STRATEGIC SOURCING & LOGISITICS
stock all the required supplies for a specific episode of care.”
Healthcare providers view bulk vs. low-
unit-of-measure distribution and inventory a bit differently, too. “Another noteworthy change is that most healthcare systems are managing a larger inventory of products,” Luoma continued. “Rather than two or three weeks of supply, most are stocking three to four months of supply. This creates new challenges in managing the product lifecycle, including product expiration and cross-facility alloca- tion, just to name a couple. Both hospital at home and inventory management are areas ripe for innovation. Success requires up- to-date supply chain data (e.g., inventory, on-hand and utilization data) that can be fed into other internal systems and facilitate cross-functional collaboration.” Telemedicine and virtual capabilities, empowered by the growth in electronic health and medical record usage, fostered by quarantines and viral spreading and reinforced by consumer-directed health planning is beginning to upend traditional market dynamics.
“The pandemic served to accelerate the move to consumerism in healthcare, and provider margins are being attacked from all sides,” noted Michael DeLuca, Executive Vice President, Operations, Prodigo Solutions. “While this is not new to large IDNs and their vast continuums-of- care models, healthcare provider supply chains will need to dig a moat around their contribution to revenue (patients) by extending their services into non-acute and home health lines of business. Large IDNs will need to ensure they meet the patient where they live, and also supply the medi- cal goods patients need to their homes. Distribution and inventory models per- fected to supply acute care, physician offices and ambulatory surgery centers (ASC) will need to be extended to home health and contracts/items controlled by supply chain management must be extended to patients close to home or in their home.” Philip Parks, M.D., MPH, Vice President, Healthcare Innovation, at- Home Solutions, Cardinal Health Inc., calls the move- ment of more care to the home as one of the most noteworthy opportunities and challenges, represent- ing a significant shift in resources.
Michael DeLuca Philip Parks
“More care in the home could mean as much as $265 billion of healthcare spend
(or 25% of the total cost of care) occurring in the home by 2025,” Parks said, referenc- ing a February 2022 McKinsey & Co. study (
https://www.mckinsey.com/indus- tries/healthcare-systems-and-services/ our-insights/from-facility-to-home-how- healthcare-could-shift-by-2025). “The goods and services that are needed for this delivery of care present new challenges for the supply chain related to service levels and response times that match the clinical needs of patients and people in their homes. Additionally, the need and expectation for transparent, near real-time information for supply chain stakeholders is a challenge that must be solved.” When arks overlays the influence of con- sumerism, he and his team see a dramatic shift in expectations for three key areas:
• Service levels • Near real-time data on order status and delivery
• “Frictionless” customer experiences enabled by easy-to-use desktop and mobile-friendly interfaces, robotic process automation, and personalized services MedSpeed CEO Jake Crampton sees the allure and the momentum happening, too.
“Consumerism and the pandemic created a seis- mic shift in the mindset of patients, furthering their transformation into con- sumers who demand low- cost, convenient care,” Crampton noted. “To meet this new patient mandate head- on, nearly every health system we encoun- ter is hard at work addressing patient needs in non-acute settings.”
Jake Crampton
But Crampton may see a silver lining among this new market adventure. “While this expanding physical foot-
print of care delivery presents numerous challenges, one noteworthy opportunity for health systems is tapping into unreal- ized value through ‘systemness’,” he said. “Transitioning from a collection of ever- expanding facilities into a truly unified system often begins with clinical integration — and rightfully so. To maximize value as a single enterprise, especially with the added demands of operating in settings further removed from the four walls of the hospi- tal, integration of the operational support infrastructure is imperative.”
These new healthcare enterprises need to create a strong logistics backbone that connects each of these new points of care, according to Crampton, so that health sys- tems have the ability to share inventory, reducing the cost of goods and eliminating a source of waste. “To realize these potential gains, the network needs to be thoughtfully
designed for proactive agility, as opposed to a reactive disconnected series of move- ments,” he added.
Meanwhile, Medline Industries has been prepping for this migration for a while, according to Zach Pocklington, Senior Vice President, Medline’s Post-Acute Care division. t edline, we are always finding new
ways to enhance shipping efficiencies out- side the four walls of the hospital,” he said. We have a private fleet of more than , MedTrans trucks to ensure healthcare pro- viders have their supplies delivered when and where they need them. For customers with low units of measure (LUM) orders, like home health agencies, we evaluate ways to efficiently leverage our edrans parcel fleet and our third-party parcel logistics partners. For example, to ensure efficient on-time delivery, we coordinate multiple daily pick-ups directly from our distribution centers as part of our partner’s delivery routes. By leveraging our national footprint of 50+ distribution centers across the country and arranging multiple pick- ups a day, we can efficiently ship those LUM orders to customers the same day for next day delivery.”
Wall Street has leapt into the fray as well, observes Doug Heywood, Managing Partner, RDA, and a for- mer hospital supply chain executive. “The equity markets are funding growth into the non-acute space and promoting growth by focusing on specialty parts of the
Doug Heywood
healthcare market, (e.g., home health, mam- mography, hospice care and primary care),” he noted. “These are organizations that will have locations spread throughout the U.S. – maybe international – and not associated with any one hospital. They will have their own contracting, procurement and supply chain information systems separate from the hospitals.”
Information system connectivity poses a key challenge, according to Heywood. “Often, not always, we are seeing dif-
ferent information systems between the acute and non-acute organizations,” he said. “Different data sets can be a chal- lenge. However, the large distributors and manufacturers in the current acute and non-acute space follow data standards with UNSPSC.”
Breaking old habits
Clearly, mainline traditional distributors, specialty product distributors, third-party logistics companies and direct medical equipment (DME) suppliers are adjusting
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