2. 1
THE EXTREME VARIABILITY AND VOLATILITY
OF THE A SUPPLY CHAIN
The business world has put new emphasis on taking cost out of manufacturing and delivering
products. Take Wal-Mart’s mandated supplier RFID program, Toyota’s lean manufacturing
principles and numerous quality methodologies like Six Sigma, Total Quality Management
(TQM) and Business Process Re-Engineering.
Yet healthcare has not achieved the same level of process
improvement and data integration as players in the
manufacturing and retail environments. Very few providers
have taken advantage of the estimated 3-9% in supply
savings left untouched in most healthcare organizations’
supply chain operations today. i
Much of the reason lies in the complexity of the healthcare
supply chain itself. In the U.S., the healthcare supply
chain involves more than 650,000 different organizations
including manufacturers, distributors, carriers, GPOs,
hospitals, users and patients.ii
And there’s a level of
unpredictability to the healthcare environment not
experienced with manufacturing or retail — you never know
exactly how many patients will come through your ED
doors next Saturday night, let alone what their ages, acuity
and diagnoses will be — so you need to remain in a constant
state of preparedness for multiple scenarios.
To demonstrate this complexity, we need only follow a
fictitious patient. We’ll call him Joe C. Joe comes into the
ER with chest pain and pressure, with pain radiating to the
left arm. He is assessed by the triage nurse and then the ER
physician. An EKG, chest x-ray and blood work are ordered.
The diagnosis — Joe has suffered a myocardial infarction
brought on by a coronary occlusion. He is taken to the cath
lab for an angiogram which shows four coronary arteries
are blocked 90-100%. Joe receives a coronary artery bypass
graft. After a successful procedure, Joe recovers in cardiac
intensive care. When his condition stabilizes, Joe is moved
to a standard room. Because of severe heart damage, Joe is
kept in the hospital for 6 days. He continues to be seen by
the cardiologist and is assessed by a cardiac rehabilitation
nurse. Joe is released with prescriptions for medication and
appointments with the cardiac surgeon, the cardiologist
and the cardiac rehab nurse.
So let’s review. In a single hospital stay, Joe was treated
in the ER, cath lab, OR, coronary intensive care and on a
nursing floor. He had tests from the lab and x-rays from
radiology. His care team included three shifts per day of
hospital nurses, nurses’ aids and technicians, as well as
contracted physicians and specialists.
Throughout his entire stay, he was medicated,
monitored and tested. Those supplies and equipment
were requisitioned/ordered by physicians, nurses and
the materials management department. Supplies were
contracted through the GPO, or were on consignment, but
were sent from the manufacturers. Floor stock items were
used from different types of inventory venues —
par-levels, stockless and point-of-use cabinets/shelves
— with supplies delivered through the hospital’s internal
supply chain or directly to the location needed from outside
vendors.
And now all of the services, equipment and medications
provided to Joe must be properly billed by the hospital
and the other separate entities working within the hospital
(such as the ER physician, the cardiologist, labs and
radiology).
And where will the payment come from? That varies as
well. It could be Medicare or Medicaid, patient insurance
or the patient himself, with rates set — not by competitive
market conditions — but by the government and sometimes
even by the dominant insurance company in that area.
Given the sheer number of players, supplies, departments/
locations and diagnoses, it is easy to understand how
inefficiencies and errors can occur along the healthcare
supply chain. Examples can be seen in almost every
functional area — FTE hours wasted on manual ordering
or justification of POs, high inventory carrying costs as
nurses hoard and keep safety stock, clinicians wasting
time searching for “lost” equipment, or underutilized use
of surgical rooms and equipment. And inefficiencies and
errors can compromise patient care if the right supplies are
not available or if there are errors in patient medications or
identities.
While healthcare organizations won’t ever be able to control
all the variables, they can eliminate many inefficiencies and
errors by creating a more integrated and automated supply
chain. The way to accomplish this? Implement an Event-
Driven Supply Chain.
