Healthcare Supply Chain Vital Signs - By the Economistupstransforminghealthcare.economist.com/wp-content/uploads/sites/... · and declining reimbursements taking the lead. ... specifically

UPS Healthcare Supply Chain Vital SignsU.S. Hospitals Study Executive Summary

2017 UPS Healthcare Supply Chain Vital Signs Survey © 2017 United Parcel Service of America, Inc. 1

UPS® Healthcare Supply Chain Vital SignsU.S. Hospitals Study Executive Summary

START

September 2017



An industry facing disruptive change:managing consumerization, clinical outcomes and costsHospitals are confronting mounting pressures around operating margins and positive patient outcomes. The following trends create ripples through supply chains and necessitate creative solutions to address marketplace disruptions.

This section of the UPS Healthcare Supply Chain Vital Signs is focused on understanding the business priorities, supplier satisfaction and logistics challenges of hospitals in the U.S., while providing valuable insights and implications for their clinical product suppliers, including medical device and pharma manufacturers and distributors. Amidst industry uncertainty, U.S. hospitals are being challenged to increase efficiency while digesting acquisitions and implementing new concepts in care delivery. Margin pressures are driving price sensitivities and efforts to reduce cost throughout the supply chain. Meanwhile, outcome-based reimbursement models mean hospitals must focus on coordinating patient care across a broad spectrum of care-delivery groups while remaining accountable to better outcomes. These factors, combined with the ambiguity surrounding potential regulatory changes, are causing hospitals to re-evaluate their supply chain and logistics strategies.

Potential regulatory changes from evolving governmental policies create uncertainty about future impacts on hospital operations.

Regulatory uncertainty Changing demands and increased decision-making by consumers are driving the need for a more patient-centered supply chain that supports the delivery of care where and when the patient needs it, which is not always in the hospital.

Patient consumerization

Technology is changing clinical workflows and operations, including focusing on virtual care. Plus, the deployment of EHR across extended care networks offers the promise of improved interoperability but comes with short-term challenges that tax IT infrastructure and resources.

Technology and innovation

Issues around manufacturers’ struggles to maintain regulatory compliance, operate resilient supply chains and make strategic decisions to reduce low-margin products have caused systemic drug shortages. Hospitals are diversifying their purchasing beyond usual channels to reduce the risk of future shortages.

Drug shortages Hospitals continue to face increased pressure to demonstrate improved patient outcomes, leading to new decision-making processes that weigh both clinical benefits and cost.

Outcome-based reimbursements

Hospital consolidation continues as more outlying surgical facilities, clinics and ambulatory care centers are merging with larger healthcare systems, driving the need for consistency across more points of care.

Continuing consolidation Introduction > An industry facing

disruptive change

� About the survey

Business priorities

Supplier satisfaction and support

Logistics challenges

Key survey insights

Hospitals

Introduction


Who we surveyedIntroduction

62%Network

38%Standalone

Since 2008, UPS has surveyed the healthcare and life sciences industry about supply chain issues to better understand marketplace needs. This year we are introducing a new global survey with a new perspective. The 2017 UPS Healthcare Supply Chain Vital Signs provides the healthcare industry with insights into supply chain issues impacting dispensers, hospitals and laboratories. We surveyed 750 participants from 19 countries across the United States, Europe, Asia-Pacific and Latin America representing executives and managers with purchasing, supply chain or materials management responsibilities across dispensers, hospitals and medical labs. The survey, which provides a 360-degree view of the industry, including manufacturers, distributors and providers, was conducted by PwC on behalf of UPS. This executive summary is focused on survey responses from 100 participants representing U.S.-based hospitals.

About the survey

Hospital respondents

Hospital type Organization type

Hospitals (n=100)

This executive summary is focused on U.S. hospitals. Here’s a snapshot of the survey respondents and their organizations:

45%Private pay

55%Government pay

Introduction � An industry facing

disruptive change

> About the survey

Business priorities



Key survey insights

2017 UPS Healthcare Supply Chain Vital Signs Survey 2

Managers83%

Executives/ VPs/Directors

17%

38%Profit

62%Non-profit

© 2017 United Parcel Service of America, Inc.



