Gatefold
Long the domain of doctors and nurses, clinical quality is beginning to have a major impact on other hospital business units. It can be seen in new technology that information specialists purchase and public relations materials promoting hospital services. And it's being seen in the supplies hospitals buy--everything from surgical gloves to syringes.
The hospital supply chain has been under tremendous scrutiny in recent years as hospitals try to streamline operations and reduce expenses. And gaining more importance is the supply chain's role in improving quality of care. Standardization can help achieve these goals by improving resource utilization, saving costs through volume discounts and reducing variation in products and procedures. "The goal of standardization is to improve outcomes and quality in a cost-effective manner," says Marc Westerman, director of materials management, Leesburg (Fla.) Regional Medical Center and The Villages (Fla.) Regional Medical Center.
Standardization requires hospitals to conduct a thorough review of their supply chain. Specifically, hospitals must evaluate the products they use to ensure the right products are available at the right times. It requires a significant amount of collaboration from all levels of the organization--from administration to purchasing to clinicians.
Hospitals are hiring more MBA holders and adding clinicians to materials management staff to assist in the process and help in negotiations with the medical staff. "We have to look at the entire cost of a product's use, including how it relates to a patient's stay," says John Gaida, senior vice president of supply chain management, Texas Health Resources, Dallas, whose 13-hospital organization has achieved $33.8 million in savings through standardization and price negotiations over three years. Adds Lydon Neuman, vice president, Capgemini, "If you focus your efforts on obtaining the best product with the best outcomes, you will achieve cost-effectiveness."
This gatefold will examine the standardization process and efforts to evaluate product quality, including the value assessment process, physician preference items and demand matching.
The Standardization Process
The supply chain accounts for 30 percent to 40 percent of a hospital's budget. Standardization not only cuts costs, but improves outcomes through the purchase of the best available products. Quality outcomes include faster recovery times, reduced length of stay and reduced infection rates.
1 |
Evaluate the supply chain from start to finish to identify areas for standardization. |
2 |
Start with high-volume products --about 12 to 15 items. Then expand to about 25 to 50 items--whatever is manageable for the organization. |
3 |
Inform
clinicians about your intentions and emphasize senior executive support. Some organizations allow clinicians to prioritize what products they want to help determine which products to tackle first. |
4 |
Collect
and disseminate cost and outcomes data on targeted areas, such as orthopedics, cardiology and radiology. |
5 |
Develop a product valuation process and establish resource or product management committees to help in the product selection process. These are often developed around service lines. |
6 |
Involve clinicians (see below Physician Preference Items and Demand Matching) |
7 |
Negotiate with vendors and suppliers
|
8 |
Notify
clinicians of which products will be available. |
| 9 | Continue to collect and share resource utilization data and demonstrate efficiencies and improvements gained from standardization. |
10 |
Committees meet regularly to identify areas for improvement and examine new items. |
Physician preference items
Standardization of physician preference items requires a similar process but is more intensive. Physicians like choices and autonomy, so a careful, well-prepared approach is recommended. Big savings are at stake. Cost for implants for certain cardiac and orthopedic procedures can consume as much as 75 percent of the DRG payment. It is important to understand what physicians are using and why. At Carson-Tahoe Hospital, Carson City, Nev., an effort to standardize total knee and hip replacements netted $740,000 in the first year. Quality improved because procedures became more streamlined and physicians gained familiarity with the products.
Review. Hospitals should review their top diagnosis related groups and compare against benchmarks.
Present case for change. Physicians should be provided detailed, accurate data comparing the costs of their procedures with their peers, as well as assurances on product quality.
Educate. Following product selection, it's important to educate physicians about product decisions.
Avoid mandates. Physicians should remain the final decision-makers. When presented with a solid business case, it's more likely they will choose lesser-priced items if they are confident that the quality is the same.
Engage physicians. Physician concerns need to be heard and addressed. If physicians continue to insist on a high-cost product, get them involved in negotiations with the vendor or manufacturer.
