Can physician-preference vendors come together with supply chain executives and clinicians for the good of the patient?
Alan Weintraub, chief procurement officer, Enloe Medical Center, Chico, Calif., talks about the inverted triangle that has characterized the acquisition of physician-preference items from….well, for a very long time. At the top of the triangle, in one corner, is the physician; at the other is the vendor. And who’s at the bottom? Yes, it’s the supply chain executive. What Weintraub is attempting to do at Enloe is round out that triangle, so that it’s a circle in which all three participate on equal footing.
Weintraub and other supply chain executives continue to explore ways to build bridges with their clinical colleagues in the quest for higher-quality care at lower costs. The successful ones enlist the support of administration and the clinical team. The most successful ones also have the support – reluctant or otherwise – of physician-preference vendors.
“The reality is, supply chain executives are gaining more and more influence [in the selection and acquisition of physician-preference items],” says Pete Allen, senior vice president, sourcing operations, Novation. “Hospitals are either employing physicians, or they have presented enough data to physicians, that some of the power is shifting from the physician community to supply chain.
“We have seen very successful aggregation initiatives around physician preference items, and suppliers have reluctantly come to the table,” he says. “And suppliers realize that some of the physician preference categories, frankly, are commoditizing, and supply chain has more influence” in the selection process.
Bridging the gap
It’s true that many physician-preference vendors continue to bypass supply chain, preferring to go right to the clinical staff. But that may be changing.
“The supplier community is learning to change its behavior and work directly with [supply chain] as opposed to bypassing us,” says Weintraub. “And that’s great. They’re coming to us upfront, and we’re able to run [product evaluations] through our proper sourcing, contracting and conversion channels. The point is to drive it to that next level – utilization. Our goal is to eliminate waste and unnecessary variation at the end user level.”
One physician-preference vendor that has chosen to bridge the gap with supply chain executives is Cook Medical, Bloomington, Ind. “Hospitals and IDNs are looking to the supply chain to help them improve, enhance outcomes for patients and do it in an economically viable way,” says David Reed, vice president, Healthcare Business Solutions, Cook Medical. Providers have come to recognize that the supply chain is an important element in healthcare delivery and in reducing overall healthcare costs, he says.
Cook created its Healthcare Business Solutions team to work with its supply chain customers on improving the business and logistics elements of its offerings, says Reed. “The ability to track the cost of care and patient outcomes is critically important to healthcare,” he says. “And there are a number of ways to do that,” including adoption of a standard product-numbering system, such as the GS1 Global Trade Item Number, or GTIN. All Cook products shipped from its North American service center bear a GTIN. “This opens up an entire world of tracking costs, looking at outcomes, examining total cost of ownership, as well as what it’s costing the provider to achieve good outcomes – or poor ones,” he says.
“We believe that the bridge [between clinicians and supply chain] needs to be transversed on a regular basis,” says Reed. In addition to addressing the logistics concerns of supply chain professionals, Cook’s reps can aid them in understanding some of the clinical implications of the company’s products.
“There has been a gap between healthcare systems and manufacturers of devices,” he says. Providers are skeptical of the clinical data that manufacturers share with them. “There is work to be done on both sides to make sure we draw closer together as an industry,” says Reed.
Price will always be an issue, he says. “At the end of the day, everybody wants to know what the price is. But value creation [encompasses] a lot of things. When you look at some of the new models of care – accountable care organizations – the real question is, ‘What is the total cost of doing these procedures or treating these types of diseases?’ If you can’t get past that price question, you may never get to what I call the most substantive elements.”
Weintraub – like most supply chain executives – prefers that physician-preference vendors come to supply chain before attempting to influence the clinical staff, so that Enloe’s value analysis team can analyze the implications of the equipment or item in question. In fact, the IDN has begun to insert language in its contracts stipulating that vendors give supply chain 60 days’ advance notice of any technology they want to introduce to the clinical staff.
“The first few times we did this, it was very difficult,” he says. That was no surprise. “We are taking away one of their channels for sales.” But that issue can be dealt with, he says.
“We wanted to demonstrate [to vendors] that if you come to the table with our best interest in mind, we’ll go to our surgeons and talk to them.” The heads-up from the vendor gives Enloe’s value analysis team an opportunity to examine the clinical and financial impact of acquiring the new item. “If it looks interesting or favorable, we’ll say [to the vendor], ‘Go to the doctors; we’ll work out a trial and do a deeper dive into it.’”
Over time, Enloe has developed better relationships with some physician-preference vendors, and as a result, the two sides have become more candid about the financial implications of devices and equipment. What’s more, vendors share with supply chain news about technologies they are developing for the future. In those cases, supply chain executives pass that word on to their clinicians.
It helps, of course, if the supply chain executive has at least a rudimentary understanding of the clinical implications of medical devices and equipment, adds Weintraub. “If you’re asking for notice [about what’s cooking in R&D], you have to understand the clinical implications,” he says. True, the value analysis coordinator carries the flag in evaluating technologies. In Enloe’s case, that person had 20+ years of OR experience before joining the supply chain team. But the more the supply chain executive can understand, the more he or she can participate in a dialogue with the vendor and clinicians about technology.
