Executive Interview: Future-proofing the Supply Chain

Better alignment and a pit crew mentality are needed to succeed in today’s – and tomorrow’s – market

When Mike Alkire talks about “future-proofing,” he doesn’t mean predicting change. He’s talking about anticipating it and preparing to adapt to it. It’s a mindset, and it’s what healthcare needs, says Alkire, COO of the Premier healthcare alliance.

Speaking at Premier’s recent Breakthroughs Conference, Alkire talked about the need to re-craft care delivery systems, spur innovation, and create scale in a clinical and economic sense. Transformation is underway in virtually every Premier member facility, he pointed out. And more work is needed. “Are we building truly integrated systems?” he asked. “Or will we become extinct or replaced by a new species?” Alkire spoke with the Journal of Healthcare Contracting following the conference.

Prior to joining Premier, in 2003, Alkire served in a number of leadership roles at Cap Gemini, including North American responsibilities for supply chain and high-tech manufacturing. He was president of Premier Purchasing Partners prior to being named COO of Premier in July 2011.

A matter of scale
In today’s world of IDNs, regional purchasing coalitions and giant national GPOs, one might question the need for even greater scale. Yet Alkire argues that economic trends dictate it. But when he talks about scale, he’s not necessarily talking about greater numbers of hospitals banding together. He is talking about greater alignment among those that do.

Providers participating in Premier’s QUEST program, for example, collaborate to measure, compare and scale patient-care solutions. “They come from various IDNs, some are stand-alone,” says Alkire. “The most important thing is, they benchmark with one another. They take variation out. And they try to understand what top-performing organizations are doing, and glean best practices from them. To the degree you can actually firm that up in terms of an IDN or virtual IDN, the more efficient you will be, because you can automate that benchmarking.

“But I firmly believe that, whatever the flaws that make up the healthcare system may be, there are unbelievable best practices happening every day in our hospitals. So the important thing is sharing them. It’s not that we have a lack of data. It’s ‘What do you do with it? How do you communicate it? How do you put performance improvement programs in place to drive better results?’”

Pit crew mentality
For the most part, healthcare executives are doing everything they can to drive this level of scale, he says. But on a day-to-day basis, their job is to provide what he calls “unbelievable care” to their communities. Larger organizations, such as Premier, are in a position to take the mass of data collected among its facilities and turn it into opportunities, “so people can understand where the gaps are in performance, and begin to share best practices.”

Alkire agrees with surgeon, writer, and public health researcher Atul Gawande when the latter says that today’s healthcare challenges call for a “pit crew” – not a “cowboy” – mentality. Instead of working in silos, care providers – spanning X-ray, lab, surgery, etc. – need to share information in a real-time fashion, he says. The goal is to implement a care plan for patients that crosses the entire continuum of care as well as all geographies.

This isn’t just theory, says Alkire. By benchmarking, sharing and acting like pit crews, the 160 participants in QUEST saved an estimated 25,000 lives and more than $2.85 billion in a 30-month period. Mortality rates dropped significantly. “You can imagine our excitement when we saw we could bend the curve on mortality,” he says. Alkire personally placed phone calls to the most successful institutions and found they were doing all the right things, such as counseling around palliative care, controlling sepsis, making pharmaceuticals available at the bedside, etc. That knowledge becomes even more valuable when it is shared with others, he adds. “It becomes a question of, ‘How do we get that information to the fingertips of clinicians, physicians and executives?’

“The information is out there. But how do you tailor it? How do you make it actionable, so [providers] can take advantage of it?”

Addition through subtraction
Sometimes innovation is about subtraction, says Alkire. That means getting rid of things you don’t need and focusing on the things you do. “My background is manufacturing. In manufacturing, it’s highly unusual for the supplier to dictate specifications for products to the person paying for the products. In manufacturing, the folks who pay for the products pay for the specs. But in healthcare, that hasn’t been the case.” But that could be – and should be – changing.

“For the better part of three years, we’ve been creating specifications for commodities,” says Alkire. “That’s the point where you can begin to really have influence on the supply chain.” Providers – particularly physicians and other clinicians – are in a position to say, “These are the most important things we need in this product; let’s get more of this and less of that.” That’s addition through subtraction. The same principle applies to custom packs. Hospitals that buy custom packs but routinely fail to use all the products in them during surgical procedures should take out those they don’t use and create processes for introducing new ones.

