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© All Rights Reserved - Confidential
Optimizing Supply Chain for
Operational Success
Marla Weigert
Weigert & Associates, LLC
Spending continues to escalate
The U.S. healthcare journey – “Volume to Value”
MOVEMENT TO INTEGRATED CARE, NEW PAYMENT MODELS & RISK
Value-based purchasing: HACs, quality, efficiency, cuts
Partnership for Patients
Bundled payment (for episodes of care)
Medical home
Shared savings & global payment
High Performing Hospitals
• Most efficient supply chain
• Best outcomes in quality,
safety
• Waste elimination
• Satisfied patients
High Value Episodes
• DRG and episode
targeting
• Care models and
gainsharing
• Data analytics
• Cost management
Population Management
• Population analytics
• Care management
• Financial modeling and
management
• Legal
• Physician integration
To be successful in the future providers must be:
• Attractive as partners in new delivery models;
• Aligned to new payment models;
• Well-positioned as value-provider with payers and
consumers.
Critical to success
Market activity
• Healthcare Consumerism • Population Health: Volume to value • Hospital consolidation/mergers • Changing decision-makers and influencers • Physician employment, consolidation and integration • Significant changes in care model to create value • Capital/cash investments redirected Cost • Reduction /Improved operational performance •Moving from holding company to operating company •Elevated role, responsibilities and expectations of supply chain management
Core Measures = 10% 100% logistic compliance to care
process protocol
Efficiency = 25% Utilization management,
predictive capped cost/episode
of care
Outcomes = 40% Products that have evidenced
based support for optimal
outcomes
HCAHPS = 25% Supply continuity critical during
care transition
Supply Chain’s influence on performance in VBP models
U.S. Supply Chain Maturity
The fundamentals • Strategic Sourcing • Direct contracting • Distribution/Logistics services • Inventory management • Information management
Extended Services • Industry data standards • Enterprise value analysis • Enterprise sourcing • Procurement • Utilization
Advanced Services • Supplier synchronization • Data Integration • Product assembly (pathways) • Regional cooperatives • Demand Management • Shared services • Support Across Continuum
Supply Chain Imperatives
• Procurement must move from contracts to more
disciplined formulary models to ensure optimal clinical
outcomes and cost predictability;
• Supply chain logistics and value optimization strategies
must be integrated across the entire continuum of care;
efficient distribution strategy
• Data integration and synchronization is critical for
measuring efficiency and effectiveness of care along
with provider/supplier transaction efficiencies and data
transparency.
Moving toward formulary for optimal cost management
Formulary Contract (Traditional)Same terms, definitions and provisions for change for all
vendor purchase agreements for formulary items
Separate agreement for each vendor with distinct terms,
definitions , changes
All items classified into functionally equivalent groupings:
items evaluated in context of benefits as compared to
equivalents
Each vendor item considered unique and evaluated
separately
Includes only authorized items that meet evaluation criteria Includes full or selected portion of catalogue
All items must go through product classification and clinical
value analysis
Fairly "open" process for addition and conversion of new
items versions
Ongoing review of utilization, cost and outcomes at procedure
and physician level
Review of purchase volume as compared to committed
volumes
Integrating supply chain logistics across the continuum
Community-Based Care Acute Care
Post-Acute Care
Hospital
IP Rehab
SNF OP Rehab
Care Home
Retail Pharmacy
Wellness and
Home
Fitness Center Diagnostic/ Imaging Center
Ambulatory Procedure Center
Free-Standing ED
Urgent Care Center
Physician Practice Sites
Clinical Guidelines
/ Protocols
Appropriateness
of Care
Multi-Disciplinary
Team
Clinical
Documentation
Evidence-Based
Action
Care Coordination
Core Measures
Product Selection
Inventory
Management
Acquisition
Process
Charge Capture
Pricing
Evidence-Based
Usage
Divestiture and
Growth Strategy
Margin
Management
Promotion of
Service Line Resource Allocation
/ Budgeting
12 6/16/2015
Create the technology platform to achieve the vision
Patient Centeredness
Physician Involvement
Clinical Governance
Quality & Safety
Business Performance & Operations
Growth & Innovation
Clinical / Ancillary Support
Supply Chain Management
Clinically Integrated
Professionally Managed
Supply Chain
Cost Quality
Revenue
An integrated data platform enabling the linkage of cost, quality, and revenue
Questions/Discussion
Supply chain challenges
• Revenue leakage - No link between products purchases and product charges; • Limited visibility into low-margin services; opportunities to increase profitability; • Lack of data transparency inhibiting contract and payor negotiations; • Disparate systems limit the ability to synchronize data to enable accurate and
comprehensive decision making; • Inconsistent pricing formulas based on supply costs; • Increase revenue by pricing variable-price services more effectively, and improving
visibility to activate stop-loss agreements more timely; • Acquisition decisions based on static inventory measures with no linkage to actual
patient volumes or demand (patient volume drops faster than expenses – no dynamic response);
• Clinical supply chain decision-making driven by suppliers, emotions; • Participants in the supply chain are limited in data visibility to product prices, current
products used in system that are clinically equivalent therefore potentially purchasing a similar item at higher cost, and limiting negotiation leverage; and
• Physician preference inventory and consumption.
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