Industry Challenges

Downloadable versions of the 2013 Top Trends, 2012 Top Challenges,   2011 Top Challenges, 2010 Top Challenges, 2009 Top Challenges and 2008 Top Challenges, are available.

ENGAGING 2013 – HEALTH CARE SUPPLY CHAIN TOP TRENDS

Over the last five years the Health Sector Supply Chain Research Consortium (HSRC-ASU) has annually published a Top Trends list for health care supply chain. Based on analysis of these five years of top trends, we have placed recurring themes within four top trend categories: Organizational Strategy, Collaboration and Trust, Health Care Reform & Regulation, and Information Technology and Data. Discussion of each trend is provided below in this year’s list.

I. Supply Chain Initiatives as Organizational Strategy

Supply Chain Design and Redesign:  Across the supply chain there is a constant quest to identify the best strategies to meet both economic and clinical needs. The value of centralization vs. decentralization, regionalization vs. nationalization and insourcing vs. outsourcing continue as essential discussions.  Buy in regarding supply chain relevancy and impact of supply chain strategies on organizational viability and excellence is critical.

• There is heightened need at IDNs for involvement of organizational, supply chain and clinical leadership in the development of strategic organizational initiatives to meet demands of the evolving health care delivery system.  Supply chain expertise related to sourcing, supply segmentation, contracting and managing sustained performance for purchased services is required to optimize support of new models of care and reimbursement such as Accountable Care Organizations (ACOs), Bundled Payments and Co-management. 
• Group purchasing organizations, distributors, information technology companies and other intermediaries continue to refine their competencies to support clients’ involvement in the wider continuum of care.  Strategies include vertical and horizontal integration as well as informal alignment with potentially competing entities. 
• Supplier response to the challenges facing health care delivery has included restructuring of internal organization and customer-facing roles to actualize the value of collaboration.

Sourcing: Two aspects of sourcing emerge strongly, a global marketplace perspective and an ongoing focus on quality and safety. The balance between local and global markets has become an important strategic consideration for organizations to achieve “value for money”. Suppliers, group purchasing organizations, distributors and IDNs continue to expand their search beyond traditional boundaries with the belief that by going directly to a wider range of marketplaces net cost of acquisition can be reduced and greater influence can be levied on purchases.  Inherent in this effort is heightened awareness of the need to maintain quality and safety as well as understanding risk but also developing contingency plans for potential channel disruption.

• Necessary at supply chain organizations is the development of human resources and tools for quality assurance, regulatory adherence, logistics and risk assessment and reduction.

Figure 1. Drivers of Health Care Supply Chain Trends

II. Collaborative Relationships and Trust Building in Health Care Supply Chain

Clinical engagement: New models of care, physician employment and increasing health care cost pressures are emerging as drivers for physician involvement in and consideration of economic as well as clinical issues for product selection.  Product selection remains a significant opportunity for lowering total cost of care. 

• Necessary is the ability for supply chain managers and suppliers to balance clinical and economic knowledge, broaden relationship management skills, maintain transparency and embody trust and collaboration with each other and the clinical community.

Building Trust between Supply Chain Trading Partners: New models of care and increasing health care cost pressures are drivers for supply chain trading partner focus on trust, collaboration and new relationship models.  Consideration of one another’s key challenges, enhancement of trust and reduction of barriers presents significant opportunity to achieve mutual value.

• Necessary is joint relationship management effort, information sharing, meaningful data exchange, and assessment of current models (e.g. inventory management and service provision) for optimization and consideration of change.

III. Impact of Health Reform & Regulation on Health Care Supply Chain Initiatives

Control of Cost and Outcomes:  The emergence of ACOs and the implementation of new reimbursement models (e.g., bundled payments) have accentuated the need to appraise the contribution of supplies to the total cost of care and clinical outcomes.

• Senior leadership support and empowerment of supply chain management is critical for success as their work crosses both economic and clinical boundaries. Clinical integration of supply chain requires supply chain-centric skills of strategic sourcing, trading partner assessment, and contract management as well as knowledge of relevant comparative effectiveness research outcomes, hospital reported quality measures, clinically relevant data on procedure outcomes and readmissions and change management skills.

The Role of Evidence and Purchasing for Value:  The relative absence of comparative effectiveness research on specific devices or materials impacts purchasing for value. IDNs face reimbursements tied to quality of care measures, patient satisfaction and readmissions.   Suppliers face the medical device tax, greater demands from IDNs and more rigid requirements for evidence. Both IDNs and suppliers are recognizing this need for greater evidence of product efficacy from both economic and clinical standpoints as well as the need for goal alignment surrounding products and patient outcomes.  

• Necessary is broad supply chain support and collaboration in research that provides greater evidence on product role in patient outcomes and quality of care. Evidence will help redefine the purchasing paradigm in health care from a cost-only-based model to a value-based model similar to the level of purchasing sophistication seen in other sectors.  Outcomes of a broader research effort in this area can support increased innovation in product development and redesign.

Unique Device Identification (UDI):  The UDI Rule, expected to be final in 2013, will mandate manufacturers to assign unique device identifiers to their marketed devices. The expected value includes the ability to track devices, improved efficiency and error reduction in procurement, a standard for device documentation, greater efficiency and comprehensiveness in recall management, and enhanced post-market surveillance for devices. Current effort is focused on incentive development for use, research to address implementation and adoption, and demonstration of the economic and clinical value.

• Achieving full value from UDI will require multi-stakeholder education and collaboration, continued research efforts focused on implementation and adoption across health care and leadership through knowledge and involvement. Supply chain is well-positioned for leadership in this initiative.

IV. Information Technology (IT) and Data

Supply Chain IT and Electronic Health Record (EHR):  Much attention has been given to implementation of EHR and meeting meaningful use but lacking is clear vision and purpose for integration of IT across provider systems to provide meaningful data to support new models of care, value based purchasing, quality and lowered costs.  Adoption of IT from a supply chain and clinical system perspective is uneven and characterized by use of different vendors, different technologies and different capabilities for integration.  Focus has typically been siloed rather than part of an organizational plan for IT. Adding into this mix are mergers and acquisitions where different IT systems are brought together.

• Moving forward, leadership is critically needed to develop an organizational plan for IT, vision for needed IT upgrades and integration, and goals for achievable value that is inclusive of supply chain, clinical and billing systems. UDI has potential to drive integration and facilitate availability of meaningful device data from IT systems. Sharing best practices and roadmap development through research and education is an important piece of this movement.

For further information contact:
Eugene S. Schneller, Ph.D., Co-Director, Health Sector Supply Chain Research Consortium (HSRC-ASU) @ 480-965-6334/ Gene.schneller@asu.edu
Natalia Wilson, M.D., MPH, Co-Director, Health Sector Supply Chain Research Consortium (HSRC-ASU) @ 480-965-7778/ Natalia.wilson@asu.edu