Long-Term Supply Chain Preparedness

February 2024 – The Journal of Healthcare Contracting

After the challenges that healthcare has faced in the last few years, it’s more important than ever to prepare for the future. At IDN Insights West, sponsored by Allergan Aesthetics, John Bain, Director, Health Systems – Strategic Accounts at Umano Medical hosted a panel that included Justin Freed, VP of Adventist Health, Shireen Ahmad, Interim VP, SSRM Strategy and Finance at CommonSpirit Health, and Brittany Schumacker, National VP, Business Development at Premier Inc., to discuss the state of the health supply chain operations since the pandemic and their key supply chain initiatives going into 2024.

John Bain: How is your supply chain operation different since the pandemic?

Shireen Ahmad: There are many events in addition to the pandemic that have influenced or have impacted CommonSpirit’s supply chain over the last few years. Throughout 2019 and early 2020, one of the biggest challenges we faced was the merger. We were actively transitioning GPOs at the onset of the pandemic. It was a bit of a shock, when in March of 2020, we were sitting in a room trying to figure out how we were going to convert to one GPO and in the next week, the pandemic shut down the country and we had to scramble to procure PPE to support our 145 hospitals and staff.

At the time, we had two strategic partnerships with distributors that we’ve maintained since. In part of the partnerships with both, we were probably one of the few IDNs with a steady supply of PPE for our physicians.

Another capability that we built throughout the pandemic is a route to directly source from China and other manufacturers. We were able to directly source some of our PPE, which was a huge advantage when others were racked with supply shortages. These two capabilities enabled us to leverage our size to be able to buy a lot of products directly at reasonable terms.

Justin Freed: For us, the last two years coming out of the fog of the pandemic, because of the financial crisis that a lot of health organizations have had the past few years, we’ve had to cut 10% to 15% staffing across the board. It’s affected our ops, logistics teams, sourcing, value analysis, accounts payable, etc. We’ve had to tighten the belt significantly when it comes to our labor structure, which has forced us to restructure our organization model, we’ve become much more efficient with how we manage the work itself.

I’ve hired some Lean Six Sigma leaders that have brought their capabilities to our organization, and we sorely needed it. It’s been a challenge, but at the same time we’ve really overcome a lot of the labor obstacles to become more efficient and effective at what we do.

The pandemic taught us a lot. The benefit from that was I was able to harness a lot of critical relationships that I didn’t have going into my job. It forced that. And now that we’re past that, it’s almost like going through a war and you’re in the foxholes and you can talk to your CMO and PCEs or clinical nurse executives and there’s a trust, there’s a camaraderie. And there’s not as much knee jerk reaction to what’s going on. They know what we’re capable of and that goes a long way when you’re trying to solve problems.

Brittany Schumacker: We’ve got to have some more geographic diversification of our manufacturers. That’s definitely a space that Premier has been focused on before, during and after the pandemic. The intention is not to compete against contracted suppliers, it’s just to give some diversification. We know that based on Premier’s 2023 supply resiliency survey three out of four supply chain executives are going to care about risk mitigation strategies, including more diverse and domestic manufacturing and sources of supply.

When and where does the product come from? Where does the API come from? Where does it get stored? We want to make sure that it can be sustainable.

Bain: What are your key initiatives in supply chain sourcing moving into 2024?

Freed: A year ago, we had Dee Donatelli come out and spend a day with us in our strategic planning meeting with all my leaders about how to look at value analysis. More than a process or a council, it’s like a state of mind. We’ve tried to continue that engagement into 2023. We’ve established some critical service line councils, orthopedic spine … We’re kicking off a nursing council. We are attempting to get closer with our clinical stakeholders that make some of these decisions.

The better we get at that, the more we’re able to take feedback and proposals and do something about it. Obviously, analytics is critical. Without that visibility of what’s happening in the supply driver world, you are flying blind. We’re going off kind of the Excel spreadsheets into the more Tableau business intelligence platforms. And that’s really been a game changer for us. And it’s not just looking at the data. We’ve created governance at every single hospital to go through that data systematically the same way. We have stakeholders from pharmacy, cath lab, periop, nursing lab, and we sit around and go through budget versus actual performance.

Ahmad: We have a lot of initiatives in the pipeline and are building out two- to three-year roadmaps around sourcing and contracting. There aren’t just a few but several in many different areas.

What I can share is that we are focusing on several fundamentals, which includes taking a pause and working on how to recharge our workforce. How do we get everyone engaged again?  We’ve spent the last three months looking internally. We’ve had a lot of restructuring within CommonSpirit and our supply chain leadership. It’s difficult because we are mostly remote and geographically spread apart, so we’ve been making an effort to truly engage our workforce and bring them closer together.

The other thing I would say is we are making an investment in data and analytics. We realize that we are a huge organization, to be able to provide actionable insights is critical for many areas but one in particular is making sure that we’re meeting compliance, another is through scorecards, so that we identify which vendors really support our endeavors and where we see a lot of room for improvement.

As we look at how we improve our vendor relationships, I think vendors should know one thing – don’t be upset if we don’t choose you this round. We might choose you in a future one. It has been an issue when we moved away from a couple of vendors, who ultimately took it very personally. Don’t take it personally. We want to work with vendors or companies that are willing to work with us.

Schumacker: Key initiatives for 2024, 2025 and beyond … I’m going to focus on one that I think is really exciting and it’s around our technology development. Here’s why I’m excited about it: What we’re trying to do is enable both providers and suppliers to see the market in a very unique way. It’s a technology solution that can predict backorders and product shortages with 90% accuracy six weeks ahead of time and also establish better short and mid-term forecasts based on provider data AT THE POINT OF USE. If you’re looking to streamline your inventory, our solution can forecast demand for product 13 months in advance with better accuracy because we see the whole market demand, not just your sales. If you are looking at decreasing inventory rates and your fill rate drops by 1%, what actual impact does that have?

We can quantify that for you in dollars. We can quantify that for you in terms of the market share that you may have lost. And we can help you predict how to use that information to right-size your inventory and build greater resiliency. If you’re a smaller supplier, I think that that has a huge implication, because you can make a better margin by ensuring availability when market competitors have issues. Your pricing can be market competitive as a way to optimize margin and compete with the bigger vendors. I think for the big vendors and suppliers out there, it’s even more impactful.

The Journal of Healthcare Contracting would like to thank Allergan Aesthetics for sponsoring IDN Insights West.

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