Supplies are the second highest
contributors to costs in hospitals. Supplies may range from cotton balls to
knee implants. As it turns out, supplies are an area that could do with reform
when it comes to reducing the cost of healthcare. Doctors prescribe a variety of expensive
medications, implants and other devices without much thought to their costs
that compels the hospitals to purchase these and put the final cost burden on
the patient/payer. A misalignment of incentives between doctors and hospitals
has resulted in supplies representing 31% of the high hospital costs that
burden patients in the end.
Seeing this inefficiency in supply,
researchers thought to study and supply chain in hospitals and come up with a
solution to curb supply costs. Gainsharing is one solution that has been
proposed by them. In the system of gainsharing, doctors are rewarded for
increasing efficiencies and reducing costs. In this way both, the doctor and
the hospital share savings from improved efficiencies. The reduced cost of healthcare
also benefits payers and patients, in the long run. Gainsharing experiments
were performed in 13 different hospitals for the use of stents in cardiology.
It was found that gainsharing lead to 7 percent decrease in costs per patient
without affecting the quality or access to care. However, the U.S.
Department of Health and Human Services Inspector General had objections to
gainsharing and found it to violate anti-kickback regulations, due to which the
researchers had to take special permission for their research. This
does raise a larger question of the negative implications of gainshairing. Even
if a few hospitals are allowed to adopt gainsharing, how will it be regulated
and monitored to ensure that there are no lapses in the quality and access to healthcare?
As more and more hospitals begin to adopt the system, this problem will become
all the more complicated and difficult to determine whether or not the patient’s
life was put on risk. It’s not like doctors don’t already take into account
cost. It is well known that doctors will not prescribe certain treatments (in
case alternatives are available) if a patient’s insurance does not cover it, or
the patient cannot afford it. Gainsharing will only give an incentive to
doctors to use supplies that are cost efficient. But to put the system in
practice, effective checks and measures will have to be out in place.
Supply chain management has also lagged
in the hospital space because of the limited customization and choice offered
by the suppliers in this space. Hospitals generally buy finished products, off
the shelf which sets them apart from other retailers or service providers that
have attributed their success to supply chain management. For example, an auto
manufacturer might ask its supplier to design a different kind of break for a
new car. However, Hospitals can’t ask a med-device company to make an implant
specifically designed for the hospital. Supplies haven’t really been seen as
assets before, so the question of supply chain management never arose.
There are certain procedures performed
in hospitals whose costs heavily depend on supplies. These are referred to as
“supply intensive admissions”. For these procedures, supplies take up 50-80% of
the total cost of the procedure. They include joint replacement and cardiac
surgery that comprise the fastest growing segments in American medicine
with the highest costs. An approach to reducing the cost of the
medical supplies in these procedures would be standardization. Healthcare
practitioners will have to come together to decide on a set of common products
for the supply intensive procedures which will lead to lower supply costs.
To bring in an efficient supply chain
for hospitals, it will become imperative for doctors, hospitals and suppliers
to coordinate their efforts to reduce costs and serve patients at the same
time. These parties have traditionally worked in silos, sometimes even sparring
with each other. Collaborating with each other will require the realigning of
interests and redefining their roles in the healthcare system in order to
mutually benefit each other. Operational efficiencies will benefit all parties,
that much is obvious. Whether the above mentioned strategies will work on a
large scale, still remains to be tested. One successful supply chain improvement
has been the implementation of electronic medical records (EMRs). With the
adoption of EMRs, paper is becoming increasingly redundant, saving on costs. Another
one is UPMC that has created an operationally efficient virtual marketplace for
procurement that improves contract compliance and saves the buyer’s time.
The healthcare sector has been a little
late in catching up with supply chain management. While gainsharing and
standardization are starting points for establishing supply chain efficiencies,
these strategies need to be further examined to eliminate any loopholes that
may deprive the patient of better healthcare. Whereas, the recent recession has
forced hospitals to think about supply chain management in order to keep their
heads above water. Would you as the supply chain head of hospital apply the
above strategies (gainsharing and standardization) to reduce costs? What
changes (if any) would you make to ensure that there is no drop in the quality
of healthcare? How would you get the various parties (suppliers, doctors, etc)
on board to accept your proposal?
Source:
http://www.upmc.com/media/newsreleases/2012/pages/upmc-wins-industry-award-supply-chain.aspx
This comment has been removed by a blog administrator.
ReplyDelete