At the 2020 IDN Summit Virtual Experience last month, Mike Langlois and I had the privilege of moderating a discussion with more than 30 IDN supply chain executives in a special virtual session. The discussion offered critical time to assess the impact of 2020 with a key group of senior leaders.
We concentrated on two major questions: (1) What are the learnings from 2020 and (2) Where do we go from here? Below are highlights and key takeaways from the discussion.
What are the learnings from 2020?
Where do we go from here?
A silversmith uses hot fire to purify silver and take out the impurities. This is often referred to as the “refiner’s fire.” I believe the healthcare supply chain has been through a type of “refiner’s fire” in 2020. In one way or another the industry has learned from the experience, rough edges were smoothed, and sharp edges were sluffed off until they became better at what they do.
These supply chain executives had positive things to say about their 2020 learnings and have hope for good changes in the future. I give big “KUDOS” to them and the entire healthcare supply chain industry for weathering the storm and coming out stronger – like the silversmith’s product.
Ken Murawski | Tuesday, June 30, 2020
For over 25 years we have worked with small, innovative, and diverse companies with great ideas, quality products produced in the US, and often touting green value, but it was a hard sell to providers.
The problem? It cost more to produce in the US.
The result? “Yes, we believe in all those things but we won’t pay more.”
Fast forward to March 2020 when PPE took center stage. For decades providers pushed suppliers to save money and the only way was to build plants where labor costs were low: Mexico, Dominican Republic, China, and SE Asia. It took the pandemic to wipe away years of saving pennies to lose millions of dollars in demand pricing escalations, aka price gouging. An N95 mask pre-COVID was $0.50. Hospitals paid $4-6 each—if they could find the product.
Between the increase in supply cost and the loss of revenue from halted elective procedures, the healthcare industry has suffered a tremendous financial blow. Many hospitals were already struggling to get by, even those that were making money were seeing single-digit profits; a few large systems on the cutting edge; many more on the bleeding edge.
The pandemic has put a spotlight on the challenges hospital systems face. Balancing between fee-for-service which can drive up the cost to value-based care has been a challenge; add labor costs that continue to escalate and one can imagine how the pandemic has changed everything. The result: rural hospitals will close or redefine their role in healthcare as nursing homes or urgent care facilities. Mergers and acquisitions will be facilitated by the inevitable bankruptcies of facilities that could not keep up with change; the big will get bigger. Large IDNs will become larger IDNs.
From a supplier perspective, a similar scenario may play out. Buyers will look to the safety of the existing contracts and large supplier relationships. Huckers looking to cash in have bombarded GPOs and IDNs; separating the wheat from the chaff is a major challenge. Unfortunately, the loss of income by many small suppliers may force them to go out of business eliminating competition and opening the door to eventual price increases. It will be frustrating to see this play out when there are so many qualified companies looking to help. There are domestic healthcare companies that can still provide value, not just in PPE but in many areas that will become the future for healthcare systems to carry out their mission: provide the best quality care and outcomes at a fair cost without causing harm.
How can suppliers help?
Quality suppliers with integrity have to distinguish themselves not by e-mail blasts, but by educating the right people on their solution and building relationships with progressive nursing and physician leadership, value analysis professionals and supply chain leaders. With face-to-face meetings canceled for most of this year, we may have to do it virtually; a low-cost efficient way to demonstrate products and solutions to a variety of stakeholders at one time.
How can supply chain leaders help?
By thinking beyond the price of products and presenting the total cost solutions available. Present those solutions to executive nursing and administration; show that you can be part of the solution. Show solutions that help nurses and doctors become more efficient reducing burnout, solutions that improve the patient experience. Solutions that reduce infections, falls, pressure injuries, and back injuries. I’m hoping that the millennials in the supply chain can be part of the solution, not just monitor online RFPs. These solutions are all double-digit savings and yes, some are hard to quantify. But this could be CQO on steroids (in moderation).
This may be a chance to really change the landscape in many ways. The public is now embracing telemedicine. The pandemic may even drive behavioral change as the most at risk are not just elderly, but those with existing conditions caused by lifestyle choices. We can only hope.
Before COVID-19, progressive systems were experimenting with telemedicine, remote monitoring, and meeting the healthcare needs of the communities they serve where the communities live. Just as Netflix, UBER, Tesla, and Amazon have changed us, large market share suppliers will be challenged by small nimble low-cost solutions from a watch to a tablet, to portable ultrasound, wireless monitoring, Software that tracks products and equipment, Careboards to improve efficiency and patient experience, beds that provide hands-free pulmonary therapy. Will systems consider more outsourcing for efficiency like transportation and lab services? Technology exists for reps to remotely “participate” in complex procedures, reducing risk, and saving money.
Let’s make this crisis an opportunity to embrace change in the way providers and suppliers work together. I welcome your comments and suggestions.