The healthcare supply chain is incredibly complex, perhaps more so than any other industry. The unique challenges of manufacturing, shipping, purchasing and stocking various medical supplies and devices coupled with a lack of standardization across the supply chain has produced a wasteland of multiple inventory management systems in hospitals, that lack data continuity between information systems and overall product visibility.
These difficulties become even more critical for high-value implantables, such as valves, pacemakers and stents that can expire and result in high levels of waste across the supply chain.
This costs the healthcare industry an estimated $5 billion in wasted product each year due to lack of visibility of unused, expired and obsolete products, too much inventory on hand or missed charge capture opportunities, according to a recent webinar hosted by Becker's Hospital Review featuring Carola Endicott, vice president of services and operations for Cardinal Health, Mike Hughes, vice president of supply chain and logistics for Cook Medical, and Alan McQueen, director of supply chain logistics and distribution at St. Louis-based BJC HealthCare.
Cardinal Health, a $91 billion business that helps providers make care more cost-effective, collaborated with manufacturer Cook Medical and the nonprofit health system BJC HealthCare to address the significant waste and inefficiency experienced in BJC's supply chain for high-value implantables in two catheterization laboratories and one GI laboratory in three different Missouri hospitals.
"Our consolidated supply chain management function is really something that helped a project like this come to fruition," says McQueen of BJC HealthCare. "We went from a very decentralized organization to one that is managed under one umbrella and one leadership structure."
BJC HealthCare realized historical approaches to supply chain management weren't working: Pressuring manufacturers to drive down prices no longer kept costs in control, while consignment and bulk buys resulted in expired product, high shipping and labor costs, overstocking, out of stocks and inventory shrinkage. Expired product just in the system's operating rooms racked up seven-digit dollar figures in waste, according to McQueen of BJC HealthCare.
BJC HealthCare, Cook Medical and Cardinal Health were a natural fit for collaboration on the project, according to McQueen of BJC HealthCare. The organizations shared values and a vision, with similar levels of supply chain maturity and similar abilities to commit resources.
"Collaboration may not be the right word for this," says McQueen of BJC HealthCare. "I almost look at it as more of our partnership with our teams and it was a natural fit with these three entities coming together. We can trust each other…I think that's why we've been so successful."
The project was piloted in two catheterization laboratories — one in O'Fallon, Mo.-based, 42-bed Progress West Hospital and another in 113-bed Barnes-Jewish St. Peters (Mo.) Hospital — in addition to the GI laboratory at the St. Louis-based, 392-bed Missouri Baptist Medical Center.
During the pilot, Progress West Hospital reported no expired products and found $5,500 in credits in just one month. Barnes-Jewish St. Peters Hospital reported no expired consigned products, and just four Cook-purchased products expired. Barnes-Jewish St. Peters was also able to complete three product transfers to other hospitals and spent less clinical time on inventory.
Missouri Baptist Medical Center reported no expired products and was able to move 163 consigned products back to Cook Medical, which will now be offered through direct purchase. Missouri Baptist Medical Center achieved a 57 percent reduction in inventory and over $17,000 in excess consignment was returned for credit as a result of the project.
To achieve this success, the organizations first identified shared pain points in the supply chain and developed a strategy to turn those areas of waste into areas of opportunity.
"That shared pain is the crux of the problem [across the supply chain]. It's where we also see the opportunity for going forward," says Endicott of Cardinal Health.
A tremendous amount of time and energy went into identifying these pain points and in the planning stages of the project, according to Hughes of Cook Medical. It allowed BJC HealthCare, Cook and Cardinal to identify what needed to change and develop a baseline to track progress.
"The Gemba process was outstanding," says Hughes of Cook Medical. "We had a chance to get into the care areas at BJC HealthCare, talk to the clinicians and lab managers in the cath lab and the GI lab, get over to the Cardinal distribution center outside of St. Louis, and walk the floor there and look at the supplies. We really spent a tremendous amount of time and energy on the front end of this project understanding what the baseline looked like."
The Gemba process built a situational awareness of the issues across the supply chain. It became clear that the organizations lacked shared, actionable data and therefore lacked end-to-end visibility.
"If we had real-time data relative to the utilization of our medical devices in any given clinical setting, it would have a very immediate impact, both on the overstock and out of stock points," he says.
"The supply chain in healthcare has really good data, actually, on what was bought," says Endicott of Cardinal Health. "But we don't really have data about the point of consumption, that key point of use that can then drive back to the hospital for there to be supply chain decisions around a particular product."
The organizations implemented a solution to create better end-to-end supply chain visibility: radio-frequency identification-based technology (RFID), in which tags that electronically store information are placed on high value implantable products to provide manufacturer, distributor and provider with real-time data and analytics on a common platform.
Stakeholders are able to view data on a dashboard, which includes information on inventory levels and usage trends, as well as real-time information on product locations, expiration dates and frequency of use. It enables better product allocation, especially for consigned products, according to Hughes of Cook Medical. It also allows for improved future processes. The predictive capability of the program allowed for more accurate ordering, inventory on-hand and reduced waste.
"There is a better way," says Endicott of Cardinal Health. "There is a completely different paradigm that is not based on any one member of the supply chain maximizing their own interest. We see it as a shared pain with the possibility for shared gain in the supply chain."
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