The U.S. healthcare supply chain has undergone as tremendous amount of change within a short window of time.
By Graham Garrison
When trying to put 2020 into perspective, Brent Petty shared a quote that he heard through industry discussions. “We went through five years of change in 120 days,” said Petty, executive industry consultant for healthcare at Lexmark International, Inc. “We’re forever changed, but that’s not necessarily a bad thing.”
The positive piece of the change is the pandemic has thrust the supply chain back into the limelight in a way not seen since the Affordable Care Act launched. Prior to the pandemic, when supply chain did its job well, few headlines were generated. But now? The successes and failures of supply chain teams and suppliers are front and center to not just the industry, but the public as well.
Indeed, supply chain leaders have a lot of new challenges to solve, and they’ll have to do it in front of a captive audience.
The Journal of Healthcare Contracting asked Petty for his insights into the key questions being asked, and perhaps the first glimpses at solutions being introduced into the market, for a supply chain that will look very different than the one stakeholders envisioned at the beginning of 2020.
In the event of an emergency
Yes, there have been stumbles from supply chain teams, but Petty hopes the industry will learn from those mistakes. One lesson was that standard best practices didn’t apply in an emergency. “I’ve always said that in an emergency the rules go out the window,” he said. “I preached that for the 19 years when I was on the other side of the desk. When we have a backorder or shortage, forget the process, let’s do what we’ve got to do. But the pandemic blew it all out of proportion, thus not following our processes. And because of that, we may have sacrificed quality. But our mission or design in the healthcare supply chain was never to be a permanent part of emergency services.”
The U.S. healthcare supply chain has been put under a microscope in an unfair way, Petty said. “We were forced to stockpile when we haven’t in the past. We were forced to buy off contract, and our everyday life before was to work from contracts. So some of the best practices got stopped pretty hard.”
Perhaps because of the upheaval, the value of the more tenured supply chain leaders was apparent to their organizations. “The more tenured supply chain leader became extremely valuable,” said Petty. “The ones with a little bit of gray hair around the edges guided their teams to focus on what was critical. Experience truly showed here. When this pandemic heightened quickly, the tenured supply chain people really were the pivot that made the difference.”
Trust and relationships often proved to be the difference between having a successful day or not having a successful day. Many supply chain teams, especially in hot spots, measured success by simply figuring out what they needed to do to get through the day. “I talked to one healthcare supply chain executive in a hot spot and they were to the point that they could predict whether or not they could get through the next two weeks. They considered that successful. So I think we have to focus a little bit more short-term. But trust, relationships, and those more tenured leadership experiences, I think have become very important during this time.”
Now more than ever there is a need for a way to evaluate the reliability of suppliers. But what will that look like? Supplier assessments or scorecards, metrics, KPI, as well as transparency upstream into the supply chain are needed.
“We’ve tracked fill rates, contract compliance, and all those type of metrics in the past, which are all good and we still need to, but we need to look further upstream,” Petty said. “We’re just going to have to engage with our supplier partners very differently. I have been in consultant work with some of the largest healthcare manufacturers in the country. Their supply chain is very different than the healthcare supply chain. And they’re going to look into their supply chain going forward.”
What about infrastructure changes? What about IT changes? Can supply chain teams handle virtual procurement? “I know technology can handle it, but can healthcare IT? Just the governance around it, for cybersecurity purposes.”
How supply chain leaders examine, divert, redeploy, or adjust resources will have to change as a result of what’s happened. “What lessons do we need to learn? How will we engage differently with our suppliers going forward? It’s got to be more strategic, and be much less transactional. The chase for the lowest price may have just ended. I hope it has. If we can retain this memory and learn from it, then we can have a lot more future successes.”
Make no mistake, the financial impact of COVID-19 on hospitals, health systems, and the healthcare industry overall has been tremendous. “This is going to be a slow recovery,” Petty said. “And that slow recovery is going to force changes – long-term changes, financial long-term planning, capital planning, etc.”
Spending will have to be reconfigured. “We’re going to have to walk down the value path and tie it a lot closer to several things. I am a big cost, quality, outcomes, and work lives of healthcare clinicians and staff supporter. We’re going to have to tie things closer to the quadruple aim.”
Supply chain has always followed the path to where the care is being delivered. But amid the pandemic, care has been delivered in new places, such as telehealth, renewed home health services, and drive through sites. “As you look at telehealth, home health, drive through, where the care is being delivered differently than it was in February, what is supply chain’s role?” Petty asked. “How do we supply these renewed adventures, or new adventures, in healthcare?”
Mergers and acquisitions of providers are often part of economic swings, but Petty said he would not be surprised to see it happening on the supplier side. “There are a lot of suppliers that have been financially crushed by this,” he said. For instance, smaller manufacturers that had 60 days cash on hand suddenly didn’t make any sales for 120 days.
Petty said he is hopeful that COVID-19 has killed the chase for the lowest strategic price. He expects healthcare systems to be more willing to pay for U.S. manufactured products, even if they come at a higher cost.
“This pandemic has really elevated, or maybe just highlighted, many key priorities that haven’t been addressed in the past,” Petty said. “Hopefully we make the most of this opportunity.”
About Brent Petty
Brent Petty is executive industry consultant for healthcare at Lexmark International, Inc. Petty joined Lexmark in 2015 after serving 12 years as System Vice President, Supply Chain for Wellmont Health System, Kingsport Tennessee. In addition to his Lexmark responsibility, Petty had the honor of being the 2015 Chairman of the Board of the Association for Healthcare Resource Materials Management. (AHRMM). Petty earned his professional designation as a Certified Materials Resource Professional (CMRP) through the AHA Certification Center, a division of the American Hospital Association.