3. 2
ELIMINATING INEFFICIENCIES AND
IMPROVING SAFETY WITH THE EVENT-
DRIVEN SUPPLY CHAIN
In the Event-Driven Supply Chain, separate actions from
disparate departments, locations are connected into one
contiguous healthcare-based supply chain. A patient care
or clinical event from any department/location and from
any point along the supply chain can serve as the “trigger”
to drive the other necessary actions along the supply chain
process. For example, the scheduling of a procedure drives
the ordering of the case cart and the scheduling of the
appropriate resources — the people, supplies room and
equipment — needed to perform the procedure.
Only McKesson offers this comprehensive, integrated
supply chain approach through our Event-Driven Supply
Chain. We’ve used our in-depth understanding of the
supply chain to develop department-level solutions that
meet the day-to-day needs of clinicians, administrators, and
HR/payroll and financial personnel.
But just as critical as having the right solutions is creating
interoperability and interdependence between the solutions
so they can work together and “talk” to one another.
Our system integration facilitates the smooth flow of
processes, information and supplies within each facility
and throughout an integrated delivery network. Errors are
reduced. Efficiencies and effectiveness are increased. And
communication is improved.
Our system integration gives you a global perspective of
your entire clinical supply chain — from hiring, training
and scheduling staff; to ordering, tracking and billing
supplies; to monitoring costs and performance. This allows
you to gather comprehensive data on your organization’s
true resource utilization, clinical outcomes and financial
position so you can optimize performance — both clinically
and financially.
Benefits of the Event-Driven
Supply Chain
Facilitates more informed decision making:
Provides a true picture of outcomes by
integrating and aggregating usage, clinical and
financial data
Reduces supply costs:
Improves resource standardization, increases
contract compliance and reduces clinician
preference through better data
Streamlines workflow:
Increases transactional efficiencies, reduces
errors and cuts FTE hours; allows managers to
reallocate FTEs to performance improvement
efforts; frees clinicians to focus on patient care
Improves inventory management:
Reduces stock-outs, minimizes safety stock
and lowers carrying costs
Enhances financial picture:
Reduces waste and captures charges more
quickly and accurately
Enhances performance improvement efforts:
Combined with advanced analytics, provides
accurate, comprehensive data for appropriate
organization-wide and service line performance
management
The integrated system approach of The Event-
Driven Supply Chain offers new process
efficiencies and provides the information needed
to drive new business initiatives that increase
profitability, while at the same time, helping to
maintain and improve positive clinical outcomes.
The Event-Driven Supply Chain
Scheduling the procedure reserves the appropriate resources Completing the procedure triggers charge and inventory functions
A patient care or clinical event triggers other necessary actions along the supply chain
4. 3
OFFERING HOSPITALS FLEXIBLE
ORDERING OPTIONS
As we’ve reviewed earlier, the healthcare supply chain is
very complex. Each department, area or role has unique
needs and may have multiple ways of obtaining supplies.
For example, a single nursing floor may utilize point-of-use,
stockless and requisitioning simultaneously. This can cause
a great disconnect within the supply chain if these disparate
systems cannot communicate and share information with
the MMIS.
McKesson offers a variety of modes to match varying needs.
What combination you use depends upon the flexibility
your staff needs and the control you require with your
product and patient mix.
Following is a summary of the common supply
methodologies and how The Event-Driven Supply Chain
facilitates efficient ordering and replenishment:
Requisitioning
The advantage of McKesson’s Event-Driven
Supply Chain is that once nurses request
non-floor stock products from either an internally sourced
area (i.e., a warehouse) or externally sourced area (i.e.,
an outside vendor), they can easily check the status of the
requisition at any given point. No more phone calls to the
materials department.
Point-of-Use
Selecting from McKesson’s open point-of-use
bins and closed cabinets for high-cost items, a
nurse scans the item needed (a bandage, fluid, basin, etc.)
and marks it for patient — the item is automatically charged
to the patient through the financial system and replaced
with new inventory through the MMIS.
Case Carts
When a case is scheduled, a case cart is picked
to match the items listed. In McKesson’s
Event-Driven Supply Chain, clinicians are flagged to a
missing item ahead of time so they can place and monitor
the order (whether it’s non-stock items coming in or
stock items on order), and view the expected delivery
date. This allows staff to foresee that a case might need
to be rescheduled and to move cases to obtain the highest
capacity level.
