The challenges of healthcare reformdue to the Affordable Care Act are forcing hospitals to look at cost effective ways of managing and improving patient care. Merging plays a significant role in providing a platform for hospitals to experiment with innovative new forms of healthcare delivery. One such form is the Accountable Care Organization (ACO).
The ACO model seeks to tie provider reimbursements to quality Key Performance Indicators (KPIs) while achieving reductions in the total cost of patient care. Specifically, the goal of ACO is to provide high quality care while at the same time avoiding the unnecessary duplication of services. Currently, there are approximately 272 ACO's in America.
Supply Chain operations and activities have become the primary focal point for cost reduction programs since these costs consume as much as 40 percent of total operating budget. This is the secondlargest expense for hospitals after labor. Based upon an average operating margin of 5.5 percent; every $100,000 in cost reductions from Supply Chain operations represents a $1.81 million increase in revenues.
Costs reductions can be achieved through the integration of multiple Supply Chain practices into a single "common" operation. Standardization throughout the healthcare system will reduce labor, improve efficiencies, and lower the types and levels of inventory.
The following are some of the tasks involved in integrating, and thus optimizing, your Supply Chain operation:
1. Verify: Document your current operations and support areas across the entire enterprise. Activities in this task would include identifying space usage, manpower utilization, technologies utilized, vendors, inventory mix, inventory quantities, order fulfillment software, care giver preferences, replenishment methodologies, systems and equipment.
2. Evaluate: Analyze the data you obtain to identify the preferred Supply Chain operation for the entire enterprise. This process includes the evaluation of Supply Chain "Best Practices" within other industries and then determining which best supports the enterprise operation while improving patient outcomes.
3. Discover: Identify additional opportunities that will help streamline costs. One opportunity would be the establishment of a consolidated Service Center that would centralize the systems' supplies, beds, patient equipment, linen, medical records, purchasing, and support services administrative offices. (A financial analysis would need to be performed to determine if a consolidated Supply Chain Service Center is warranted.)
4. Standardize: Establish and set new guidelines for operations, vendors, inventory mix, inventory quantities as well as replenishment software, methodologies, systems and equipment. This includes the realignment of Supply Chain operations within Central Sterile Processing, Environmental Services, Interventional Platform, Clinics and Nursing Units.
5. Set Objectives: Determine and set Key Performance Indicators (KPIs) that target improved patient care, cost reductions and space savings. KPIs should be established for each facility in the enterprise. This becomes the benchmark to determine the success of the redevelopment plan.
6. Plan: Develop a strategy for an enterprise-wide implementation plan. The plan should be phased to transform one facility at a time. This approach allows the implementation team to evaluate, step by step, if the KPIs for each facility were met.
7. Launch: Establish an implementation team comprised of internal stakeholders. This team is responsible for training, supervision, identifying performance gaps, and then providing remedies. This team should be dedicated to the implementation of the plan and travel from facility to facility.
Although the integration of Supply Chain operations provides an opportunity to manage costs, CEOs and CFOs should understand that there are some inherent difficulties. These difficulties include Supply Chain managers with different operational methodologies and philosophies, time availability of in-house staff to integrate operations, and the knowledge of staff about Supply Chain operations outside the healthcare industry.
1 From "ACO directory: 272 ACOs in America", written by Ayla Ellison and Jake Wise, July 23, 2014. Becker's Hospital Review
2 From "Not you Fathers Supply Chain", written by Michael Darling and Sandy Wise, April 2010 publication. Materials Management in Health Care
3 From Setting the Record Straight on TIME's Article "Bitter Pill", American Hospital Association, February 28, 2013
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