Top priorities for hospitalsQ: Over the next 3 years, how important will the following areas be to your

hospital/physician network’s business results? (% rating very or extremely important)

Eighty-two percent of hospital provider networks ranked improving operating efficiency as the most crucial priority for achieving their business goals over the next three years. The strong focus on efficiency is driven by multiple factors, with margin pressures and declining reimbursements taking the lead. According to American Hospital Association financial data, the average margin for U.S. hospitals is less than 10% and three out of ten are operating with negative margins. Hospitals have not fully adopted and implemented supply chain best practices found within the industrial, automotive and high-tech industries. Now the trend is changing, supply chain efficiency is being elevated to strategic importance as a means to combat the challenge of declining reimbursements.

Prioritizing efficiency and cost control

Business priorities

Making capital investments66%

Managing declining payment/prices for clinical services

69%

Navigating changes in regulations63%

Introduction

Business priorities > �Prioritizing�efficiency�

and cost control



Key survey insights

78%Controlling supply chain and logistics costs

82%Improving hospital/physician network operating efficiency

Industry insight – supply chain best practices

Leading hospitals implement best practices to improve operating efficiency and manage supply chain cost.

· Visibility and Collaboration – Increased visibility and control of product inventory will help reduce expiry and inventory scrap.

· Performance Management – Tools to efficiently monitor patient outcomes will be critical to assessing performance which will drive reimbursements.

· Data Standardization and Interconnectivity – Standardizing product data across manufacturers, distributors and providers will aid the transition to outcome-driven decisions.

· Process Standardization – Standardized supply chain processes across the care network will help leaders identify cost reduction opportunities.

http://www.aha.org/research/reports/tw/chartbook/2016/chart4-1.pdf



Introduction

Business priorities


> Seeking the “right” support from clinical suppliers

� Exploring why hospitals switch suppliers

� Taking advantage of key supplier opportunities


Key survey insights

Hospitals found customer service lacking among their suppliers, citing it as often unavailable or unresponsive. In fact, customer service was the most requested type of support cited by 49% of hospital survey respondents, followed by training at 38%. Training and clinical support was highly valued by hospitals as 23% reported they would switch suppliers who failed in this area. To clarify, hospitals are seeking support from dedicated trainers or medical professionals with specialist expertise versus sales representatives whose primary job responsibility is to promote new products and services. To improve training efficiency, hospitals and suppliers must be shrewd about using nurse and physician time in this effort. As hospitals are embracing technology to enable a more patient-centric supply chain, it makes sense that respondents are seeking additional support, specifically training on new types of equipment and medical devices being introduced into the marketplace.

Seeking the “right” support from clinical suppliers

53% of hospitals expect additional support from product suppliers

Overall Supplier Satisfaction

Q: What type of additional support is desired from your clinical product suppliers, healthcare distributors, pharma and medical device manufacturers?


“guide (us on) how to use equipment and products so that it lasts long and also equipment

maintenance support” “from product maintenance to post-sales support to new

product introductions and 24-hour customer service”

“how to handle or use the product efficiently,

maintenance support and taking good care of products

so that products do not spoil”

49%Customer service

38%Training

13%Product availability

33% of hospitals could not say that they are very or extremely satisfied with their primary clinical product supplier

Extremelysatisfied

Implementation monitoring

Maintaining medical device

services



One in four survey respondents were dissatisfied with product availability from their primary clinical supplier and would be very likely to switch suppliers due to issues in this area. Recent generic injectable drug shortages may be influencing the response to this question. Shortages cost hospitals more than $200M annually, according to The Pew Charitable Trusts. Respondents also identified the ability to track supplies in transit as an area likely to drive a switch in suppliers. Outside of price, product availability and the assurance of timely delivery are the most frequent complaints from hospitals regarding suppliers and are a necessity to ensure positive patient care. If the wrong product is delivered or a critical device needed for surgery arrives late, the procedure will likely be delayed or canceled. Canceled surgeries can have a significant impact on hospitals, which receive most of their revenue from surgical procedures. In addition to potentially affecting a hospital’s bottom line, product availability issues will likely erode overall satisfaction and could cost suppliers future business.