Strong, collaborative relationships between supply chain executives, administration and end users might be the thing to “round out” the triangle that Weintraub speaks of.
“[Many] companies still focus on the end users of their products and avoid supply chain executives,” says Lori Pilla, vice president, Clinical Advantage and Supply Chain Optimization, Amerinet. “This is due to the fact that supply chain executives usually do not have the ability to affect usage without C-level and surgeon support in taking the position of the service line champion. Companies will work with these executives, but usually only after the end users of the products have been involved and demonstrated their partnership to the hospital and process associated in reducing costs to maintain the viability of their services in the community.
“Overall, more and more communication is going into helping suppliers realize that outside of traditional sales of their products, the real focus is on maintaining existing business in a very volatile/tense market,” continues Pilla. “There have been few who have acknowledged the change in practice and are beginning to recognize the need to find ways to work better with providers in maintaining their relationships, business and overall long-term strategy – which may determine who is left standing in the next 36 months.”
The overall goal for healthcare providers is to improve margins on procedures and improve financial viability, while providing high quality care and outcomes to the patients they serve, says Pilla. “Physicians need to be supportive of the effort with the suppliers and find some common ground without leveraging the relationships they may have had with those suppliers over the years. This may involve physician employment or some other arrangement needed to win their support.” It also involves direct communication with vendors, she adds.
“Some large healthcare systems…have specifically communicated their need to reduce the cost of doing business overall, not just on the implants; and they have asked those suppliers who are truly willing to partner with them, for the good of patient care, to assist them in finding ways to maintain their viability long term, together.”
The key challenge for supply chain executives with regard to physician-preference items is aligning surgeons’ incentives with those of the hospital or IDN, says Tom Beall, director, supply chain management, Halifax Health, Daytona Beach, Fla. Doing so can be difficult, however, given anti-kickback regulations. Yet without clinicians’ support, the cycle of rising costs will be hard to stop. The purchase price of physician-preference items is one issue. Another issue that providers may have to address are sales reps in the OR. While they do provide a valuable service to the surgical team, they come at a high price, says Beall.
One factor that may hasten alignment between surgeons and hospital administration is the availability of actionable reports, that is, information that can tie together medical products, costs and outcomes, continues Beall. Unfortunately, such data is still rudimentary. Another factor that might turn the tide is the emergence of accountable care organizations, which are intended to unite physicians, hospitals and other providers to provide cost-effective, high-quality care.
Clinically integrated supply chain
For four years, Matthew Pehrson, vice president of supply chain management, Presbyterian Healthcare Services, Albuquerque, N.M., has been developing what he calls a clinically integrated supply chain. “We have integrated supply chain into our service line leadership,” with service-line-specific value analysis teams working to drive down cost and utilization of products, he says.
“I’m not a clinical expert, but part of the advantage of our clinical/supply chain integration is the fact that supply chain really understands what’s important to the clinicians,” he says. “By being involved in meetings every month, as we contract and source together, I begin to understand the push points of clinicians, and they have begun to understand those of supply chain. That’s how we bridge those gaps.
“We’ve also taken a pretty aggressive stance with [physician-preference] vendors in the area of capitation contracting,” he continues. In the process, the supply community has learned to change its behavior. Rather than bypass supply chain, “they’re coming to us upfront and we are able to run [new products] through our value analysis process, to ensure we’re getting a product that will provide value.”
As a member of Premier healthcare alliance’s ASCEND oversight committee, Pehrson is working to take Presbyterian – and other Premier members – beyond sole-source contracting. (ASCEND, or Accelerated Supply Chain Endeavor, is a collaborative project involving Premier and more than 300 Premier members, designed to aggregate, monitor and analyze supply chain data.) “The point is to drive [contracting] to that next level – utilization,” he says. “That is, selling the right product to us, with evidence-based practices, and then sourcing to those specifications. The goal is to eliminate waste and unnecessary variation at the end-user level.”
Can’t stop now
Supply chain executives continue to pursue savings opportunities associated with physician-preference items, says Allen. “If you look at the big aggregators, I think everybody is focused on this area,” he says. “They’ve had many initiatives around the more commodity-based products, and most are satisfied they’ve done a good job controlling those expenses. But they’re facing continued pressure to control costs, so they’re going after more complex categories. Every year we have at least one large system that has a physician-preference category they want to work through.”
Says Reed, “Providers and suppliers have to move their conversations beyond price and get to value. How do we help create value for patients, because that’s why we’re here. It’s easy to get locked in a pricing conversation and miss the opportunity to help lower cost and help patients improve or have a better lifestyle.
“We are keenly interested in this part of the process of improving healthcare,” he says. “And while I’ll say we are not going to execute perfectly, and we don’t expect providers to do so, we’ll have peaks and valleys over time. There are elements in our team and in healthcare systems’ teams that won’t execute right. But it’s critically important to move beyond where we are today.”