PRODUCTS & SERVICES
Value-based procurement: What’s in it for provider supply chains?
The answers are CLEAR – no hardball by Brian Mangan, MSc, FCIPS, and Randy V Bradley, Ph.D., CPHIMS, FHIMSS
Photo credit: bakhtiarzein |
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efore life with social distancing and face masks, you may remember that health systems were already strain- ing under the weight of increasing demand and the push towards improved patient outcomes and experiences. All of this was set against a backdrop of limited fi nancial and human resources. To date, healthcare procurers globally have responded to these challenges largely by playing “hardball” with suppliers to drive down product prices.
As time in the COVID-19 capsule pro- gresses, healthcare procurers have con- tinued to fl ex their procurement muscles by leveraging common tools of the trade, such as standardization, aggregation and price-weighted competitive tendering. As a result, procurement professionals are in danger of becoming victims of their own success.
Essentially, once you’ve won the race to
the bottom on price, where do you go next? Another issue is the limited, if not non- existent, impact of price-based strategies on the numerous emerging supply chain problems highlighted by the COVID-19 pandemic. This healthcare and social crisis has amplified the need for rapid and radical change in the way we deliver healthcare. The key areas in need of special attention include: • Pathway and patient fl ow ineffi ciency – As health systems seek to address the backlog of patients and increased cost of care caused by the cancellation of elective procedures;
• Supply chain fragility – A lack of product demand transparency, supply visibility and price-down strategies have
exposed supply networks that are long, have numerous weak links and have tremendous points of vulnerability due to a lack of supply chain investments and increasing consolidated manufacturing in low-cost countries.
• Product saturation – Due to high levels of safety stock accumulated during the crisis, traditional procurement savings workplans will be slowed. Given the stockpiling of products and supplies by provider organizations, there will be fewer opportunities to go to suppliers with a request to reduce product costs across certain categories. This inability to ask for and receive year-over-year product cost reductions will create a gap in hospitals savings plans initially in the post COVID-19 environment.
• Slow pace of innovation – Health sys- tems are now reaching out to the market to identify virtual care, virtual triage and remote patient monitoring solutions that can help keep patients out of the hospital, expedite treatment and radically reduce readmission rates. What this creates is a situation where procurers, who are traditionally risk adverse, are expected to change their behaviors and natural instincts and be more agile purchasing agents that take risks when working with suppliers to adopt innovation quickly to address the challenges of COVID-19. Further complicating this unrealistic expectation of procurers (at least in the short term) is that they lack subject mat- ter expertise and fundamental under- standing of these types of innovative solutions for which we’re asking them to spearhead the negotiation process.
42 September 2021 • HEALTHCARE PURCHASING NEWS •
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• Lack of focus on customer service – We continue to see where patients are no longer willing to make a distinction between industries when considering their experiences. As such patients are holding hospitals to the same or similar standards as they hold their favorite pizza chain or e-tailer. So considering the focus on virtual care to help offset the capacity constraints created by continu- ing surges in COVID-19 cases, products and services are now being delivered to the home setting or some other setting other than the hospitals. This means that getting the right products, at the right time, and in the right quantity into the “back door of the facility” can no longer be the standard for assess- ing supply chain effi ciency. Hospitals now must reimagine their distribution networks, and this includes how they negotiate and partner with suppliers to assist with the best channels to utilize to ensure the right patient receives the right products, at the right time, and in the right quantity and quality. This could mean negotiating different [Freight On Board] terms for products going direct to patient versus those going direct to the facility. Nevertheless, this challenge is going to require hospitals to take a totally different approach than they’re accustomed to as this new environment creates more direct interaction between procurement professionals and patients than the pre-COVID-19 world. The adoption of value-based procure-
ment (VBP) is an alternative approach that could signifi cantly aid health systems in addressing these challenges, providing job
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