Perpetual Inventory (from OR)
An Event-Driven Supply Chain helps nurses
verify what’s on the case cart and highlights
short-delivered items. When the case is completed, supply
usage is charted and bills are automatically generated for
patient-chargeable items. Unused items are returned to
central sterile and automatically updated in inventory so
they can be available for the next case.
Par Level
Throughout their shifts, nurses take needed
items and chart that each item is charged to a
specific patient. Materials Management batch-counts the
inventory on a daily basis and reorders the items needed
through the MMIS — this frees clinicians from ordering
duties and alleviates concern of stock-outs.
Supply Tracking
With our Fed-Ex style tracking capabilities,
McKesson provides facilities with yet another
level of vision into the order, allowing nurses to verify the
exact location of the needed supply — whether en route, at
receiving or on its way to the nursing floor.
Stockless
The MMIS tightly monitors stockless
inventories to verify that correct levels are
maintained, and to ensure that the hospital’s usage and
pricing synchs with the third-party vendor. This enables the
hospital to take full advantage of the benefits of stockless:
reduced carrying costs and maximized space — critical for
newer facilities with limited storage space or “penned-in”
organizations without room to expand.
Consignment
With The Event-Driven Supply Chain, you can
identify the location of a consignment item and
properly charge that item to the patient when it’s used in a
case. This helps your organization maximize the advantages
of the “pay-when-you-use” consignment structure: no
carrying costs, shortened waiting time between payment
and reimbursement and the ability to list supplies as an
expenditure, not a liability.
5. 4
Departmental Overview of Events
Clinical, patient and supply order events drive other processes within the supply chain.
Methodologies
6. 5
For example, if a nurse needs a specialty brace to arrive the
next morning, she’ll spend time calling in the initial order
and may make numerous calls that next morning to verify
the brace’s progress and arrival time.
With McKesson’s automated requisitioning, the nurse
simply notes on the request that the brace is needed next
day air, and can also include other specific information such
as patient’s name, sizing requirements, known allergies, etc.
The next morning, the nurse logs into the requisitioning
application and it automatically tells her the expected
delivery on that item. Package Tracking can tell her if it has
been received; and if yes, where it is in the hospital, and if
already delivered, who signed for the item.
Automating main supply and billing functions through an
integrated, Event-Driven Supply Chain allows nurses to
focus more completely on patient care, not on paperwork.
Integrating Materials
with Surgical Services for
Accurate Forecasting
The advantage of an integrated, event-driven system is that
information flows seamlessly from the OR into the MMIS.
When a procedure is scheduled (i.e., the trigger event),
the items needed are fed directly into the MMIS from
the inventory location identified. This allows true supply
forecasting based on the schedule and the acuity of the
patient.
Accurate forecasting can save your organization significant
dollars, especially considering that OR supply inventory
accounts for 60–70% of all supplies used in a hospital.
Proper forecasting enables you to maximize inventory on-
hand to the case mix scheduled, so dollars aren’t wasted
on unneeded inventory. You can identify missing case cart
items up front so cases aren’t delayed on the day of surgery.
Rush and overnight
shipping charges
can be reduced.
Most importantly,
the seamless
integration of
information helps
ensure proper patient care. Forecasting means you can be
sure the right items are on the shelf when they’re needed.
And integration with materials ensures that the right
products are used on the right patient. For example, if a
latex-sensitive patient is scheduled for an OR procedure,
latex-sensitive items are automatically substituted on the
ENHANCING WORKFLOW WITHIN
EACH DEPARTMENT AND
THROUGHOUT THE ENTERPRISE
As we’ve seen with our patient, Joe, there are numerous
departments/areas and players involved in the care cycle of
a patient. Each of these entities must operate successfully
on its own and as part of the entire healthcare network. The
department-specialized solutions provided by The Event-
Driven Supply Chain allow each area to effectively perform
its unique functions, improving workflow and increasing
financial performance.
Integration allows the smooth flow of information,
processes and supplies between each department/area.
This provides continuity along the supply chain, improving
efficiencies and eliminating the potential for error or lost
data. An proficient supply chain, in turn, helps ensure
continuity in care to improve patient outcomes.
