Executive Insights

For IDNs in the healthcare supply chain industry, pressures are real and significant. The supply chain world is huge and complex. As supply chain leaders, we often try to do everything ourselves. Unfortunately, that is nearly impossible if we expect to navigate the financial burdens that confront us.

Old practices in a new changing environment

won’t give you the same results.

Luckily, we have many resources to help us. These resources include other IDNs, suppliers, consultants, technology, industry organizations (like the IDN Summit) and industry experts. I always liked identifying these industry experts, “stealing” their best ideas, and applying them to my own company as it made sense. Similarly, the right supplier partnership can help to improve cost and service.

The biggest help to manage your supply chain will likely come from the largest participants in the industry: GPOs and distributors. However, their business and focus do not always match that of IDNs. While they don’t always make good partners, they can - and should - if their business can be more aligned to solve the problems of IDNs.

We need GPOs because IDNs can’t afford purchasing departments large enough to manage the estimated 2,000 contracts needed to support most hospitals. At Intermountain Healthcare, we built a very large strategic sourcing staff but still needed GPO services. If an IDN is not doing any “strategic sourcing” and instead just doing “contracting,” then maybe they could better utilize their GPO and spend more of their time driving compliance.

GPOs should be used as a tool not a

strategy – but a very important tool.

But how do you make a GPO a “partner”? To do this, you must look at a GPO as an extension of your own business, managing it for your needs, but not letting it dictate your business. Additionally, it can be helpful to utilize the many solutions that a GPO can offer, such as:

Basic contracting for key categories
Spend analytics – for pricing standardization and opportunity identification
Procure-to-pay solutions
Non-acute spend management
Help with Rx

But what about distributors? In healthcare, tracking a multitude of products from source to patient is very complex and expensive. The basic distributor supports mostly med/surg products. Some IDNs, as we did at Intermountain Health, have built their own warehouses as a self-distribution strategy. While there are benefits to this, it simply doesn’t make sense for every IDN.

Just as a GPO needs to be managed, a distributor also needs to be managed to accurately and efficiently meet the needs of the IDN. You can achieve the same benefits of self-distribution if you manage the distributor well, resulting in a strategic partnership.

Another aspect of distribution is the diversity of products, who manages them, and how they get to the patient. There are med/surg products, but there are also pharmacy, lab, radiology, food & nutrition, linen, MRO and capital equipment products. Managing every one of these supply chains is a huge undertaking that many IDNs don’t have the resources to effectively manage.

I once knew a leader that had a strategy to track all products through the hospital for efficiency, cost reduction, and improved service, all for better patient outcomes. This leader called this strategy “Dock to Doc”.

Someone once said, “you pay for every truck

that backs up to your hospital.”

The healthcare supply chain is very complex and expensive and can be managed more effectively and efficiently if we look to GPOs and distributors as “partners.” But a partnership isn’t formed overnight. It takes mutual effort and a desire to create improved outcomes and benefits for both sides.