Product standardization is a key method hospitals and health systems can use to improve efficiencies and cut supply chain costs. However, it must be approached strategically.
One way healthcare leaders can ensure they are selecting the right standardization strategies for their organization is by leveraging the vast amounts of data available to them, explained Ben Roewer, senior manager of Cardinal Health Spend Essentials™.
Here, Mr. Roewer discusses how healthcare organizations can use data to select and support standardization initiatives, offers tips to overcome SKU rationalization hurdles and describes how standardization can help systems better navigate supply disruptions.
Question: How has the increased availability of data affected health systems in recent years?
Ben Roewer: One of the major increases in data comes from the proliferation of EHR systems. With the rise of EHRs, health systems and providers have access to a wealth of valuable information about clinical outcomes, charges, and expenses. Materials management systems have been equally important. Both can be particularly challenging to manage in recent years with mergers and acquisitions creating a need to merge and cleanse systems and data.
In addition, health systems are needing to allocate more time, expertise and money to sort through and analyze all the data that is available. There is now more information available than ever before, and many organizations often get bogged down too much in day-to-day operations to analyze and identify what value-added opportunities might live in the data on which they’re sitting. It can also be challenging to find the right resources to do such work. In some health systems, I see clinicians or materials managers being tasked with finding value in this wealth of data on top of their normal day jobs.
Overall, there's an expectation that health systems should be able to derive value from the data they collect and maintain, but without a clear direction or dedicated resources, health systems can have too many competing demands to execute on it successfully. It takes people, expertise and a direction to use data appropriately.
Q: How can data help health systems determine the right product standardization initiatives for their facility?
BR: Sometimes it is challenging for facilities to decide where to start. Having clear data, which must be clean and up to date, can help health systems make informed decisions about what clinical area or product category to tackle first. The data can help health systems make decisions based on where a facility could garner the most savings, or where it can align better with its group purchasing contracts. At Cardinal Health, we give health systems visibility across all product categories using data to help them find an area to target first.
Q: Why is SKU rationalization so vital?
BR: SKU rationalization can help simplify the supply chain. By rationalizing or standardizing, health systems have fewer products to manage, which frees up storage space and can help limit the number of potential stock outs. Additionally, rationalizing can lower the number of manufacturers a healthcare provider buys from, which can be a positive from a contracting perspective. It also presents an opportunity to save money with purchasing.
Another big reason, outside of the materials management side, is that SKU rationalization can help standardize patient care. If physicians care for patients at different sites in the health system, it helps ensure that the same products will be at each facility.
Q: What are some hurdles facilities face while implementing SKU rationalization?
BR: Implementing SKU changes can be challenging. I think one of the biggest reasons, beyond not having the right data or expertise analyzing the data, is because it requires a strong change management process. What I've seen is that someone in the materials management department might be allured to a standardization opportunity because reducing SKUs can cut manufacturer costs. However, if you don't have a way of communicating the need for SKU rationalization with clinical staff, a standardization opportunity could stop in its tracks. Leadership needs to be clear with the clinical staff about why they are making this change and why clinical staff should get on board.
Another hurdle is that health systems are facing a lot of demands and have limited resources. As a result, supply chain leaders need a strong business case for finance leadership to make it clear that dedicating one or two people to standardization will actually yield savings and sustain savings. It requires folks to sell the need for standardization to their senior leadership, who have the power to activate resources or put people in place to pursue the effort. Standardization isn't a side job; it really takes a lot of dedicated effort and good communication.
Q: How can health systems overcome those challenges?
BR: Starting with the data is certainly key. Providing data helps overcome the challenge of where to start and what products to standardize.
Another major way to overcome these challenges is to have a change management process in place. This requires having the right people involved in the change from the clinical side, whether those are physicians or nurses. These clinical representatives should be prepared to translate standardization decisions in a way that's going to resonate with or get buy-in from clinicians. It also requires having engagement and support from the right senior leaders and having a value analysis team in place to measure the work and complete the standardization.
The health systems that are the most successful at SKU rationalization have buy-in from clinicians and senior leadership. These organizations have fostered a collective understanding about why hospitals buy certain products and the purpose of reducing the number of purchased products.
Q: What impact does standardization have in times of supply chain disruption, like the current COVID-19 pandemic?
BR: Organizations who have undergone formal standardization efforts may have already determined alternative products that are suitable for their facilities. In the time of crisis, like the current pandemic, when the supply chain is strained and supplies are running low, having already gone through that exercise makes a system more flexible and adaptable. Essentially standardization can give organizations more confidence that they will have the right supplies to care for patients.
In addition, hospitals starting standardization projects during or after the pandemic need to understand that what was purchased and used in late February, March and April is not the norm. While it’s important to earmark this period’s usage in order to potentially learn from the experience, it will be best to look at data from a time period outside of the pandemic in order to make judgments that reflect typical usage. In short, don't make standardization decisions strictly based on what the organization was buying during the pandemic.
To learn more about how Cardinal Health is handling the COVID-19 pandemic, visit cardinalhealth.com/covid19.