What Keeps You Up in the Night?

6/19/2018

Seven White-Hot Topics
(in Healthcare Supply Chain)

Over the last couple months, I've been privileged to serve as a keynote speaker at numerous events, to support inspiring coaching clients, to cultivate commercial growth for supplier organizations and to facilitate education events. Overwhelmingly, the question I keep getting asked is "what keeps you up at night?"

Our healthcare supply chain is at a crossroads, facing an unprecedented convergence of circumstances. Are we progressing or regressing?

Below are seven "front burner" topics consuming my attention credits:

Merger Mania: Companies often buy each other for a few specific reasons: economies of scale, economies of scope, customer/market share growth, population health risk pool viability, diversification or synergies. The real challenging work begins post merger when the integration activities consume both organizations for period of time. Many mega-mergers make perfect strategic sense. Others should cause us to pause and invite curiosity about the motive, strategic justification and conviction to integrate. Let's not forget that if IDNs were publicly traded companies, the Fortune 500 list would be reconfigured to include many hospital systems (pre-merger).

Strategic Misalignment: The CDC reports 86% of nation's $2.7 trillion annual health care expenditures are for people with chronic and mental health conditions. Why does the C-Suite task service line leaders and supply chain leaders to reduce supply expense when they could be collaborating to fundamentally change the care model while addressing the total cost of care? Why is supply chain taking goals and initiatives from others rather than sitting at the table (as part of C-Suite) and influencing/setting the goals and initiatives? If 50% of a hospital's cost structure is non-labor, then when is supply chain going to step up and earn the seat at the table next to the COO, CFO, CIO, CHRO and CMO?

Executive Talent: There have been more than 25 vacant VP/Chief Supply Chain Officer roles since January. More astounding than the actual number of openings is the harsh reality that these organizations did not have a clear successor ready to assume the role (or unfortunately did not have enough confidence in the qualified emerging leader in their own organization). Through my coaching and mentoring business, I've been exposed to number of uniquely-talented emerging leaders, each of whom are already ready for top-spot roles. Who is fostering their development, advocating for them and coaching them to their fullest potential? Many feel isolated, trapped and discouraged even though our future is in their hands.

Leadership Development: Possibly related to the Executive Talent topic above, the healthcare supply chain is under-investing in its leadership talent. Supply Chain Sherpas issues an annual Supply Chain Leader of the Future survey. Responses indicate we are not adequately elevating the leadership competencies of our incumbent executive leaders, our emerging leaders or our next general leaders. Improving supply chain influence and impact is a function of leadership competency much more than technical competency.

Benchmarking: We continue to misuse benchmarking for prices and for practices. Benchmarking is a great starting point on a value continuum, which supply chain should be creating over time as illustrated below. We are too often stuck at phase 1.1 in a perpetual loop of benchmarking prices with each other rather than advancing each expense category to incremental forms of value towards population health. Benchmarking alone may also create an artificial price floor for our industry. Why would any supplier provide lower an IDN lower prices if they expected that price to show up in an industry-wide benchmarking database (even if de-identified)? From a practice benchmarking perspective, we have a bit of impostor syndrome in that we limit benchmarking people, process and technology to healthcare peers. Imagine the breakthrough potential if healthcare supply chain leaders began benchmarking their people investments to Proctor & Gamble or Apple rather than to each other.

Ripe Fruit on the Ground: Why do walk over ripe fruit on the ground to climb trees to the highest branches, out on thin limbs to get what we believe to be the last bits of fruit? Many hospital systems continue to explore creative ways of eliminating choices for physicians so they can rationalize suppliers and implants to create negotiating leverage with suppliers. Meanwhile, there are still hundreds of unaddressed Purchased Services expense categories throughout Construction/Facilities, Finance, IT, Human Resources, Marketing, Clinical Operations and others. We also fight over the acquisition price of equipment only to forgo 20-30% of its value at the end of its useful life. We still cost-shift through price haggling rather than creating value by addressing the 30-40% waste in the shared supply chain between the supplier and the hospital. I'm committed to creating a movement around these important topics. Look for articles, videos and whitepapers and maybe even some mastermind groups in the near future.