Exploring why hospitals switch suppliers


Introduction

Business priorities


� Seeking the “right” support from clinical suppliers

> Exploring why hospitals switch suppliers

� Taking advantage of key supplier opportunities


Key survey insights

Industry insight – Optimizing supply management in the operating room

Historically, the operating room (OR) supply chain has received less oversight because hospital leadership has been reluctant to challenge surgeon and staff practices. Estimates indicate the OR represents 40-60% of total hospital supply expenditures, but optimizing its supply management has long been a challenge. Poor inventory management, physician preference items, lack of good data, lack of standardization and inefficient practices all contribute to a system that is costly, ineffective and a potential area for savings. Given declining surgical profits and the new economic landscape, healthcare organizations are examining how improving supply management in the OR could improve the bottom line.

Product availability satisfaction

Q: How satisfied or dissatisfied are you with the product availability of your primary

clinical product suppliers?

Why hospitals switch suppliers

Q: If your supplier were to fail on any of the following factors, which one or two are

most likely to make you switch?

25%Could not say they were

very or extremely satisfied

50%Product availability

35%Ability to track

supplies in transit

23%Clinical support

and training



Introduction

Business priorities


� Seeking the “right” support from clinical suppliers

� Exploring why hospitals switch suppliers

> Taking advantage of key supplier opportunities


Key survey insights

Suppliers searching for opportunities to quickly improve customer satisfaction and differentiate themselves should focus efforts on their inventory management programs and regulatory compliance support efforts, if applicable. Both of these areas are strong drivers of hospital satisfaction but are significantly below median satisfaction performance levels. Hospitals want Just-in-Time inventory management and are looking for supplier support as they work to reduce costs and improve their inventory management programs. It’s critical to have products in stock to avoid unanticipated delays that impact patient care. This is even more critical for hospitals with the rise of value-based payments. Because hospital storage space is minimal, inventory management can be a competitive differentiator for suppliers. Continued uncertainty surrounding potential changes in federal regulations is impacting U.S. hospitals, with 63% citing navigating regulatory compliance as a business priority over the next three years and 79% saying they value help from their clinical suppliers in maintaining compliance. Therefore, suppliers should maintain or enhance their regulatory compliance, if applicable, to support hospital relationships.

Taking advantage of key supplier opportunities

Prime opportunities for suppliersSupplier satisfaction and support

79% of respondents stated they value help from their clinical suppliers with maintaining regulatory compliance

Industry insight

Suppliers have an opportunity to differentiate themselves from competitors by improving inventory management programs and regulatory compliance support, two key drivers of hospital supplier satisfaction that are not being delivered to satisfaction.

Inventory management programs

Regulatory compliance and/or industry accreditation support

Currently: High importance/Low satisfaction

Opportunity: High importance/High satisfaction



Given current market realities, hospitals are considering a broad plan of attack to achieve their goals. Several approaches to improve efficiency rated highly, including inbound freight management, cost controls for physician preference items and alternative forms of distribution. When asked which logistics support methods are the most important for improving the supply chain, providing standardized product kits and quantities to help reduce waste received the highest rating. As an example, a manufacturer of endoscopy devices researched the user experience and successfully created an optimized kit, making it easier for hospitals to pack out and clean up. Hospitals also value how identifying and isolating STAT shipments can expedite receiving, eliminating the need to search through hundreds of items on their receiving dock to find a STAT product needed for surgery. Suppliers must also be aware that hospitals are redistributing products to varied points of care like patient homes, ambulatory surgery centers and urgent care sites. Manufacturers who design and package products with this new reality in mind are likely to gain market share.

Collaborating for supply chain improvement

Strategies and support methods to improve supply chainLogistics challenges

Introduction

Business priorities


Logistics challenges > Collaborating for supply

chain improvement

Key survey insights

Q: How successful or unsuccessful has your provider network been at implementing the following

outbound and home health logistics?

