A New Name

The transition from supply chain to “Care Chain.”
By Greg Firestone, CEO of NCI

While we’ve seen improvements in many areas during 2006, the greatest transitions remain ahead. Healthcare costs continue to rise, while reimbursements decline. Large employers are challenging endlessly escalating healthcare costs, while the impact of the uninsured is becoming increasingly transparent, leaving a greater opening for government intervention. The healthcare supply chain represents more than a third of total healthcare delivery costs and great inefficiencies remain. How will we improve?

All seven national GPOs now offer flexible contracting models that enable IDN members to contract locally. Two have made significant strides in more closely aligning their services with the needs of their provider customers. GPOs now need to recognize that manufacturers and distributors are also customers whose needs are as important to consider – in their and our industry’s success – as those of their provider clients.

While there’s been a good deal of internal restructuring among distributors, largely in response to changes in Federal regulations, we’ve yet to see a dramatic shift in their external customer orientation. I believe we’ll see distributors transition from product to service providers when they move beyond internal structural changes (such as shifting from cost plus to fee for service plans) and more effectively align with the needs of their provider customers.

Lacking the motivation of fiscal pain of some stakeholders, manufacturers are generally less incentivized to change. Another inhibitor to change is that many are public companies constrained by shareholder pressures. However, changed GPO and distributor models will strongly encourage manufacturers to more closely align with provider needs, which will result in more strategic sourcing relationships.

Private insurance companies are also beginning to feel the pinch that motivates change; e.g., 2007 premium increases are expected to be the lowest in many years. The future for insurers is in population health management: providing the data necessary for the successful shift to electronic medical records and better treatment protocols.

Providers will develop closer relationships with key stakeholders around high cost products and services that enable them to enhance margins and grow revenues around key service line offerings. We’ll also see staffing changes as GP/MDs strive to move to higher revenue/reimbursement specialty areas, and general patient care is increasingly shifted to physician assistants and hospitalists.

What I’ve come to understand over the course of 2006 is the importance of how what we call something shapes our thinking and response to it. I believe true transformation for our industry involves maintaining our awareness of the very special nature of the healthcare supply chain. Referring to our industry as a supply chain, with its primary association being one of materials and logistics, doesn’t adequately focus us on the vital nature of our work as healthcare industry stakeholders. For these reasons, I propose that going forward we refer to healthcare’s supply chain as the “Care Chain.” In doing so, we will be less likely to forget that ours is not a simple supply chain, but a chain of goods and services that provides care and well being for mankind.

My hope is that in embracing this new name, we’ll continually nudge ourselves closer to greater collaboration and balance between the divergent goals of business and care-giving, and remember, whatever our sector, to always put care first.

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