Taking a Comprehensive
Approach to Nursing Needs
The more ways we can ensure that nurses have the right
product in the right quantities at their fingertips, the more
efficiently clinicians can perform. McKesson is the only
vendor that can
offer the full range
of supply chain
options under
one umbrella,
with integration
that streamlines
processes and allows for easy exchange of data across
departments and job duties. Our point-of-use tightly
integrates with our materials system, that in turn integrates
with stockless and supply tracking. This provides broad
visibility into usage, while allowing measurement to a
minute level of granularity, all through a single report —
not multiple reports out of multiple separate systems that
need manual manipulation to reconcile.
Your organization can access critical data on key attributes:
fill rates, patient charges and usage, and verify supply
spend for each area, to compare revenue to cost. Accurate
data ensures that nurses have the right products available
in the correct quantities, optimizing limited supply space
(especially important in newer facilities with less supply
storage on nursing floors) and supporting proper patient
care. It lowers stock-outs. And it facilitates proper charge-
backs to the patient, including mark-ups.
By automating the ordering process, nurses are freed from
placing multiple phone calls to order, verify and track the
status of an order. This can be extremely time-consuming.
Accurate data ensures nurses
have the right products and
quantities, supporting proper
patient care.
Non-latex items are
automatically substituted on
the pick ticket for Latex-
sensitive patients.
7. 6
pick ticket. The technician pulling that case doesn’t have to
perform the extra step of checking for sensitivity on the case
— he or she simply pulls the items listed. That’s ease-of-use
for the tech or clinician and an added safety measure for the
patient.
Integration between surgical and the MMIS offers other
advantages, as well. For open shelf point-of-use, the
surgical system tracks that the product is being used in the
case and feeds that information directly into the materials
system so inventory is automatically replenished. With
perpetual inventory, you can ensure that you have the right
products available and, through supply tracking, that the
right product is being sent if an item was shorted.
By automating much of the supply functions, personnel can
focus on maximizing usage of the room versus ordering and
verifying supply items.
Coordinating Supplies for
Cath Lab and Specialty Areas
After the OR, cath lab and interventional radiology are the
most profitable centers for the hospital. As such, they have
a profound impact on the overall financial health of the
organization. The true benefit of The Event-Driven Supply
Chain is the capability to properly and cost-effectively plan
for your non-emergent cases, so personnel are freed from
day-to-day events to concentrate on emergent cases.
In specialty labs, the driving event is the scheduling of
a procedure or an emergent visit to the lab, such as for
diagnostic work, a stent or a CT scan. Scheduling drives the
procurement of needed resources — the supplies, room and
personnel.
Cath labs depend heavily upon consignment items. An
advantage of an integrated supply chain is that you can
properly identify where the consignment item is located and
who should be charged if it’s used — this is critical, as you
pay to replenish a missing stent regardless of whether or
not you receive compensation. For example, if the patient is
scheduled for a procedure because of a suspected problem
with an artery,
many different
sized guide wires
must be available.
During the case,
clinicians use the
wires that best match the size and acuity of the patient. An
integrated point-of-use and materials system automatically
tracks what was pulled, what was used and should be
charged to the patient, and what should be returned to
inventory.
Depending upon the size and complexity of the organization,
perpetual inventories and point-of-use may both be used,
and preference lists built for certain procedures/physicians.
Typically, the supplies (such a guide wires, stents, pacemakers
and defibrillators) are already stocked based on the procedure
type performed in each lab. Because of the integration of
the Event-Driven Supply Chain, all reorders go through
the materials management system — replenishment is
automatically triggered by consumption.
Integration also gives your organization access to usage
and charge information. Additionally, clinicians can scan
expiration/serial lot information on an individual item,
such as a catheter, so that detailed product information is
available.
Helping Emergency Rooms
Stay Prepared
Because of the urgent nature of the cases, the OR relies
primarily on par level inventory. Clinicians need to be
able to “grab and go” without taking time for point-of-use
systems or requisitioning. They need it now! And, as we’ve
reviewed in the
introduction of this
white paper, there’s
little way to predict
case mix and
patient acuity, so the ER needs to be well stocked to handle
a myriad of illnesses and injuries.
The integration provided by The Event-Driven Supply
Chain gives the ER a critical business advantage — the
ability to collect and analyze usage and trend data.
Analytics enable your organization to project what items to
have on hand and in what quantity, so items are available
when needed. One example is the “snow bird” phenomenon
in Florida. Hospitals in that state will see an influx in
hip injury cases during the winter months as many older
Midwesterners and Easterners travel south for the winter.
