Hospital Supply Chain Presents Prime Opportunity to Reduce Costs

The supply chain department should act as waste or utilization consultants for the entire health system.

The supply chain represents close to a third of hospitals’ overall operating expenses, and it is predicted to surpass labor costs as hospitals’ greatest expense by 2020 . As such, the supply chain presents a prime area for providers to achieve cost reductions.

Christine Torres, system vice president of supply chain management at Main Line Health, a five-hospital health system based in the western suburbs of Philadelphia, discusses how her health system focused on reducing variation by developing a sustainable model to bend the Medicare cost curve while maintaining high-quality patient care.

What is the key strategy or tactic top-performing supply chains are implementing to efficiently manage supply budgets and maintain quality?

First and foremost, providers need data analytics, but it can’t just be more data for data’s sake. Instead, it has to be actionable data that generates useful insights tying costs to patient outcomes. Furthermore, providers must have professionals on staff who have been trained on how to analyze this information.

Having this type of data opens up a world of opportunity to optimize utilization—for example, by consolidating suppliers and contracts for like items, especially products used during routine procedures. It also allows hospitals to engage physicians on strategies to standardize use of medical devices and medications proven to produce clinically equivalent outcomes at a lower cost.

The supply chain department should take it upon itself to act as waste or utilization consultants for the entire health system. Doing so requires having the right data at the right time and the right experts who can leverage the data to help reduce variation in pricing, product usage, and clinical outcomes.

How is Main Line Health using data analytics to improve supply chain efficiency and maintain patient care?

Our focus always is to optimize patient outcomes while reducing unnecessary utilization. A few years ago, we developed a systemwide approach for product, service, and technology review, based on the National Academy of Medicine’s STEEEP principles (STEEEP represents six aims for care delivery: safe, timely, effective, efficient, equitable, and patient-centered).

We know that we won’t be able to enact change without clinician buy in, so we’ve placed a significant emphasis on clinician engagement and the use of data as evidence-based influencers.

For instance, getting physicians to change their product and utilization preferences is a challenge, and understandably so. Consider it in terms of how familiar and comfortable we get with our cars. We drive a car every day for years and become acclimated to it, inside and out. But then you rent a car on a business trip or vacation, and suddenly you have to get used to where the lights are and how to turn on the windshield wipers. Now, think about a physician who has utilized certain products for years, if not decades. Whether it’s an implantable device or something non-invasive, any change can impact delivery of care and patient outcomes.

One area where we’ve seen tremendous success is utilization of antibiotic bone cement for procedures such as hip and knee replacements. After analyzing the data, we uncovered clinical evidence supporting limited use of antibiotic cement based on surgery type. Our supply chain and executive leadership engaged our physician partners, and we worked to standardize appropriate utilization across the system. The result was an 80 percent reduction in antibiotic bone cement use, leading to 45 percent savings—all with clinically equivalent patient outcomes.

See related sidebar: Hospitals Have Opportunity to Save $23B While Maintaining Quality

How has the healthcare supply chain evolved over the course of your career?

The supply chain has truly moved from the basement to the boardroom and has become more strategic in supporting the operating and clinical results of health systems. I already mentioned the need for supply chain professionals to have strong analytical skills. There’s also a need for strong “softer” skills in leading teams and collaborating across stakeholder groups with facility, departmental, and clinical leaders. Further, with concerted efforts, health systems are taking tens of millions of dollars of cost out of their supply chains, based on efficiency and clinical factors.

What would you tell other supply chain departments about improving their performance?

The pressure on hospitals and health systems to reduce costs and maintain quality will only intensify. As Navigant’s analysis suggests, there are improvement opportunities for all organizations, no matter how well they think they’re doing (see sidebar on page 10). But in-hospital data and goals don’t reveal an organization’s actual improvement potential. To get a true snapshot of performance, providers need to utilize data that benchmarks their supply performance against that of their peers.

Interviewed for this article:

Christine Torres is system vice president of supply chain management, Main Line Health.