In the past, health system leaders were almost solely concerned with delivering clinical excellence to patients. Operating efficiency wasn't as essential to success as it is now — striking the right balance between clinical excellence and operating efficiency has become table stakes for today's health systems.
To achieve this equilibrium, leaders are leveraging supply chain as a strategic asset.
Becker's Hospital Review recently spoke with two executives from Cardinal Health: Robert Rajalingam, senior vice president of strategic accounts and enterprise marketing, and Michael Brown, vice president of managed services. The two spoke about their experiences working with leading U.S. healthcare systems and detailed how effective supply chain management can yield better clinical outcomes and more efficient hospital operations.
Executive mandate: Balance clinical excellence and operational efficiency
The healthcare organizations most successful in achieving both clinical excellence and operational efficiency have a clear vision and mandate from the CEO or other C-level leaders. "The health systems that find the right balance make sure the supply chain leader has a seat at the hospital CEO's executive table. The C-suite also encourages the supply chain and clinical teams to work together," said Mr. Rajalingam.
Pharmacy is often one of the most underutilized resources to improve efficiencies and clinical programs. It must also be elevated to the executive team, so the pharmacy department's strategies and goals can be aligned with the strategic goals of the entire organization. "Traditionally, pharmacy has been relegated to the basement of the hospital and viewed as a utility. The pharmacy department now must be viewed as a strategic asset. It needs to be represented on the care team and the executive committee," Mr. Brown added.
What holds supply chain standardization back?
Supply chain standardization is a proven way to achieve operational efficiency and clinical excellence. Reducing variation lowers costs and contributes to higher levels of safety, especially around pharmacy. "Cardinal Health has intel based on deep relationships that confirms clinical standardization and supply costs are the two leading health-related cost-savings opportunities for health systems," explained Mr. Rajalingam.
Healthcare systems are more successful at achieving those cost savings when they address important organizational and cultural issues, which can otherwise hold supply chain standardization back. Best practices to address these hurdles include:
- Implementing the right reporting structure. Unless the organizational structure is aligned to the strategic objectives, teams will run into conflict. Ideally, supply chain and pharmacy leaders report to the CEO.
- Cross-training supply chain and clinical leaders. Cardinal Health is seeing more healthcare supply chain leaders with clinical backgrounds. "This enables them to build credibility and bridge the inherent cultural and strategic differences between clinical and supply chain groups in hospitals," explained Mr. Rajalingam. It is also helpful when clinicians are cross-trained or exposed to supply chain issues. Understanding supply chain metrics helps them appreciate the tradeoffs between the clinical and operational environments.
- Confronting the cultural shift. Historically, the clinical community has perceived supply chain leaders as opposing product choice and continually saying "no." Unless this perception changes, clinicians won't view supply chain as a partner. Supply chain leaders must walk in clinicians' shoes to understand why they want different products based on different patient criteria or situations. Once supply chain professionals understand that, they can negotiate contracts more effectively.
When it comes to supply chain standardization, it is critical to get some early wins on the board. A recommended approach is to start with high-volume, high-spending categories that use multiple vendors. Standardizing through consolidation decreases variability and leads to better outcomes. Organizations also see savings. "Once you get wins on the board, it creates a flywheel of momentum. When both the operational and clinical sides see the benefit, you can go after more challenging projects and make more far-reaching changes," Mr. Rajalingam said.
Pharmacist, meet your patient
As health systems strive to balance clinical excellence and operational efficiency, the role of the pharmacy is also evolving. One trend is combo-staffing models where traditional pharmacy activities are performed remotely. This frees on-site pharmacy staff to participate in expanded, patient-centered care.
"We work with some facilities where the pharmacists' duties include medication reconciliation and discharge planning with patients before they go home. Hospitals see a direct correlation between these activities and increased HCAHPS scores for medication questions," Mr. Brown explained, adding that one hospital Cardinal Health has collaborated with recently launched an initiative to reduce readmissions for cardiac patients. As a part of this program, pharmacists speak with patients during the discharge process, review prescription instructions and help patients pick up medications from the pharmacy before leaving the hospital. This patient-centered approach to pharmacy has significantly reduced readmissions at the hospital.
Health systems are no longer confined to the four walls of the hospital. As organizations expand into ambulatory care, the silos associated with traditional pharmacy practice are crumbling. "When I graduated from pharmacy school years ago, you were either a hospital pharmacist or a retail pharmacist," Mr. Brown said. "Those days are over. You have to be able to do both." To ensure high-quality care throughout the continuum, pharmacists must meet patients wherever they get care — that could be the physician's office, the hospital, a surgery center or a retail pharmacy.
Transforming the pharmacy department from reactive to strategic
Pharmacy administrators can often fall into two traps: They can be overly focused on cost control and/or overly reactive to outside forces, like regulatory changes or drug shortages. In today's healthcare environment, the best pharmacy leaders understand the organizational strategy and look at things through a lens of operational excellence. This perspective positions them to identify initiatives that align with the health system's goals.
"If you're only focused on cost-cutting, you may be doing more harm than good," Mr. Brown said. "We try to reframe the conversation and explore how pharmacy teams can drive innovation in their health systems. Given mounting financial pressures, innovation is the key to expanding services and improving care."
Once new policies are in place, it is essential to involve the key stakeholders and measure results. Two types of metrics are helpful for the pharmacy department:
- Cost metrics related to drug utilization. When Cardinal Health rolls out clinical programs for clients, it tracks drug costs by prescribing physician, DRG code, discharge category and more.
- Operationally dependent scorecard metrics. Regulations mandate that pharmacy departments do certain things such as count controlled medications and ensure that all employees are licensed. To monitor these activities, Cardinal Health maintains a scorecard for clients with approximately 450 metrics. The scorecard is reviewed annually then spot-checked throughout the year, which supports continuous compliance.
Looking ahead: Data, collaboration and strategic roadmaps
In the next five years, Cardinal Health expects that data, collaboration and strategic planning will only become more essential to bridge the gap between clinical excellence and operational efficiency.
Data helps different stakeholders find common ground around organizational objectives. "Good data systems are number one. If a healthcare organization doesn't have good data and systems to understand their usage patterns and clinical metrics, they will be very challenged as they try to improve in those areas," Mr. Rajalingam said. One way Cardinal Health can help is through the WaveMark inventory management platform, which provides visibility into data while also helping to collect and generate data that drives insights.
Collaboration with top suppliers, vendors and business partners is also critical for hospitals. Cardinal Health works with many health systems at a strategic level to create three-to five-year roadmaps to help achieve operational efficiency. These roadmaps assess potential areas for growth, possible changes to the patient population and operational targets necessary to achieve cost savings.
"Once you have a strategy, you must prioritize and put together a tactical plan," Mr. Brown said. "In pharmacy, for example, it's all around which medications to use and their costs. Another consideration is how to redeploy staff to expand patient care. An area that's often overlooked is continuous compliance."
Conclusion
There is great opportunity standing right in front of health systems to make meaningful clinical and operational improvements. Cardinal Health's work with health systems has contributed to a better patient experience, as evidenced by improved HCAHPS scores.
"All these factors affect the financial metrics, so the organizations that are further along with the implementation and measurement of correlating clinical and financial outcomes are also seeing higher margins and profitability in the system overall," Mr. Rajalingam said. "To see them improve patient outcomes has been exciting."