Innovation: Excluding academic hospitals, its rare for an IDN to have an R&D budget. Suppliers are therefore a tremendous source for meaningful innovation. Progressive IDNs already consider their best suppliers to be an extension of their teams. However, there is an overwhelming sense of discouragement from supplier organizations that their ideas, concepts and relationship are trapped in the bottleneck of the healthcare supply chain. I invite each of us to embrace important lessons learned from RTI's journey, which is highlighted in the film Puncture (click here for a summary of the film). How many meaningful innovations are not making it to the point of care because of breakdowns in our healthcare supply chain? How does a company making a single breakthrough device get the attention of supply chain? How does a company offering tech solutions to supply chain itself get the attention of supply chain? How does the supply chain leader know how and where to allocate their limited attention credits, when they are already overworked, undervalued and misunderstood? Providers and suppliers are both struggling while meaningful innovation comes to a halt.

These topics are white-hot in our healthcare supply chain today. They are relevant, important and urgent. These topics understandably shape the battleground for my provider and supplier clients. I invest significant time digging into solutions around these areas since I'm not a fan of admiring problems. Supply Chain Sherpas is centered around these topics and we will continue to adapt to the ever changing needs of our clients.

With that said, these are not necessarily the topics that keep me up at night. I have found myself consumed by our country's mental health epidemic. The CDC just released a long term study, highlighting a 25.4% increase in suicide rates (nationwide) between 1999 and 2016. Click Here for the study. I don't yet know what this means to me, but something is clearly pulling my attention towards a meaningful purpose.

What's keeping you up at night?

9 Comments

Dee Donatelli link

6/20/2018 12:49:08 pm

I am consumed by the outcomes in our current healthcare practices! By continuing to allow such wide variation in clinical practice rather than focusing upon proven superior outcomes we allow waste & misuse to dominate.

Joe Walsh

6/20/2018 04:27:17 pm

Great perspective Dee and I agree with you completely. Some IDNs are very focused on clinical quality and eliminating unnecessary variation, although there is still so much more to do. Its a good thing your business is available to help hospitals to identify the clinical practice improvement opportunities and to close the practice variation gaps. :-)

Tim Ingram

6/20/2018 03:57:25 pm

good list, many of these impact the other.

6/20/2018 04:29:02 pm

Thank you Tim. Agree that these topics are related to each other. Makes you wonder about the collective impact of making a 10% improvement in any one of these areas.

Nancy LeMaster

6/21/2018 10:03:53 am

As we look to expand our executive talent base and improve leadership development I think it is critical we confront unconscious biases and seek to create inclusive cultures that will attract diverse team mates.

Howard Mann

6/21/2018 12:47:18 pm

All of the above and the attached replies, are valid. I would add "Linkage" keeps my thinking occupied. When going through the Baldridge application and process, I was astounded that what makes a world class organization tick isn't its separate functions but the linkage before, between and outside of the entity. Not only did everyone involved have to know, repeat, understand and practice the Mission, Vision and Values of the organization but we knew the impact of the process of how it all impacted each other as well as our customers and communities. If our goal was to create the best healthcare then everything had to converge to that end. When looking at supply chain and the linkage that it had throughout the organization and its impact on practice, evidence based thinking, cost/quality/outcomes as well as our supplier partnerships and our community obligation - then each item that keeps us up at night, is a means to that end and must be linked to the whole.

Rob Addison

6/26/2018 08:30:06 am

Thoughts related to fruit on the ground. First, I like to call purchased services API, ie Administrative Preference Items. That reflects the same preferential sourcing practices by all personnel instead of just physicians. Second, I think we tend to focus on “purchased” services because, well, we are procurement and admin fee driven. To bring more value, we need to look at Services that may or may not be purchased. That requires analytics beyond spend eg looking at the GL, but could add so much more insight to hospital leadership about practice variance (important in non-clinical areas too, right.), without forcing a “purchase” decision. That isn’t in our comfort zone, but that’s what makes it fun! And raises our game to another level!

8/10/2018 12:42:25 pm

Rob... I don't disagree with API as a more defined term than Purchased Services, however, I try to explain my responsibilities to the organization(s) that I work with that I should be accountable to them for all Non-Labor expenses. Even non-purchase contracts and processes are included in my perspective on this. So, catering for example was analyzed and assessed, key stakeholders and teams gathered to look at the cost or value impact, and improved efficiencies were reviewed and selected which ultimately reduced costs. I certainly agree that nothing is off the table, and everything is on the table. Thanks for bringing this up.

Heather Lavrich

8/20/2018 07:33:29 pm

What keeps me up at night, is the focus on year over year price reduction. It is not sustainable. Greater value comes from collaborations with suppliers to eliminate pain points that cost suppliers and IDNs money. Reduce the cost share the savings.

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