The Affordable Care Act (ACA) turned four in 2014, and Gunter Wessels reflects on its impact on supply chain management

strong focus on cost reduction is an enduring feature of the changes to the healthcare structure brought on by the ACA. Providers are cutting costs in every area of their operations—from supplies and purchased services to capital expenditures and labor. Supply chain managers are central to these efforts, and the dedicated professionals working in this area have delivered both incremental and structural cost efficiencies.

Across the country, provider organizations are focusing on value in innovative and meaningful ways. One example is physician preference item initiatives that have increased medical staff engagement, ramped up interdepartmental dialogue, and required demonstrable clinical, operational and financial value to avoid potential conflict.

Value analysis in the services sector also has grown recently. In addition to cost, supply chain leaders are considering not only patient and staff satisfaction, but even family and visitor satisfaction when contracting for food, environmental and revenue cycle services.

Value analysis in capital decisions has increased as well, with project managers building upon evidence-based design principles and considering how to better engage patients in multiple care settings. Diagnostic assets also are being assessed in a balanced way, looking at cost in the context of a patient’s physical size and limitations as well as a patient’s satisfaction, comfort and safety. Meanwhile, provider organizations are embracing solutions that reduce radiation dose without compromising diagnostic accuracy. These advances augment best practices in the industry, and their achievement should be celebrated.

Going forward, a new frontier for supply chain management is emerging. The new-normal environment requires supply chain managers to continue to focus on cost, but also to reconcile a fundamental shift in emphasis from inpatient to outpatient program development, physician practice integration and population health management.

One thing is clear as the future unfolds: Supply chain managers will be required to effectively balance a dual focus on volume growth and value enhancement.

Instead of pursuing a singular strategy, many providers are pursuing a plural market orientation where service line growth in volume coexists with utilization reduction efforts. This is appropriate because healthcare delivery must manage large populations of chronic disease sufferers and acute disease and injury episodes at the same time.

Though chronic diseases such as diabetes, heart failure, kidney disease and end-stage renal disease make up the majority of current Medicare spend, studies show they are best managed in non-acute care settings, such as a clinic or physician group practice. When actively managed, these disease states do not require much acute care utilization. Therefore, improving the management of chronic diseases (thus lowering their costs) requires population health initiatives and quality and access improvements at outpatient centers.

Conversely, neurology, orthopedics, heart attack and stroke care require sophisticated and higher-cost infrastructure in the acute care setting. These service lines are growing and benefit from better reimbursement than most other dominant service lines, but pursuing them will require an increase in capital investment and case-finding.

Another growing service line is oncology, which straddles inpatient and outpatient settings. Fueled by relatively strong reimbursement and growing incidence rates, independent centers are vying for market share with integrated delivery health systems. Larger organizations are countering with huge capital investments in proton therapy centers, new robotic systems and advanced therapy solutions to achieve a perceived competitive advantage.

Because of this plural focus, the roles and responsibilities of supply chain managers have increased. To support the organization in achieving its mission and thriving in the new-normal environment, supply chain managers must be able to pivot organizational resources to support an evolving mission. For example, when pursuing growth in acute service lines, diagnostic assets (imaging, lab, point-of-care devices and IT) or therapeutic assets (robotics, beds, tables, operatories and vaults) may need to be moved, upgraded or replaced more rapidly than before.

Consequently, supply chain managers must have a broader view of the inventory of assets and their capabilities. It might be important to enlist the facilities and biomedical engineering teams in determining current capabilities. Such collaboration is crucial when attempting to balance the need to offer high-complexity, capable services in multiple settings. Furthermore, capital planning and asset monitoring solutions should become part of the supply chain managers’ IT tool chest.

On the other hand, utilization reduction initiatives and population management require disease management to take place in multiple settings, such as medical office buildings, group practices, and affiliated ambulatory surgery and rehabilitation centers. Supply chain leaders should consequently consider assigning specialized buyers to a bundle of capabilities, including diagnostics, point-of-care and IT appliance solutions. Such personnel would need to work closely with service line managers and directors in the imaging, clinical laboratory and nursing departments, as well as with clinical informaticists and revenue cycle managers to help procure solutions that can meaningfully reduce utilization.

One thing is clear as the future unfolds: Supply chain managers will be required to effectively balance a dual focus on volume growth and value enhancement. New and innovative approaches to these novel challenges require the discipline to continue its evolution and operate in an expanded sphere of influence.

Share Email

Author Information

Gunter Wessels, PhD

Gunter Wessels, PhD

Wessels is a partner at Total Innovation Group Inc., a consulting firm specializing in healthcare. Clients of his firm include policy makers, payers, providers, group purchasing organizations and supplier companies, both in the United States and internationally. More Articles by This Author »