“I’ve been speaking about commodities,” he continues. “But where it’s really, really important is with physician- and clinician-preference products.” Providers should strive to understand the features of expensive medical devices that truly add value, and demand that vendors remove those that don’t. That calls for some kind of pre-commitment on the part of the hospital(s), however. Otherwise, vendors won’t be willing to accommodate providers’ wishes.

“We’re not about slowing innovation – it’s the exact opposite,” says Alkire. “We love and push suppliers to deliver it. We get recognized for helping our hospitals provide the best care at the best price. If there’s a new thoracic closure device that costs more but [improves care], we would implement it tomorrow.”

But how can the clinical effectiveness of a new technology be documented or measured, and by whom? “Two, three or four years ago, providers felt it was upon them to justify whether or not something was providing clinical efficacy,” says Alkire. But today, physicians are working more closely with their hospitals, and together, they are asking vendors to prove their claims. “I think the onus or burden of proof is beginning to shift back to suppliers, whereas traditionally, it was with the hospital,” says Alkire. In essence, providers are – or should be – demanding that suppliers wanting to introduce new technologies share some of the risk with them.

Price sensitivity
At the Premier conference, Alkire remarked that providers often lack adequate price sensitivity. “I’m trying to challenge suppliers and hospitals,” he says. “I’m saying to hospitals, ‘We have to do a better job of forecasting utilization of products, of understanding what’s therapeutically interchangeable, and when a commodity is a commodity.’ We need to aggregate that [information] and take it to market.

“That’s what I mean about price sensitivity,” he says. “I want prices to be incredibly sensitive to people who are performing.”
The next evolution in pricing calls for two activities: The first is forecasting, the second is analyzing therapeutic interchangeability. “Let’s make sure that when we say ‘commodities,’ we’re talking about commodities,” says Alkire. “And make sure we know specifically why a product can’t be changed out, and then put a value to that. If there is a difference in innovation from one [product] to another, we need to figure out the value of that difference and get the appropriate pricing for it.”

Global supply chain
For years, Alkire has been raising an alarm about the vulnerability of the global supply chain. And he’s not about to let up.
“I’m thinking every day about how to help Premier members future-proof our fragile global supply chains, about how to face the challenges of sourcing safe and quality goods,” said Alkire, speaking at the Breakthroughs Conference. “Whether it’s acts of nature or acts of protectionism, whether it’s the global flow of capital or raw materials, the supply chain can be shut down in an instant.
“Remember 2008?” he said. “We didn’t have answers when China enacted pollution controls and shut down the world’s largest glove producer.” China produces 90 percent of the face masks used in this country, 80 percent of the antibiotics, nearly all surgical gloves and two-thirds of the world’s aspirin, he pointed out. “What happens if those goods are taken offline? We’re putting all our eggs in one basket, and we’ve got no Plan B if those eggs break.

“There’s a huge dependence on one country. We have to figure out ways to spread that to other areas.

“It isn’t just about China,” he said. “I recently talked with a pharmaceutical manufacturer who sourced their active ingredients from France. They bought chemicals from China and India. Germany supplied their glass vials. And their packaging supplies came from North Carolina – all to be assembled and shipped from a plant in Ohio.

“Most of us look at that and think sourcing from France and Germany is completely safe. But what happens if the European debt crisis gets worse? What if those factories in Germany and France can’t get capital to make their goods? Right now, our industry doesn’t have a complete answer for that.”

Another area of concern for America’s healthcare system are drug shortages, some of which can be attributed to the shutdown of pharmaceutical manufacturing plants by the U.S. Food and Drug Administration. “It’s not good enough that the FDA is a watchdog,” he says. “The FDA has to improve its processes, so they can help get these organizations’ lines back up and producing.

“If you shut down production plants – and we saw this with propofol – there’s a huge risk to consumers when folks have to go to grey markets. Forget that the price of these products have gone up two- or three-fold. I’m very, very concerned about the shortages in the pharmaceutical industry. To me, it’s a solution that must be owned by hospitals, suppliers and the FDA.”