The Collaboration Imperative

This article originally appeared in [ SourceBook ] Purchasing Power.

With the outcome of the 2012 presidential election, which ensured the forward motion of the Patient Protection and Affordable Care Act, healthcare providers are facing unprecedented productivity imperatives.  From the onslaught of the newly insured to decreased reimbursements, the not-so-new normal for supply chain managers requires a spirit of collaboration.

What is the New Normal?

As we enter the fifth year after the great recession and financial crisis of 2008, the healthcare environment is on a path to doing more with less.  Providers must do more procedures with less reimbursement, effectively treat greater severity in less time, see more patients with fewer staff, increase quality while reducing cost and maintain an increasing workload on a smaller budget.  These are daunting tasks.

A 5-Item Improvement Checklist

Whether large or small, providers have a common work list, with tasks sharing the common thread of a patient focus and a need for collaboration.  As the industry awaits the next wave of regulations and rulemaking from the Centers for Medicare & Medicaid Services, everyone is diligently working on improving:

1. Quality
2. Patient Safety
3. Patient Flow
4. Patient Satisfaction
5. Coding and Charge Capture

Improving the quality of care remains the top priority, and doing so requires a focus on safety and error avoidance.  Many facilities are employing Lean Six Sigma and other workflow techniques to design more efficient patient care pathways that reduce delays and unneeded waiting.

An efficient care episode has the quadruple benefits of increasing quality, reducing likelihood of harm, bettering throughput and efficiency, and enhancing patient satisfaction.  It’s important to build a strong IT infrastructure to empower a well-designed care pathway, and coding and charge capture must be dialed in to support the process.

Beyond Arbitrage: The Collaboration Imperative

The bulk of supply chain managers’ work is concerned with what can be fairly characterized as arbitrage: exploiting market inefficiency to acquire a commodity at a price advantage.  This function will never cease, and HealthTrust members are experts at utilizing contracts, negotiating and achieving savings goals.

However, the providers’ work list in the new normal requires even more.  Because it’s difficult to chart the progress and savings that result from large projects, it’s important to achieve some quick wins throughout the process.  Supply chain managers can make these wins happen with tools and processes that rationalize incremental improvements and sustain improvement.

For example, value analysis can be focused on processes as well as devices, and as a result, the results of process change can be more readily quantifiable.  Similarly, benchmarking and spend analysis tied to clinical and operational processes can be expanded to include next-link labor and utilization factors.

By using the best practice tools familiar to supply chain managers, the focus of process improvement—the patient and the quality of the care episode—can be more clearly rationalized.  Risks and disruptions can be modeled using supply chain manager’s techniques, ensuring the goals of the process improvement project are robust.

In the end, for supply chain leaders to deliver on their potential value to the organization, they need to increase their collaborative effectiveness.  The tools and techniques used to achieve pricing-related value can be readily repurposed to achieve broader quality-related value.

What’s Next?

The pending changes confronting providers in 2013 increase both the influence of supply chain leaders and the need for them to cultivate a more collaborative atmosphere.  Over the next 24 to 36 months, providers are confronted with three consequential changes:

1. As the Sustainable Growth Rate Physician Pay-Fix is reached and implemented, additional fee cuts will be implemented.  Congress must reduce the deficit and map the course of healthcare reform on a renewed footing.  One of the biggest areas of reform not yet implemented is the now nearly $400 billion cost of the physician fee schedule adjustment.  Adjusting physicians’ fees is unpopular and risky.  Therefore, it’s likely that additional fee schedule offsets that affect devices, drugs and inpatient/outpatient fees will be proposed and implemented.  Providers will need to be ready to digest additional fee reductions, some of which are yet to be proposed.
2. Mergers and consolidations in the provider and supplier domains will continue.  Many facilities are severely challenged in the current environment.  Some are failing to reduce costs and improve quality enough to avoid reimbursement cuts from value-based purchasing and episode-based payment schemes.  Many of these facilities are likely to attempt mergers, increasing the likelihood that the landscape for providers will remain intensely competitive.  Similarly, suppliers are seeking to gain scale by acquiring rivals to consolidate markets.  A concentration of power or scale in any market increases risks for participants, as alternatives and substitutes dwindle.
3. The transition toward consumerism in health care will accelerate.  The acceleration of consumerism is perhaps the most influential change affecting healthcare in the near future.  Engaged patients, empowered by mandated insurance coverage, will continue to reshape the provider landscape.  They’ll focus activity on building brands and enhancing patient experiences.

The path forward might be clearer in 2013 but certainly no easier.  Today, supply chain managers need to collaborate and elevate their influence.

Image: Google Images