Michael DeLuca, EVP of Technology & Client Services, Prodigo Solutions
For all the outdated processes and inefficiencies we hear about in healthcare, there are an increasing number of bright spots; new solutions or ways of doing things that make you wonder: why didn’t we think of (or do) this sooner? One of those bright spots is a fairly recent development in supply chain management technology.
"Enhancing supply chain efficiencyrequires increased availability of andaccessibility to affordable, converted data"
The same Amazon-like, advanced e-procurement technology that has been enjoyed in the retail sector for years is now being tailored and applied to healthcare purchasing. As these best practices are put to work in healthcare, new supply chain management solutions are emerging that offer clinicians and staff a more user-friendly shopping experience when searching for medical supplies, yielding efficiencies and more precise contract compliance management, enabling health systems to save millions of dollars. While it may seem like a no-brainer, in order to truly appreciate how significant these developments are, you have to understand the complex challenges within the existing infrastructure that these new solutions had to address.
Here’s an example of just how fragmented healthcare purchasing is: users buying products and services don’t know what their hospital is paying for them. That’s, in part, because not everything under contract is catalogued, buying happens through a multitude of channels, and vendors may charge a different price than what’s on the purchase order, among other contributing factors. To overcome those challenges and increase visibility, new healthcare supply chain technologies must increase integration of contracts, pricing tiers and rebates, while improving integration between ERP systems, electronic medical records, clinical sub-systems and supplier systems. Calling it complex is an understatement.
A Reticence to Share Data
Enhancing supply chain efficiency requires increased availability of and accessibility to affordable, converted data. That means applying the same supply chain data standards used by retailers like WalMart and Zappos to the healthcare supply chain. Advancing data standards initiatives has been difficult in Enhancing supply chain efficiency requires increased availability of and accessibility to affordable, converted data healthcare because, until recently, suppliers have been hesitant or averse to sharing content because they feared commoditization. That tide is finally starting to turn, thanks to the FDA’s GUDID, GS1’s Global Data Synchronization Network (GDSN) and other data sharing initiatives that are starting to push progress forward. Manufacturers are beginning to realize that sharing detailed item data for their products is not only good for their health system customers, but good for their business. It can help maximize sales volume, increase customer satisfaction and decrease product return volume.
A Need to Leverage Existing Assets
ERP systems were originally developed to specifically serve the needs of internal purchasing staff. As self-service requisition gained popularity in the interest of process efficiency, health systems needed to make their catalog content available to clinicians and other staff outside of purchasing. Since health systems had invested millions of dollars and hundreds of integration hours into their ERP systems, they justifiably wanted to leverage those assets. The downsides to doing that are that item masters weren’t developed to be robust enough to allow clinicians and other staff to make quick and educated purchasing decisions, and the interface wasn’t intuitive, leaving users unsure whether they were ordering the product they needed. For example, they don’t see pictures of the product they’re ordering; only concatenated written descriptions. That’s equivalent to a consumer shopping for shoes online without seeing what they look like. The chances of purchasing what you want to drop significantly when you can’t see the product. That’s particularly problematic in healthcare and arguably creates more inefficiencies.
To be fair, ERP systems often get a bad rap. Those investments definitely serve important purposes, but there are gaps in their ability to support self-requisitioning. Since replacing an ERP system is highly time-consuming and expensive, the best way for the healthcare industry to apply retail shopping best practices is to integrate solutions that leverage existing infrastructure rather than replace it. It’s simply taken time for the leading edge of third party solutions to figure-out how to easily connect to the major ERP and clinical systems.
Looking Ahead to an Improved Hospital Purchasing Experience
Now that the difficult hurdles to adoption have been cleared, let’s take a closer look at some of the new features and functionalities emerging and the associated benefits we’ll realize from improving healthcare e-procurement.
• Cost-Savings: Between dramatic efficiency gains and improvements in contract compliance rates to realize volume discounts and rebates, the potential for cost savings is in the millions.
• Influencing Purchases to Drive Utilization Compliance: Emerging advancements in supply chain software allow health systems to influence purchases at the point of requisition. When shopping for products, requestors only see items for which the health system has negotiated the best price, which allows the system to direct spend to meet contract terms.
•Increased Transparency and Integration: Bringing disparate applications together is a giant leap forward in improving data and analytics interconnectivity. As real-time visibility to what’s purchased improves, contract compliance rates also improve and put health systems in a better position of leverage to negotiate more advantageous future contracts.
•Enhanced Search Functions: If clinicians and staff are better enabled to find the products they’re looking for, it increases efficiency and mitigates risk of incorrect purchases or delays.
• Automating Manual Methods: Replacing labor-intensive traditional processes, such as paper-based invoices and disparate data sources, reduces errors and increases efficiency.
These long-awaited benefits are certainly welcome news, but there may be even more bright spots ahead. While much of this article highlights how far behind the healthcare sector has been in leveraging more advanced e-procurement technologies, the industry may really be turning a corner to become more of a leader in this space. Some of the newest capabilities–such as enabling improvements in recall management and the management of bill only purchase orders–may have other market segments taking notice, giving us yet another reason to celebrate. Congratulations, healthcare supply chain, you have finally arrived.