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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.