Health system leaders look to reduce their overall costs by targeting supply chain optimization — almost half say it’s their No. 1 cost-saving initiative this year. But amid financial challenges, inflation and supply shortages, that goal is much trickier to achieve today.
The traditional group purchasing organization (GPO) approach fails to help leaders attain needed cost reduction. While 37% of total costs of care come from supply chain, 32% of hospitals aren’t satisfied with their GPO.
High-performing health care supply chain teams leave behind the transactional mindset to create value beyond cost reduction alone.
“As a supply chain, we must not sacrifice quality in exchange for lower price points,” says Dan Hurry, president of Advantus Health Partners. “It is our job to strike a balance that meets the quality needs of our patients and clinicians while helping our organizations achieve financial stability.”
A transformational supply chain strategy helps health systems align with value-based care. Leaders of high-performing organizations build supply chain relationships that:
- Improve access to prescription drugs.
- Enhance the care experience for patients and clinicians.
- Create a catalyst for innovation.
Here are three lessons from high-performing supply chains that enable long-term value for their health system.
1. Create stable, long-term supplier relationships
Don’t accept the practice of short-term supplier contracts. They create extra work and limit you from pursuing value beyond price points. Just as you finalize an agreement, educate your staff and convert a product, you’re back at square one: revisiting pricing.
Instead, pursue sustainable relationships with suppliers built on quality and transparency. The ideal supplier or GPO is open to these dynamics. Look for partners willing to:
- Align on common goals.
- Have frank, honest discussions.
- Share greater transparency.
The key may be quality over quantity. Identify fewer suppliers with which to build trust and long-term collaborations.
2. Hold suppliers and hospitals accountable for performance
Mutual accountability creates a foundation for trust and collaboration to thrive. But simply measuring supply chain performance against an annual budget fails to measure if you’ve created value. Instead, more frequent performance evaluations — perhaps quarterly or monthly — enable operational decisions closer to real-time.
Consider tracking and holding all parties accountable to these key performance indicators (KPIs):
- Contract value
- Customer service and satisfaction
- Data quality
- Inventory turnover
- Purchase order cycle time
- Service response performance
3. Conduct ongoing value chain analyses
With the right data, supply chain leaders can play a pivotal role in driving key organizational decisions. Start by investing in technology that captures accurate, real-time data while leaning on your GPO to maximize available data. Backed by quality information, supply chain leaders can proactively deliver creative solutions to create value for patients and providers.
Vet the right partner to transform your supply chain
As your organization transforms its approach to health care supply chain management, your ideal partners will share your desire for a collaborative relationship that aligns with value-based care.
Advantus was founded to change the status quo in health care supply chain and create more long-term value for health systems, providers and patients.
Contact us to see how we can support your vision of a value-based supply chain.
Sources: Gartner research, Definitive Healthcare, and FTI Consulting GPO Survey, 2021.
