Supplying good health

US supply chain optimisation expert Professor Carl Briggs, discusses how improvements can save the health system money and improve patient outcomes.

Timely supply of life saving drugs, scalpels, medical instruments and devices, and the rest of the astonishingly broad inventory hospitals and aged care requires, is a critical business function that in some cases could be life and death.

As healthcare costs continue to escalate, optimising hospital supply chain performance offers an opportunity to mitigate rising costs, improve efficiency and patient outcomes.

Hospital and AgedCare spoke with Professor Carl Briggs, a Clinical Assistant Professor of Operations and Decision Technologies at the Indiana University’s Kelly School of Business in the United Sates. In Australia to present a masterclass workshop for Cook Medical on supply chain excellence, Briggs says getting it right cannot be underrated. An edited version of our interview follows.

H&A: What does supply chain mean for healthcare?

CB: Supply chain performance is extremely important for healthcare providers; if the supply chain is flawed or isn’t optimised, it can seriously impact on peoples’ lives. Getting it right is all about adding robust, innovative processes to enhance how healthcare is delivered.

H&A: There are different stages of evolution to supply chain management; where do you think most Australian healthcare facilities are ranked?

CB: Supply chain stages evolve over time. There is the basic or ‘traditional’ phase where items are bought with minimal measurement; a transaction phase also known as ‘tactical competence’; a ‘service’ phase which incorporates more sophisticated negotiations; and a, final optimal phase called ‘transformation’.

This is when world-class supply chain management leverages technological innovations and all company disciplines from design, manufacturing and finance contribute to the decision making. Australian workshop participants thought the average Australian healthcare system would fall slightly above “tactical competence” but below “transformative”. For supply chain management to deliver better patient outcomes, healthcare facilities should aim for this level.

H&A: How does the Australian healthcare system rate in terms of SCM compared to other industries e.g. car manufacturing?

CB: Healthcare in every developed country is, from a supply chain perspective, about ten years behind the supply chain practises of most other industries. The reason other industries are more advanced is that they had to significantly improve or go out of business. 

What we are seeing in healthcare today, with escalating cost containment pressures, is reminiscent of earlier eras in other industries. Australia’s healthcare supply chain situation is troublesome right now, there is aperture for significant improvement.

H&A: How does Australian healthcare rate in terms of SCM compared to some of the larger healthcare providers in the United States?

CB: The Australian healthcare case study is unique: the history, government, institutions, the role of the church; it all combines to create a very unique situation in Australia. These factors and conditions really don’t exist in such a complex form anywhere else in the world. Issues such as cost containment and moving towards evidenced-based decision making are common amongst healthcare providers around the world.

H&A: There is an abundance of SCM theory, what are the fundamentals for the hospital setting?

CB: The foundation of real supply chain performance is creating a transparent, coordinated system that contributes continuously to improving patient outcomes.

It is more than just moving boxes. It is about working together to deliver value. An example presented at the American College for Healthcare Executives suggests the supply chain team at a university hospital was able to improve the quality of care and at the same time reduce costs by engaging physicians in the supply chain management process.

The group used a standard, data-driven process improvement methodology but the real power came from the collaboration between the clinicians and the supply chain professionals that supported their work. If there is poor supply chain performance (e.g. miscommunication, poor order management, process delays from the Value Analysis Teams or New Product Evaluation Committees, etc.) then costs increase and the quality of care decreases.

The latest clinical innovation in devices or drugs will have no impact if they never reach the patient, or are too costly for the patient to afford. On the other hand, supply chain excellence does much more than reduce costs—it promotes a powerful alignment of clinical and non-clinical factors focused on one thing—producing the most valuable patient outcomes.

H&A: What is one of the most significant barriers to SCM improvement?

CB: Besides the resistance of all relevant stakeholders to work together and understand healthcare as a system, probably the most significant barrier is access to good data that supports decision making.

Facts and data produce information; information informs good decisions; better decisions lead to optimised outcomes. This is the heart of evidence-based medicine, and it is as applicable to the way we source products as it is to the way we treat illness.

H&A: How does a framework (like the Supply Chain Operations Reference Model – SCOR) improve Supply Chains?

CB: SCOR is a supply chain process reference model based on a collection of best practices from a variety of industries; its main benefit is that it points us in the right direction and allows us to not have to reinvent the wheel.

By using this model – which is based around five primary processes: plan, source, make, deliver and return – it helps to determine what to measure and what to improve to achieve the optimum point very quickly. It also has clear application to the delivery of healthcare, from the strategic planning that goes on in a hospital to the sourcing of necessary labour and materials. The model not only includes the actual delivery of healthcare services, the “make” and “deliver”, but also considers readmission “returns”.

H&A: What are the benefits of enhanced SCM in a healthcare setting?

CB: Some of the more obvious benefits are: cost savings, improvement in quality, no out-of-stock issues, increased capacity, the ability to deliver care to a greater number of people and the ability to provide higher quality care without having to increase cost or the amount of resources.

These are the primary supply chain benefits; when supply chains are optimised there is increased visibility and transparency of information across the whole chain. This means that even under resource limitations, the system is able to serve more patients with better outcomes than it would otherwise be able to do.

I know an example in which a large integrated healthcare system, used long-term data and robust analytical tools with its supply chain group to make a positive contribution to clinical practice. As a result, the change resulted in fewer complications, and better outcomes – improving quality and reduced costs. That is real innovation and leads me to predict that the “next big innovation” in healthcare will come from this kind of supply chain management.

H&A: At the workshop you asked respondents what issues were keeping them awake at night in relation to SCM? What issues did they mention?

CB: Cost, getting a handle on data, the complexity of products, dealing with back orders, government legislation and other forms of involvement were all mentioned. However, the most significant concern, the one that came up most often was the challenge of working together effectively with those in the clinical role. Working together effectively means that both groups are able to work together to create better outcomes. The best advice is to, collect, analyse and use the best data that you have.