Demand matching
Demand matching is an effort to standardize the use of a product based on the product's capabilities and the patient's current and projected health status. For instance, it seeks to match the quality of an implant with a patient's needs. Standard costs for hip implants, for example, can vary by as much as $8,000. Demand matching sets a protocol for use of high-cost, high-value hips versus lower-cost, lower-value hips. It takes into account, among other things, a patient's age, activity level and weight. "Physicians don't necessarily know the costs of implants, and historically there hasn't been a lot of administrative pressure on cost reduction," says Tod Lloyd, R.N., value analysis manager at Dartmouth-Hitchcock Alliance, Hanover, N.H. "Demand matching helps raise awareness and start a conversation about cost and quality."
The Value Assessment Process
The value assessment process helps hospitals determine whether they are getting the best product for the best price. Multidisciplinary value-analysis committees take a close look at product utilization and performance, usually along service lines. The complexities of value analysis require strong administrative support and accurate, timely data. Some hospitals rely on their GPOs, which have extensive value assessment practices in place.
Banner Health System, based in Phoenix, has a three-tiered review. Which process the product undergoes is determined by one of three clinical supply managers, who are all registered nurses. A formal evaluation is an extensive process where a product is tested and rated against other similar products. When clinicians present a new product they'd like to use, it is studied to determine clinical effectiveness. And, products already in use at one Banner facility undergo a more simplified review before being brought to a new facility.
Considerations that could help your hospital understand a product's value
- The reputation of the manufacturer and availability of support
- Product availability
- Cost and reimbursements for procedure
- Turnover time
- Potential liabilities
- Amount of waste generated by the product's use
- Outcomes of product trial
- Training and certification requirements
- The safety and risk to patients and clinicians
- Desired outcome and ability of product to meet goals
- Product effectiveness and efficacy
Source: H&HN research, 2005
The Experts' Advice
"The goal of standardization is to improve outcomes and quality in a cost-effective manner. If you have a choice of providing physicians with no data or bad data--go with no data. They are too intelligent."--Marc Westerman, director of materials management, Leesburg (Fla.) Regional Medical Center and The Villages (Fla.) Regional Medical Center
"We need to have clinical leadership up front with the sophistication necessary to make the best supply decisions. It's no longer [just] about how to take care of patients. Clinicians need to understand contracting and financials to be good medical leaders."--Manuel Lowenhaupt, M.D., vice president, Capgemini
"The key to success with physician preference items is having someone in materials management who has rapport with the physicians."--Cathy Dinauer, R.N., chief nursing officer, Carson-Tahoe Hospital, Carson City, Nev.
"We have four clinicians working on the supply side. It's easier to teach a clinician supply chain basics than it is to teach nonclinicians the basics of clinical practices."--John Gaida, senior vice president of supply chain management, Texas Health Resources, Dallas
"Clinicians bring a different perspective to the supply chain process. They have a better sense about whether a product meets patients' needs. Physician stakeholders should have the ultimate say about what products are used."--Jim Rivard, vice president of support services, Virtua West Jersey Hospital, Marlton, N.J.
"Physicians certainly want the best outcome for their patients. But, the best product is not necessarily the most expensive."--Tod Lloyd, R.N., value analysis manager, Dartmouth-Hitchcock Alliance, Hanover, N.H.
"Hospitals need to take responsibility and control over things they've previously outsourced to vendors. This includes the selection of the right implants to use and the development of protocols for product use."--John Walker, managing director, Navigant Consulting, Pittsburgh
"It's important to plan well and get support from administration. A representative from administration attends every meeting of the value-analysis committees to show support and help solve problems."--Colleen Hegland, director of materials management and central processing, Indiana (Pa.) Regional Medical Center
"We developed a materials management board that brings all of the stakeholders together. It allows for open dialogue and consensus-driven decisions. Before that, we suffered from one-way communications."--Doug Bowen, vice president of materials management, Banner Health, Phoenix
How We Did It: H&HN and Materials Management in Health Care compiled the information for this special supplement from industry group studies and research.
Research: Lee Ann Runy (lruny@healthforum.com)
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