Capturing and retaining accurate proof of delivery data

Tracking, intervening and addressing critical shipment issues while in transit

Ensuring specimen pickups at internal labs and clinical sites are completed timely

Packing and shipping Biological Substance (UN3373), Category A infectious substances, and radioactive shipments

56%

45%

50%

58%

Q: How important are the following logistical support methods in helping to

improve your supply chain?

Isolating and identifying “STAT” shipments for expediting

Leveraging advanced data capture and barcodes for

inventory

Providing standardized product kits and quantities to reduce waste

61%

Providing manufacturer consigned inventory

67%69%

Providing automatic reorder programs based on inventory

on hand

55%

71%


2017 UPS [INSERT NAME] Survey © 2017 United Parcel Service of America, Inc. 8

Key survey insightsThe following insights into hospital networks are based on the survey results and include some potential impacts and opportunities for suppliers and manufacturers.

Other than price, issues with product availability are the main reason hospitals will switch suppliers, followed by the ability to track products in transit. It goes without saying that having products in stock is crucial to hospitals, from both a quality of care and efficiency viewpoint. U.S. hospitals pay at least $200 million more a year than they ordinarily would to find drugs facing shortages.1 To help solve product availability issues and avoid losing customers, suppliers must have up-to-date visibility of their inventory and should work to improve transparency around communicating potential shortages.

Hospitals want additional support from their clinical product suppliers, particularly in customer service and training. By adding programs such as training on new equipment service and support for asset management, suppliers can help strengthen customer relationships. It’s important for suppliers to provide dedicated trainers or medical professionals with specialist product knowledge versus relying on sales representatives whose job responsibility is promoting new products and services.

Hospitals cited improving operating efficiency as the most crucial business priority for achieving their business goals over the next three years. Declining reimbursements drive a greater importance on this. Suppliers can be part of the solution by increasing transparency into inventory to enable JIT without putting undue risk on patient care, and collaborating to provide standardized product data, which will help facilitate transitioning to outcome-driven decisions.

Hospitals are leveraging supply chain strategies to help reduce waste and streamline operations. Manufacturers and distributors who collaborate with hospitals to better understand the user experience and adjust their products and processes accordingly will be the most likely to succeed. For example, if a manufacturer has been supplying kits containing 5 ml quantities to a hospital that normally uses 3 ml quantities, packing standardized kits with 3 ml quantities would be optimal and help the hospital achieve its goal of reducing waste.

Manufacturers and distributors should recognize that their products are increasingly being distributed by hospitals to varied points of care, such as ambulatory surgery centers, urgent care sites and patients’ homes. Manufacturers who design and package products with this in mind are likely to gain market share.

Uncertainty regarding potential regulatory changes are impacting hospital operations. To sustain customer relationships, suppliers should continue to provide programs that help hospitals maintain regulatory compliance, as applicable to the service provided. Based on our research, any reduction in regulatory compliance support would not be well received, as 79% of survey respondents value this type of support and 63% cited navigating regulatory compliance as a top business priority. Survey data suggests that regulatory compliance continues to be highly valued.

Key survey insights

Introduction

Business priorities



Key survey insights

Learn more about the ways UPS can help healthcare companies.

Collaborate to reduce waste

Enable multiple points of care

Enhance regulatory compliance support

Provide special training & support

Ensure product availability

Improve efficiency to create value

2017 UPS Healthcare Supply Chain Vital Signs Survey

1 Analysis finds shortages increased U.S. hospital costs by an average of $230 million annually,” February 2014. https://www.premierinc.com/drug-shortages-contin-ue-pose-patient-safety-risks-challenge-providers-according-premier-inc-survey/

© 2017 United Parcel Service of America, Inc. All rights reserved. UPS, the UPS Brandmark and the color brown are trademarks of United Parcel Service of America, Inc. 8

http://ups.com/healthcare

https://www.premierinc.com/drug-shortages-continue-pose-patient-safety-risks-challenge-providers-according-premier-inc-survey/

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Healthcare Supply Chain Vital Signs - By the Economistupstransforminghealthcare.economist.com/wp-content/uploads/sites/... · and declining reimbursements taking the lead. ... specifically