Analytics can be used to trend these injuries over time/
season to ensure the ER is properly stocked and staffed.
Point-of-use and materials
integration automatically
tracks what was pulled, used
and returned.
Usage and trend data helps
project what supplies/
quantities to have on hand.
8. 7
Giving Clinics the Ability to
Easily Order and Receive
Supplies
Clinics encompass urgent care centers, outreach programs
or specialty clinics such as orthopedics. Because clinics are
often located on a different campus than the main hospital
— up to 30 or 40 miles away — requisitioning and supply
tracking become their two most important supply chain
tools.
Clinics do not typically carry a large dollar amount of
supplies. Even a specialty clinic, such as an orthopedic
clinic, will carry only a limited number of high-cost
items such as braces or range of motion machines on a
consignment basis. So off-site locations need to have a way
to easily and effectively order and receive supplies.
The advantage of an integrated Event-Driven Supply Chain
is to provide each off-site location with its own receiving
and requisitioning capabilities so it can order and confirm
receipt of its own supplies. This ensures proper ordering of
needed items. And it facilitates proper payment. Too often
in today’s systems, supplies are ordered by the main facility
but shipped directly or by courier to the off-site location,
so the delivery is never confirmed. When an order falls
out of the system, it can be time-consuming for the central
facility when the invoice comes in — billing doesn’t have
confirmation that the product was ever received and must
take the time
to call to verify
receipt so the
proper charges
can be made.
Supply tracking
also becomes
very important to clinics so they can track the location of
an expected delivery online (including confirmation of
expected delivery time and acceptance signature), without
having to call central materials.
Providing Physicians with
the Data They Need
Requisitioning is a physician’s most important supply chain
tool. Because physicians have strong product preferences,
they need to feel
comfortable that
they can easily
requisition and
quickly receive the
items they need.
The Event-Driven
Supply Chain gives the physician the flexibility to order
from anywhere within an Integrated Delivery Network —
the ER, the nursing floor, the doctor’s office or clinic — and
at any point during the process — from ordering diagnostic
tests, to ordering a procedure with specific preference
items, to ordering proper pain medication and antibiotics.
And The Event-Driven Supply Chain gives physicians the
comprehensive data they need for sound decision-making.
Having access to in-depth cost and efficacy data helps
physicians properly evaluate products for standardization
efforts, and helps physicians participate more fully in
quality improvement initiatives.
When each location performs
its own receiving and
requisitioning, it ensures
proper ordering and payment.
Access to comprehensive
cost and efficacy data helps
physicians properly evaluate
products for standardization.
9. 8
ANALYTICS AND THE
EVENT-DRIVEN
SUPPLY CHAIN: TYING
IT ALL TOGETHER
Event integration, combined with McKesson Analytics,
provides a powerful business advantage: your organization
gains a global perspective of your entire business — your
true resource utilization, clinical outcomes and financial
performance by patient, by procedure, by physician, by
day/month/year. Global business metrics give visibility into
the inter-relationship of clinical and financial outcomes,
helping you maximize financial performance, while at the
same time maintaining or improving clinical performance.
Analytic tools such as dashboards and scorecards
alert managers to areas needing immediate attention.
Benchmarking allows managers to track and compare the
results against your own historical data and/or the results
of similar organizations across the country.
A critical area for the use of McKesson Analytics is the
OR. As the key profit center, understanding costs and
clinical efficacy is crucial. Analytics helps your organization
determine the true clinical- and cost-effectiveness of
different procedures, products and physicians. For example,
McKesson Analytics can help you compare two different
physicians with a similar case mix — one using a drug-
eluting stent and the other using a standard stent — taking
into account the total cost-per-procedure by physician,
the acuity of the patients, and the clinical performance,
( i.e., the outcomes of the stents). This provides concrete
information so you can determine if the use of drug-eluting
stents make sense clinically and financially. And the case
example allows your management to use it as a forecasting
model.
