Tag Archives: supply chain

Supply Chain: Leveraging Product, Process Innovations for Better Outcomes

A recent article in The New York Times questioned whether the mergers taking place in the health insurance industry—and elsewhere in healthcare—would stifle innovation by driving down competition. While the impact of provider and payer mergers remains to be seen, I think the idea that fewer players will diminish innovation belies the idea that the remaining players, post-merger, have the dual incentive of reducing costs while improving quality. That, I would argue, is the heart of the current innovation challenge for the industry.

People often assume that health innovations must be expensive new lifesaving drugs or high-tech equipment that will inherently drive costs up. In reality, innovation is about creating more effective processes, products, and ideas. Innovation can be simple yet effective changes to products or protocols that improve patient outcomes and reduce the overall cost of healthcare.

In some cases, innovation may be driven by healthcare suppliers looking to improve a specific product. Examples that have garnered recent attention include

  • redesigned bags for IV fluids featuring better labeling that’s easier to read in a medical emergency. In a recent study, medical trainees were twice as likely to choose correct medication when it was stored in bags with these redesigned labels. Such outcomes may help reduce the estimated annual 98,000 deaths in U.S. hospitals that are due to medication errors.
  • flooring made from impact-absorbing materials to prevent injuries from falls in nursing homes. One study concluded that such flooring can reduce injury rates by 59% over traditional flooring.
  • an adjustment to hospital gowns that gives patients more privacy. In one test, newly designed gowns led to a rise in patient satisfaction score. Similar long-term results could potentially offset added costs from the new gowns if they prove helpful in increasing patient compliance and lowering readmission rates.

In other cases, a stakeholder in the healthcare value chain, such as a group purchasing organization, may drive innovation that leads to better outcomes. Several years ago, the team at GNYHA Services partnered with our GNYHA hospital colleagues to address central line-associated bloodstream infections (CLABSIs). Through an Association-based CLABSI reduction collaborative, area hospitals became aware that patient care workers often lacked the proper materials required to insert a central line at the point of care, prompting them to improvise with other supplies. Over time, this practice increased the infection rate.

Through the collaborative, GNYHA Services worked with an interdisciplinary CLABSI reduction team to develop central line kits. These kits packaged all of the supplies needed to insert a central line (drape, tubing, catheters, gowns, etc.) in one bundle. When area hospitals adopted these kits, CLABSI rates in the ICU dropped by 54%, with 53% of collaborative hospitals reporting no infections for six or more consecutive months. This case is just one example of the power of supply chain innovation to solve a problem and foster a significant overall improvement in patient outcomes, ideally leading to shorter hospital stays and fewer readmissions.

Of course, healthcare innovation can also be higher tech and higher cost—prompting healthcare executives to ask what the ROI is on newly introduced state-of-the-art products. It is incumbent on the supply chain to collect and analyze product data to determine the comparative effectiveness of new products against existing treatments, with the obvious question being, is the added benefit of this product worth the additional cost?

To answer this question, we must view comparative effectiveness on a spectrum. One often cited example is biologic versus synthetic mesh for hernia patients with comorbidities. The price of biologic mesh is six times that of synthetic; however, the cost avoidance benefit that comes with infection prevention in certain patient populations far outweighs the initial product investment. Armed with this type of patient outcome data, suppliers have begun to respond to questions of value by taking an innovative risk-sharing approach to selling their innovations, a topic I’ll cover in a future blog entry.

As regulatory and market forces continue to change reimbursement models, both suppliers and healthcare providers are recognizing the more competitive landscape puts financial pressure on both sides. Supply chain professionals are in a unique position to lead a clinically integrated, data-driven approach to balancing investments in new products and treatments with quality and reimbursement outcomes, ensuring a steady flow of innovation across the healthcare continuum.

Lee H. Perlman


GPOs Work Behind the Scenes on Front Lines of Ebola Response

The important work of group purchasing organizations has been the subject of several recent studies, including a new survey sponsored by the American Hospital Association and conducted by Lawton Robert Burns at the Wharton School. While I am heartened that Burns found that GPOs produce savings and “help hospitals with services beyond supply-chain management that include clinical improvement and value analysis,” I believe there is an additional piece of the GPO story that is critical: supply chain emergency response.

Read the rest of Lee Perlman’s guest commentary at modernhealthcare.com


Drug Shortages: Finding a Solution That Adds Up

Last month, the United States Government Accountability Office (GAO) released a report entitled Drug Shortages: Public Health Threat Continues, Despite Efforts to Help Ensure Product Availability, which reviewed the effectiveness of the FDA’s efforts to combat drug shortages. The report concluded that while fewer new drug shortages were reported last year despite respectable measures made by the FDA to curb them, the overall drug shortage numbers continue to climb.

As expected, the report prompted numerous articles speculating on the cause of drug shortages. From economics to raw materials to group purchasing organizations and even government oversight, the blame game continues. In a press release response to the GAO report, Healthcare Supply Chain Association President Curtis Rooney stated, “The GAO and FDA today reaffirmed that the root causes of drug shortages are manufacturing problems, quality issues, and barriers to getting new suppliers on line when a supply is disrupted.” But he also acknowledged that given the complexities of the industry, there is no easy fix to the problem. This is unquestionably a costly problem for providers. According to a recent Premier analysis, U.S. hospitals spent almost $230 million a year between 2011 and 2013 to pay for the added cost of generic substitutes for shortage drugs. While importing drugs has been promoted as a viable stopgap measure, I feel strongly that more attention needs to be paid to the percentage of pharmaceuticals that we depend on that come from outside the United States. Frankly, our reliance on foreign pharmaceutical products and raw materials should be considered an issue of national security.

GPOs have unique insight into the drug shortage problem because we work closely with every segment of the supply chain: providers, manufacturers, distributors, Congress, and the FDA. The Ventures GPOs— GNYHA Services, Innovatix, and Essensa—combined serve nearly 30,000 healthcare member entities across the country. We are committed to ensuring that our members have access to the resources they need (including pharmaceuticals) in order to deliver high-quality patient care. Our pharmacy program has invested significant energy into helping members address drug shortage issues, including the provision of ongoing information and technical assistance. The Ventures companies have also advocated extensively on behalf of healthcare providers, most recently speaking to the FDA just this week to help mitigate one of the most challenging shortages for our hospitals right now, IV solutions.

I agree with Rooney when he says, “The GPO contracting process provides stability and predictability to hospitals and to the market; GPOs help hospitals and healthcare providers source and safely migrate to alternative products when shortages arise; and the voluntary GPO contracting process gives significant flexibility to both hospitals and manufacturers.”

While much of the burden of addressing shortages lies directly with manufacturers, the entire supply chain must work together to help minimize the impact on providers and patients and lessen the frequency and severity of shortages when they occur. The best way we can significantly reduce the number of drug shortages and address this ongoing crisis most expeditiously is through careful data analysis and forecasting (which can help predict demand and bring stability to the market), through open channels of communication between all stakeholders across the supply chain continuum, and through a nimble, responsive regulatory body that can troubleshoot and act when exceptions or adjustments to government policy need to be made.

Lee H. Perlman