volume to value. We have always been responsible for delivering quality outcomes
and high levels of service at a reasonable cost, but our accountability will likely now be correlated to pay for performance. With the advent of
healthcare reform, over the next decade hospitals will experience an estimated 8-10% downward pressure on reimbursement and a declining
ability to shift costs to commercial payers (insurance partners).
This major change will create an unrelenting focus on supply cost management. Exceptional supply chain professionals will seize the opportunity
and leverage change to the best advantage of their organizations. In regards to the way we manage our supply chain, it will be a game changer
and the clock speed will be accelerated.

What are the game changers?

Supply chain leaders must accelerate and expand efforts to further manage and reduce expenses. This is a continuous process and we will never
reach an end point as long as there are medical breakthroughs, technology developments with medical devices and pharmaceuticals, and evolving
economic markets.
Supply chain professionals must advocate that their healthcare organizations embrace the concept of centralizing the sourcing, contracting, and
procurement for all supplies, equipment, and services. We need to learn from the non-healthcare sector and recognize that we can no longer
afford disparate supply chains within the same organization.
For example, we see progressive supply chain professionals taking responsibility for purchased services, which have not traditionally been under
their domain.
Examples include: professional services, travel, print/marketing, corporate services, real estate, energy, transportation/fleet, IT, telecom, and
HR/benefits.
We need to identify and optimize every opportunity to reduce costs while maintaining or improving quality. Most organizations understand their
supply, equipment, and service costs but they dont fully understand total supply chain costs, which include operational expenses associated
with order management, receiving, distribution, inventory management, and the information systems that support these operations. As earlier
said; It is estimated that total supply chain costs can represent up to 40% of a providers operating expenses.
Supply chain leaders must embrace the clinically integrated supply chain. With a multi-disciplinary and holistic approach by both clinicians and
non-clinicians, we can move effectively to focus on cost and quality that is driven by evidence-based medicine.

Healthcare wide Reform will likely trigger a change in the way functions and teams are structured and the processes they oversee. Some
organizations are further along the continuum than others. In my opinion, we will see a transition toward organizing a multi-disciplinary team of
clinicians and non-clinicians around population and disease-specific management.
Supply chain will need to be an active member of this team. Through collaboration, the standardization and utilization of products will be
addressed.
There will be a holistic approach to resource consumption and outcomes in essence, value-based purchasing.
The future is all about the data and integrated information.
Organizations must have systems robust enough to capture enormous amounts of data and quickly translate and integrate it into useful decision
making information. Data must be real-time and actionable to make clinical and financial decisions. Some project a migration to integrated data
warehouses.

The healthcare supply chain has left the building and we must meet the challenges of this new model.
Traditionally, we have focused on the hospital, but with healthcare reform driving accountability across the continuum of care, we need to
consider both the acute and non-acute care supply chains.
The approach must be quicker, better, cheaper. We will need to drive our information systems to provide more functionality for the non-acute
care segment at a reasonable cost. The unready, or those that choose to believe it is business as usual, will be exceedingly challenged to survive
in a very different environment.
Providers want more control; he who has the information has the power.
The landscape is changing as it relates to the relationship of the provider to group purchasing organizations and distributors. We are seeing
providers migrate to various derivatives of self-contracting and self-distribution.
Demand & Supply versus Supply & Demand. We will need to get tighter control of our supply chain to more effectively and efficiently meet
clinical needs while managing the cost of inventory. This will also be driven by emergency preparedness that, as a result of pandemics, needs to
be addressed on a global level.
Benchmarking networks will become more prevalent. For example, healthcare systems on the same materials management information systems
will be able to establish benchmarking networks both internally and externally to their systems.

There is always an element of the unknown in any shift and healthcare reform will be no different. Other elements already in motion that will
likely impact the future include:
Accountable Care Organizations
Mergers, alliances, consolidations
Physician integration with healthcare systems/hospitals
Payers are forming new relationships with providers
Venture capitalists are entering the provider space
Generic implants are being considered after all, we eat generic foods and take generic drugs
Comparative Effectiveness
Electronic Health Records and Meaningful Use
Unique Device Identification (UDI)

There are opportunities to gain a competitive edge for the future through the changes that healthcare reform will bring.
Healthcare reform brings a greater meaning to the whole is greater than the sum of its parts. Integration on many fronts will be one key to
success.
Charles Darwin said, It is not the strongest who survive, or the fastest. It is the one who can change the quickest.
The savvy supply chain professional will be engaged and continuously reading the changing environment. Those who will be successful will not
hesitate to fail forward and be the trail-blazers by carefully calculating risks, while also making the errors and creating the solutions that early
adopters are known for.