Analytics also helps alleviate a common objection from
physicians regarding comparisons: that evaluating
physicians on supply usage costs alone does not tell the
whole story. With McKesson Analytics, your organization
can not only compare supply costs, but also compare
patient outcomes. It may be that one physician has lower
supply costs but actually costs the hospital more in the
long run because his patients have more complications
and extended lengths of stay (for which the hospital does
not get adequately reimbursed). Without a way to connect
and compare both the clinical and financial outcomes, your
organization may reach the wrong conclusions.
By knowing actual, true costs for procedures or physicians,
your organization will no longer need to rely on average
patient costs, which can be inaccurate and misleading.
An average patient supply cost might be $175/day, yet an
appendectomy patient may have no supply costs and a burn
patient may have daily specialty bandage costs that run into
the thousands.
With McKesson’s advanced Analytics, administrators
can gain insight into the root causes of inefficiencies and
expenses so improvement efforts can be targeted to produce
the most impact.
Maximizing Service Lines
With increasing competitiveness
from specialty facilities and with
consumers becoming more and more
value conscious, hospitals will have to make changes —
such as reorganizing around a narrower range of clinical
activity, and differentiating themselves on quality and
service.
McKesson Analytics give you the unique ability to
determine profitability and outcomes by service line.
Although some organizations (such as community
hospitals) may not be in a position to eliminate unprofitable
service lines, each organization should know which of
its service lines are most profitable — and why. It helps
identify problem areas, facilitates long-range planning and
highlights areas that might bring in additional revenues.
And if you have “losing” service lines that still must be
maintained, you can better understand how to compensate
for those losses with extra effort and investment in your
more profitable lines.
With McKesson Analytics, your organization can obtain the
global information you need for sound decision-making and
planning. From the time a patient walks in the door until he
or she leaves, you can know the cost for that engagement,
by patient, by DRG. Managers can access information from
all the integrated solutions (point-of-use, the OR, clinicals,
materials, clinical ordering, even pharmaceuticals), plus
each location, (whether it be the cath lab, the nursing floor
or a remote facility). Combined, this gives a true picture of
the entire patient event, with exact costs and outcomes for
that specific patient and stay.
Global data knowledge helps your healthcare system
identify areas where costs are out of line with similar
facilities across the country. You can use benchmarks to
compare cost-per-procedure, -per-physician, -per-patient,
taking into account any differences in patient mix/acuity.
10. 9
It also helps you make accurate determinations of which
service lines to invest in. For example, let’s consider the
profitability of adding two more rooms to your cath lab,
designated specifically for more invasive procedures such
as installing pacemakers and defibrillators. McKesson
Analytics can tell you whether it makes financial sense to
make the capital investment. And our Analytics can tell you
if you’re maximizing utilization and revenues from the stent
rooms you already have in operation.
By harnessing the power of McKesson Analytics, your
organization can truly gain control over its strategic
planning. This is comprehensive information that goes
beyond just red, yellow, green dashboards — it gives your
decision-makers in-depth knowledge of where and how
your organization is successful, and where improvements
need to be made.
THE HEALTHCARE SUPPLY CHAIN:
FUTURE STATE
Moving forward, the healthcare supply chain will offer even
more integration and automation, and increased power of
analytics, eliminating manual “hand-offs” of information
and allowing your organization to better anticipate case/
supply needs.
Improved technologies, such as RFID and/or Wi-Fi,
will continue to improve the granularity of information
available for each item — including item history, specific
case/lot/expiration information and tracking of the exact
item location. This would allow for automated item tracking
and recall, with a central product recall repository — a data
base of detailed information on each item — so devices,
implants and other specialty items could be instantly
located in the event of a recall.
Integration with physician orders would automatically
trigger a requisition in the MMIS and delivery to the proper
location. Orders entered by the physician that have a
pharmaceutical component would trigger the order with the
pharmacy.
And advanced analytics would allow the system to predict
the items needed. Based on your last six-month usage your
integrated system could provide an automatic assessment
and recommendation on par levels. And based on the
current census and diagnosis, the system could provide
recommendations on what supplies will be needed. For
example, if a high number of burn patients come in and
several are sent to an overflow floor that only occasionally
handles burn patients, the system would automatically
bump up burn supplies on that floor to accommodate the
new patients.
CONCLUSION
The pressures facing today’s healthcare organizations
will only continue to grow. In order to retain and increase
profitability, you need to manage your hospital or
healthcare system as a business, understanding why and
how you are profitable and where you are failing.
