Knowledge Center

A detailed example of a new Master of Health Administration (MHA) program with a medical logistics concentration.

Learn how Baptist Health forged its traditional AP cost center into a cost savings driver.

Healthcare expenses continue to rise and yet hospitals are realizing consistently shrinking margins. Healthcare supply costs are typically the second largest expense to a hospital and must be managed in a manner that ensures providers have access to quality products but also with an emphasis on cost awareness and expense reduction strategies. Healthcare supply chains must leverage their data in order to make better business decisions to reduce costs and increase operational efficiencies through the use of business analytics.

2018 AHRMM CQO Summit: Each year at the annual AHRMM Cost, Quality and Outcomes (CQO) Summit, participants throughout the health care field come together to share their knowledge, leading practices and ideas on supply chain’s role in delivering higher quality care at a more affordable cost. The CQO Summit discussions, in turn, inform the next year’s CQO report, which guides the development of the agenda for that year’s Summit.

In 2014, AHRMM hosted the first Cost, Quality, and Outcomes (CQO) Summit to bring healthcare thought leaders together to discuss particular supply chain issues and concerns. The results of those conversations were used to develop the first task force and to shape the agenda for the second CQO Summit, held in 2015. This white paper was written as a recap of the AHRMM17 CQO Summit, held in July 2017 in Washington, D.C.

Increasing federal regulation compliance costs and declining reimbursements have compressed hospital profitability. This is leading hospitals to turn to Supply Chain to reduce direct costs for supplies, devices, drugs, and purchased services. Traditionally Supply Chain has aggressively pursued these cost reductions through price reduction tactics. These techniques, however, are yielding diminishing savings returns.

Increasingly, the hospital and health care delivery system executives are viewing the supply chain as a strategic asset that can be leveraged to meet operational, clinical, and financial performance imperatives. This has not always been the case. For years, the supply chain was seen as little more than a necessary but ancillary function – to buy and deliver products as needed – with the primary supply chain improvement strategy focused on buying those products at the lowest price possible.

Incorporating the targets for transformation set by the leader of our organization including unjustified variation, fragmentation of care-giving, perverse payment incentives, and the patient as a passive receipt of care, Supply Chain has developed a strategic model and plan that transforms our thinking from a focus on “chains” to a focus on “flow” and from “Supply Chain Services” to “Care Support Services.”

Purchasing in healthcare is largely based on a hierarchical management style. In an experimental case started in 2004, at Floyd Medical Center in Rome, Georgia, this standard was altered. The introduction of a team concept combined with lean manufacturing practices to this traditional purchasing setting was unique. The results of this radical change over the past eight years have been exceptional. The paper describes the steps taken to change the culture, the actions taken to implement lean tools, and the wins achieved by the team.

A recap of the Executive Thought Leader Forum hosted by AHRMM on August 6, 2012, to discuss the transforming healthcare environment.