Survey Article: Supply Chains in Health Care

In my search for resources to help me begin to gain an appreciation of how order and inventory management are addressed in health care (particularly on the level of large systems) I stumbled on a working paper by Manuel D.Rossetti, Ph.D., P.E., Professor of Industrial Engineering at The University of Arkansas. Inventory Management Issues in Health Care Supply Chains [1] is a concise and approachable article that describes the current state of the health care value chain, problems with the current model (where opportunities for streamlining to the benefit of the health system might exist) and ways in which these problems might be mitigated.

Rossetti looks briefly at the two ends of the spectrum, e.g. Mercy Health System in St. Louis, comprised of 31 hospitals across 4 states [2] which manages its warehousing and in-system shipping entirely in-house thereby cutting overhead from distributors, and the Nebraska Medical Center, a single hospital which outsources its inventory management entirely to Cardinal Health, a very large ($103 billion) healthcare supply chain company. [3] He then goes on to survey the literature from the past decade or so, and finally suggests topics for future investigation.

This paper is a nice survey of current thinking in the field of health care supply chain management and is an excellent introduction for anyone wondering what kind of infrastructure is behind their physician or nurse’s ability to reach into a cabinet for a needed item at any given time.

As an aside, it is worth taking a look at the 2011 Healthcare Supply Chain Top 25, wherein Gartner “strives to identify organizations that use their supply chains to improve the patient care experience.”[4]

Question:

Hospitals need to stock consumable items across a broad cost-range, e.g. alcohol prep pads costing pennies or less per unit to teeny-tiny drug-eluting stents for your plugged coronary arteries costing more than $1000 each. How do they optimize ordering and inventory so that the overhead for items across the cost range is optimized? Remember that a “stock-out” condition for a stent could be devastating or lethal for a patient who presents acutely with a heart attack. Delivery the next morning before 8 a.m. won’t cut it.

References:

[1] Rossetti, M.D., (June 5 2008). Inventory Management Issues in Health Care Supply Chains http://www.uark.edu/~rossetti/reports/healthcare_supply_chain_rep.pdf accessed 10 September, 2012.

[2] Mercy Health System website, http://www.mercy.net/newsroom-mercy-quick-facts accessed 10 September 2012.

[3] Cardinal Health website http://ir.cardinalhealth.com/ accessed 10 September 2012.

[4] Blake, B., O’Daffer, E., et al. 9 (30 November 2011). The Healthcare Supply Chain Top 25 for 2011 http://www.gartner.com/resources/227200/227253/the_healthcare_supply_chain__227253.pdf accessed 10 September 2011