Only McKesson offers you the comprehensive data, the
healthcare-specific products and the integration you need to
effectively run your healthcare system. Because McKesson
is focused only on healthcare, it has the breadth of products
and services needed to aggregate all of the information,
all along the healthcare supply chain — including the OR,
point-of-use automation (cath lab, radiology), Pharma,
materials, financials, HR/Payroll and distribution.
McKesson is uniquely positioned to incorporate data
from both internal systems (such as materials, financial
and clinical) and other disparate sources (i.e., GPOs,
manufacturers, distributors or data companies), to help
your organization gain a comprehensive view of its total
supply spend, driving effective contract negotiations,
standardization efforts and overall performance
improvement.
By harnessing McKesson’s Analytics and the integration
of The Event-Driven Supply Chain, you can better manage
all aspects of your business. You gain process integration
between departments, players and locations to improve
efficiencies. You expand the depth, breadth and quality
of information. You gain the visibility to understand how
your entire supply chain is operating — each area, each
physician, each patient, each product — enabling you to
improve both your profitability and your clinical outcomes.
With McKesson, you can answer critical questions
regarding your organization’s current performance and
future opportunities — such as knowing which of your
service lines provide the best return, which of three drug-
eluting stents provides the best clinical/financial outcome
or even which nursing shifts typically have the most
absenteeism.
By improving efficiencies and communications between
disparate departments, locations and players, you can
better ensure the safety of your patients. Clinicians are
alerted about missing case cart items, and items are
automatically substituted for latex-allergy patients.
Improved processes streamline and automate manual
processes, and provide automatic double-checks and alerts.
Ultimately, the Event-Driven Supply Chain frees clinicians
to do what they do best — provide quality care for their
patients.
11. 10
More and more executives are recognizing the
pivotal role proper supply chain management has
on their financial viability. And it’s no wonder. In
the most resource-heavy area of the hospital — the
OR — materials account for 40% of an average
annual OR budget, with capital equipment and
instrumentation making up another 18%.iii
Labor
is the other big resource cost, accounting for more
than 60% of total healthcare expenses.iv
And costs continue to increase each year. Supply
costs are still skyrocketing, with one study showing
a 23% increase in supply expense over a three-year
period.v
Increasing turnover, rising vacancy rates
and temporary agency utilization all contribute to
increasing labor expenses.
Other issues also add cost and time to the
healthcare supply chain.
Hospitals can have difficulty tracking their
supplies and assets. Each year, 5%–15% of hospital
inventory is written off because it can no longer
be located, or more importantly, serviced.vi
In
addition, hospitals can lose upwards of $1 million a
year in medical thefts alone.vii
A further issue is bad data. The Coalition for
Healthcare e-Standards estimates that hospitals
waste 24%–30% of supply administrative time
each day correcting data errors — at a cost of
$60–$80 per correction.viii
Part of the reason for manual rework is decades
of underinvestment in healthcare IT, representing
only about 2.5% of overall health expenditures, a
percentage which is less than half of that in other
industries.ix
Many organizations continue to utilize
manual processes and disparate information
systems. For example, current use of electronic
data interchange (EDI) represents only 31% of
eligible transactions; yet, as much as 85% of all
purchase orders and invoices could be converted to
electronic.x
Disparate systems mean data is held in separate
silos, making it difficult, if not impossible, for
healthcare organizations to obtain accurate cost,
usage and outcome data. This means organizations
can’t correlate their financial and clinical outcomes
to understand their true profitability and patient
success.
When the right IT solutions and processes are not
in place, patient care can also suffer. A study from
the Institute of Medicine pointed the finger not
at the caregivers but at the environment in which
they work. The study cites that more commonly,
errors are caused by faulty systems, processes and
conditions that lead people to make mistakes or fail
to prevent them.xi
With all these pressures converging — combined
with falling reimbursement, decreasing capacity
and a growing elderly population — providers must
find ways to manage their business more efficiently
and cost-effectively, but without compromising
their quality of care.
Integrating and automating process and
information flows through an Event-Driven Supply
Chain will help organizations maintain profitability
and gain a competitive advantage.
THE SUPPLY CHAIN AS A STRATEGIC ENABLER
