A look at healthcare supply chain trends in 2020

Throughout the 2000s, the healthcare supply chain underwent a major transformation, evolving from a transactional product and cost center into an established partner able to deliver value throughout the organization. Now, as we head into the new decade, the supply chain appears set to continue along the path of holistic partnership with other departments and operational performance improvement. HBI will continue to examine supply chain progression, beginning with an emphasis on three areas we see as key for 2020: productivity KPIs that reflect new expectations; increasing overlap with other departments, particularly revenue cycle and finance; and impact on patient experience.

Productivity KPIs

While many provider supply chain departments have productivity metrics in place for internal benchmarking purposes-oftentimes displayed on a dashboard or other reporting platform – there is far less clarity into industrywide standards for labor and productivity efficiency. There are several factors behind this, but it is largely influenced by disparities in supply chain governance. Every department

is designed uniquely with varying levels of scope and oversight at each organization; departments may report up to different C-level executives, for example, or have ownership over different ancillary functions.

Despite these differences that make comparison difficult, there is still an industry need for a way for providers to compare performance and labor with like organizations: those with similar characteristics like scope, organizational structure, size, and workload. Departments desire clarity for many purposes – to justify workforce needs, to demonstrate the value they provide, and to develop

continuous improvement strategies. HBI recognizes this need, so throughout 2020, we will explore insights into labor and productivity metrics. This will include traditional supply chain functions such as purchasing, sourcing, contracting, logistics and operations, and inventory management, but also emerging topics such as supply chain analytics and informatics.

Throughout 2020, HBI will further explore this topic by asking:

  • What productivity metrics are most valuable for provider supply chain departments?
  • How can organizations implement best practice operational improvements driven by KPI data?
  • How can supply chain departments optimize labor needs depending on workload volume?

Increasing Overlap With Revenue Cycle and Finance 

As provider supply chain scope has expanded over the last several years, so has the department’s integration with other divisions of the provider organization, such as revenue cycle and finance. While much has been achieved toward breaking down silos to collaborate more holistically, integration of the departments has room to expand. For one, further integration of the various IT systems the departments use – the item master, the chargemaster, the EHR, and the ERP – could provide not only new clarity into uncaptured revenue and unnecessary spend, but could also pinpoint patient outcomes more effectively.

There is also the capacity for further understanding of the relationship between expenses and revenue. Many supply chain organizations have cost visibility in terms of spend, opportunities for product and vendor consolidation, and purchase volume, but tying supply expense factors to revenue capture is a more difficult picture to paint. To do this, organizations need to relate costs with revenue; one example HBI has highlighted in the past is Mayo Clinic’s KPI of tracking supply cost as a percentage of gross medical service revenue, broken down by service line, region, and enterprise.

Throughout 2020, HBI will further explore this topic by asking:

  • What have best-practice organizations done to further integrate supply chain with revenue cycle and finance? What has been the outcome?
  • What KPIs or metrics are organizations using to look at spending as it relates to revenue?
  • What enterprise-level cost KPIs can serve a dual purpose for both supply chain and revenue cycle operations?

Supply Chain’s Impact on Patient Experience

 While not always overt, the supply chain does have an impact on patient satisfaction and outcomes. One key way is through the supply chain department’s strategic sourcing and value analysis role. These routes play an integral role in introducing new, better technology into the organization and to the patient’s bedside. Value analysis committees are now including not only cost factors, but efficacy, outcomes, and safety of products under evaluation.

A more direct way supply chain interacts with patients is through any ancillary functions falling under the supply chain umbrella, such as dietary services or environmental services. How the supply chain manages these roles can influence the patient’s stay at the organization. Outsourcing versus in-house service becomes a consideration, for example. Staff members of a third-party provider may be less conscious of the subtleties of interacting with hospital patients as compared to another customer base. Turnover may also be higher with third-party providers, which may pose a customer service consistency issue.

Throughout 2020, HBI will further explore this topic by asking:

  • How can supply chain organizations better directly tie patient outcomes and satisfaction to value analysis efforts?
  • How do best-practice organizations determine which ancillary functions to keep in-house and which to delegate?
  • What other ways can the supply chain department provide value directly to the patient?