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Healthcare Supply Chains in Crisis

"The healthcare problem is the No. 1 problem of America and of American business, It’s the tapeworm, essentially, of the American economy, and we have not dealt with that yet."

Warren Buffet

• Demographics

• Unhealthy Lifestyles

• Higher Patient Expectations

• Exponential Innovation

• Unprecedented Financial Crisis

Demand, Demographics & Economics

Investment or Rationing or Something else ...?

Healthcare Value Chain Service Funders & Providers

NHS England Value Chain

•53M Patients

•150M+ Patient events

•1M+ Staff

•8000+ General Practice’s

•250+ Hospital Providers

•c£116Bn Total

•c£36Bn Goods & Services

•440K Suppliers

http://www.nhsconfed.org/resources/key-statistics-on-the-nhs

Parliament

£116.4 billion

Department of Health

NHS England

Health Education England

Public Health England

£101.6 billion

£2.7 billion

£4.9 billion

£1.8 billion

NATIONAL

Public Health

Community Services

Mental Health Hospital Providers

Specialist Services

Clinical Commissioning Groups

Local Authorities

Better Care Fund Primary Care

£69.2 billion £2.7 billion £14.6 billion

PRIMARY CARE

HOSPITAL / COMMUNITY CARE

Products & Services (Including Primary Care)

c£36 billion

SUPPLY BASE – GOODS & SERVICES

Outcomes led Incentives ?

• Capacity, Capability, Safety, Revenue, Cost

• Inefficiencies: Variability, Variety, Volatility

• Personalised, Preventative & Patient Led Care

• Integrated Care Pathways (Value Chains)

• Improve Outcomes (Quality) & Cost

• Demand Mgt: Epidemiology & Disease Trends

• Specification Complexity: Treatment,Technology

• Relationships Complex: Stakeholder,Supplier

• Aligned: Commercial Incentives, Objectives

• Innovation: Translation, Stimulation

Healthcare Value Chain

Products & Services

Hospital Supply Chain Structure, Size & Growth

Total c£22Bln of £67Bln CAGR 5.1%

250+ Providers

1 Aggregator/Warehouse

440K Direct Suppliers

Medical Technology Innovation & Growth

Segment

Global

Market

($ Bln)

Global

Market

(£ Bill)

UK

Market

(£ Mill)

% of

Total

Growth

CAGR

(%) Maturity Stage

Innovation

Impact

TOTAL $441.51 £275.95 £5,518.9 7.6%

Digital Health $64.78 £40.49 £871.99 15.80% 13.0% Growth 8

In-Vitro Diagnostics $51.20 £32.00 £640.00 11.60% 8.2% Growth 7

Medical Devices & Equipment $325.53 $203.46 £4,069.18 73.73% 5.9% Mature 5.4

Orthopaedics $40.36 £25.23 £504.50 9.14% 6.7% Mature 4

Cardiovascular Devices $35.85 £22.41 £448.13 8.12% 8.4% Growth 5.5

Medical Imaging $30.20 £18.88 £377.50 6.84% 4.2% Mature 6.5

IV Access , Admininstration, Closure $22.20 £13.88 £277.50 5.03% 5.0% Mature 6

Wound Management $15.00 £9.38 £187.50 3.40% 5.4% Mature 6.5

Endoscopy & Endosurgery $14.45 £9.03 £180.63 3.27% 6.4% Mature 5

Ostomy & Incontinence $13.00 £8.13 £162.50 2.94% 6.7% Mature 4.5

Opthalmology $13.00 £8.13 £162.50 2.94% 5.1% Mature 6.5

Anesthesia & Respiratory Devices $13.00 £8.13 £162.50 2.94% 9.0% Mature 5

Dialysis Equipment $12.00 £7.50 £150.00 2.72% 4.0% Mature 3

Tissue & Cell Engineering $11.12 £6.95 £139.00 2.52% 11.9% Emerging 8.5

Audiology $10.00 £6.25 £125.00 2.26% 8.0% Growth 6.5

Surgical Equipment $9.20 £5.75 £115.00 2.08% 3.6% Mature 5

Patient Monitoring $8.96 £5.60 £112.00 2.03% 3.8% Mature 5.5

Dental $8.50 £5.31 £106.25 1.93% 5.8% Mature 6

Mobility & Patient Aids $6.50 £4.06 £81.25 1.47% 5.2% Mature 4.5

Neurology $5.20 £3.25 £65.00 1.18% 9.9% Early Growth 8

Custom Procedure Packs $5.00 £3.13 £62.50 1.13% 9.0% Mature 4.5

Radiotherapy $4.40 £2.75 £55.00 1.00% 5.3% Mature 4

Urology,Gynecology, Gastrointerology $4.40 £2.75 £55.00 1.00% 9.0% Mature 5

Drapes, Gowns & Gloves $4.30 £2.69 £53.75 0.97% 4.0% Mature 5

Orthotics & Prosthetic $3.50 £2.19 £43.75 0.79% 6.0% Mature 6

Operating Room Equipment $3.20 £2.00 £40.00 0.72% 5.0% Mature 4.5

Sterilisation & Dissinfection Equipment $3.10 £1.94 £38.75 0.70% 6.2% Mature 4

Contraception $2.90 £1.81 £36.25 0.66% 2.1% Mature 3

Patient Handling $2.20 £1.38 £27.50 0.50% 5.0% Mature 6

Hospital Beds & Furniture $2.20 £1.38 £27.50 0.50% 6.0% Mature 4

Enteral Feeding $1.60 £1.00 £20.00 0.36% 7.5% Mature 4

Aesthetic Devices $1.50 £0.94 £18.75 0.34% 7.0% Mature 6

Other (30+) $18.69 £11.68 £233.68 4.23% 5% 5

Medical Supply Chain Inefficiencies

Close Clinician Relationships, High Sales Presence, High Margins, High Inventories

Hospital Procurement Diagnostic

Issues... • Low Commercial Governance in Key Categories

• Clinician conflicts of interest with Suppliers

• Poor Procurement Clinical & Finance Relationships

• Difficulties Measuring cost, revenue, quality & value

As a result ... • Low Influence, Investment, Capability

• Inflated Product & Service Pricing

• High supply chain intermediation

• High Price Variance, Product Variety & Change

• Excessive Volatility & Inventories

• Excessive Obsolescence

• Lack of focus on Quality & Safety

• Increasing product recalls

• Dis-incentivised Innovation & Investment

• Flying blind without Management Information

Increasing Brand Fragmentation & Reducing Safety

Transformative Response ?

• People, Relationships, Capability;

– Top table leadership: Lord Carter and DH Chief Exec, DoF and NED’s

– Policy / Regularity e.g. Sunshine Act, Transparency, GS1 Traceability

– Improved Clinical & Strategic Supply Base Influence

– Raise competency and impact of procurement

• Re-Structure – Aligned primary, secondary and Social Care treatment strategies

– Outcome led incentives and gain share

– Consolidation in Providers (supercentres)

– Restructure Supply Chain Intermediation

• Word Class Processes – Efficiency Matrix & Performance Indicators

– Involved in Service / Product Specification & Innovation

– Demand and Category Management

– Co-Operate to Share Scarce Category Expertise

– Operational Optimisation: P2P, Inventory Management

• Enabling Technology Investment ...

• Provider transformation fundamental

• Aligned incentives for cost, quality and outcomes in all tiers

• Supply Chain issues begin in the provider tier and are amplified into

the products and service supply chains

• Supply chain for medical goods and services needs to be

transformed and transparent

• The best people and technology are required in healthcare supply

chains...now !

Healthcare Supply Chain Challenge

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