With decelerating reimbursements and continually mounting downward pressures on operating margin and cash retention, the bright lights of scrutiny are being placed squarely on the supply chain inside of the majority of large IDN’s. The advantages which should come from the cumulative scale of growing IDNs are diluted by the supply chain model that they most typically deploy. IDN’s expect to see substantial savings due to their buying power increasing, but unless they change their model, the savings will only be a fraction of what they could be and that may not be enough to offset the margin erosion most IDN’s are experiencing.
Suppliers serving healthcare today are faced with serving an old model that needs to be reconstructed from the ground up. There are too many layers and too many hands touching every order. In order to be effective in this inefficient model, suppliers have been forced to load up on marketing, sales firepower and inefficient logistics to the extent that the percentage of SG&A expense is higher in Healthcare (35% of every dollar of med/surg/pharma spend) than all other of the top 16 industries surveyed but one. In 2006, Sales rep earnings on the supplier side surpassed Clinician reimbursements on the provider side for the first time; and in the decade since then the gap has widened steadily and substantially. Manufacturers and Distributors are also forced by IDN’s to deliver “Just In Time” to too many locations and too often. All in turn driving up the vendors costs-to-serve.
All of these costs are then passed on to the IDN and any real chance of significant savings are difficult to realize unless the way these IDN’s acquire products is reconstructed.
These costs, coupled with resultant inefficiencies inside the IDN absorb way too much Clinician time, not to mention supply chain staff, and contribute to mushrooming total supply costs. These purchasing approaches and habits established in an earlier time all but preclude true efficient and effective purchasing opportunities - the kind of integrated supply chain innovation which leaders in other industries have adopted decades ago. Collectively, these factors and the mindset that “this is the way we have always done it” often conspire to undermine an IDN’s attempts at transformation from within.
Throughout the past two decades of working with large healthcare systems, the RiseNow Supply Model Optimization team of consultants (formerly known as ISC Expeditions under the leadership of James Grieger) has continued to perfect Supply Model variations by incorporating supply chain innovations and best practices from industries such as automotive, retail and Hi-Tech. These models provide best practices for consolidating the acquisition and optimal distribution of supply categories and service offerings. Our team has consulted with 20 major IDNs and led 8 of them through the challenging but rewarding transformation to various forms of the Integrated Supply Model.
Reducing costs is great, but not if it impacts negatively on patient outcomes. RiseNow has actually seen improved patient outcomes by the models we deploy by improving consistency across locations through standardization and reducing the amount of variables in any given procedure throughout the IDN. Our clients are not only striving to decrease costs, but to improve patient care by improving consistency across their health system.
Many healthcare executives are realizing that attention needs to go to the supply chain where action can have a very direct impact on the bottom line in the here and now. IDN’s that take this journey with us can expect to see significant bottom line improvement.
RiseNow does not work with every health system or supplier as this model is not right for everyone. RiseNow’s discovery process and feasibility study will determine very quickly if this is a venture that is worth pursuing or what needs to happen before this model should be pursued. Also, there are several flavors of the RiseNow Supply Model, from an integrated 3PL-based model to one that is fully insourced and operated by the IDN, with several hybrid variations on the spectrum in between. Our team helps each IDN select the model variation that is right for their health system, then take a “hands on” approach for ensuring the model is properly implemented.
Having developed many Custom Supply Models worldwide, James Grieger and his team know what works, and what doesn't work. For each non-clinical ancillary service deemed eligible for consolidation and centralization, RiseNow often knows several good providers the IDN will want to consider. RiseNow will also help the IDN determine if the competency exists to run the service with health system personnel. If so, RiseNow will help define production methods, policies and procedures to ensure the most effective operating solution is implemented to track to best-in-class results.
Integrating a supply chain is a journey. As expedition leaders on this journey, RiseNow will stick with each client from the beginning of the journey all the way through to the summit and back. RiseNow prides itself on getting its clients to their destination as quickly and as safely as possible. It is often said that reaching the summit is only half of the journey – the safe half – the return down to base is the most dangerous. RiseNow views it much the same way when it comes to implementing new Supply Models. The implementation is the summit; getting the model to operate as planned is the return. It’s also the time when small errors during implementation can cause big problems during go-live. RiseNow keeps each client as safe as possible on the Integrated Supply Chain journey.
RiseNow Supply Model Optimization is still led by James Grieger and his key associates, but is now fortified by the deep technology expertise, software implementation expertise, process transformation expertise, and outside the box thought leadership of the other RiseNow business units. All the principals of RiseNow share a commitment to integrity and accountability. For professionals with decades of expertise they also share something not so common among veteran specialists: a willingness to engage in a hands on fashion to ensure that clients realize the outcomes they were promised.
If you or your organization are contemplating a different Supply Model or are looking to Optimize what you already have in place, don’t wait, contact RiseNow today.