From a Supply Chain to a True-Value Chain: Best Practices for Transforming Your Clinical Supply Chain

by | Apr 26, 2013

On Thurs., April 18, healthcare supply chain experts from three Chicago-area health systems shared best practices for managing the clinical supply chain in a panel at an educational program hosted by the Chicago Health Executives Forum.

Thomas Lubotsky, vice present of supply chain clinical resource management at Advocate Health Care in Oak Brook, Ill., began the presentation by discussing Advocate’s supply chain strategic framework, which aims to drive value through purchasing products demonstrate evidence-based clinical effectiveness.

Mr. Lubotsky explained that Advocate has an ongoing “march” to reduce 2-3 percent of total supply spend annually, which amounts to a reduction of roughly $20-$25 million. The health system has been able to achieve these savings by transitioning to a demand-based supply system, where all supply orders are “driven by demand” rather than a pre-set schedule, he explained.

Gary Fennessy, vice president of operations at Northwestern Memorial Healthcare in Chicago, then explained some of Northwestern’s clinical supply chain best practices. “We’re trying to move from a supply chain to a true-value train,” he said. He then shared five steps Northwestern has taken to move to a more value-based supply chain.

1. Initiated an executive medical technology and device committee. The committee determines which technology and devices are clinically effective and provide the most value. According to Mr. Fennessy, all new products or devices must be approved by the committee, and the committee is given the following directives: 1) all devices must be safe and effective, 2) evaluation should focus on outcomes, and 3) the committee only has $1 million per year to spend. Mr. Fennessy said the $1 million cap has created physician engagement, as each specialty wants to ensure their preferred devices make the cut. What’s most fascinating though is that the committee has yet to spend $1 million in a year. “We’ve never even come close,” he said.

2. Redefined metrics for performance. “There are lot of bad [supply chain] metrics out there,” he said, adding that Northwestern’s supply chain team created new metrics for performance.

3. Created a clinical sourcing team. Mr. Fennessy explained he is very focused on hiring clinicians on to Northwestern’s supply chain team.

4. Created a portfolio of initiatives to drive a value proposition to our customers.

5. Invested in talent. Northwestern has relationships with two business schools that offer supply chain specialization and bring interns from those programs to Northwestern each year.

Next, David Valestin, senior director of corporate supply chain management at Winfield, Ill.-based Cadence Health shared his system’s strategy and improvement efforts surrounding supply chain issues. Primarily, the system is focused on product standardization and cost reduction in both its inpatient facilities and physician offices. This has been a major goal for Cadence after it formed in 2010, following the merger of two separate health systems, both with disparate supply chain practices.

Finally, Ron Michalak, director of business resources solutions for the Metropolitan Chicago Healthcare Council explained the future of the clinical supply chain management, saying that just getting pricing for a commodity item isn’t going to cut it. He said he sees the supply chain as “no longer a cost center, I like to consider it a margin enhancement center.” Specifically, supply chain managers need to start managing costs to the lowest level of reimbursement, ensuring clinical supply costs don’t eat away too much of a case’s margin. He believes that better management of clinical preference items through an objective clinical value analysis program, which results in preference standardization, is a critical component of a well-managed supply chain. For a clinical value analysis program to be successful, executive leadership must support the effort, he added.

From: Beckers Hospital Review