By Mariel Paige
Imagine yourself as the supply chain manager of a manufacturing plant, recently advised of a dangerous rise in expenses that are eating away at the company profits. You are confident that you can achieve significant savings with a little leg work to find cheaper products and some bulk-purchasing deals.
…Now, change the scenario slightly by imagining the same financial situation, but you are an executive of a healthcare facility. It’s not quite as easy to find similar savings when you’re dealing with the care of patients, whose lives literally depend on product quality and supply availability.
Health systems across the globe are struggling to manage shrinking margins in a highly volatile environment. Medical cost trends and policy reform have constrained providers into a cost-cutting frenzy to find solutions that won’t compromise care effectiveness. Success can be found by targeting supply chain weaknesses by removing waste. The purpose of this article is to explain the healthcare industry challenges, delve into the benefits of applying lean principles, and provide the framework for implementing a Just-in-Time (JIT) inventory concept through demand-driven procurement, which will result in reduced costs and enrich the delivery of patient care. The key to sustainable inventory control lies in the backbone of the new primary care model that focuses on bringing back the patient-physician relationship.
Healthcare spending in the U.S. is continuing to escalate and there is unsurmountable pressure faced by providers to control costs and improve quality. Process inefficiencies and wasteful resource utilization are common issues that result in expensive, fragmented, low-value care. The Economist reported that without change, expenditures will rise at a 5.4% annual growth rate to $7.724 trillion by 2022.
Demand for medical services and expectations for improvement in clinical outcomes have risen to a critical level, but much of the healthcare sector seem to neglect the substantial benefits of implementing lean strategies. Poor asset management in traditional care practices trigger extravagant spending habits and bloated inventory levels. The shift to consumerism, provider shortages, and unpredictable patient demand patterns are major driving factors that cause clinical staff to stockpile supplies and hoard equipment. The associated storage and material handling costs from these wasteful habits are tacked on to the patient’s bill, ever-worsening the unaffordability of care. The complexities and ambiguities of healthcare are perceived as justification to maintain traditional management styles, when in reality the service of providing care is very relatable to manufacturing and providers can reap substantial savings from implementing lean techniques.
Health Systems Adopt Lean Strategies
Case studies from Vanderbilt University Medical Center and ProMedica Health system report the benefits realized through the adoption of inventory management models. The results show that application of basic lean principles to eliminate excess inventories and unnecessary spending can be seamlessly integrated into the unique healthcare landscape to improve service efficiency without sacrificing effectiveness. Patient value increased with the removal of non-value adding activities and operating costs reduced with pragmatic management of resources. Inventory and process control strategies are effective in cutting costs, but fear of stock-outs lead staff to revert back to cushioning their inventories.
A sustainable solution is attainable using the JIT model, but only if providing patient-centered care remains the top priority. The goal is to overcome demand-forecasting challenges by strengthening the patient-physician relationship, which is the foundation of the innovative care delivery model used by direct primary care practices.
Maintaining JIT Inventory with Direct Primary Care
Cost reduction and improved performance can be achieved by meeting demand through efficient supply management. Direct Primary Care (DPC) is a high-touch care delivery model that promotes frequent interactions to foster a meaningful and trusting relationship between a patient and his or her physician. Forecasting demand and required inventory is possible when you are able to anticipate needs through familiarity of the health level of each of your patients. DPC physicians manage small on-hand inventory levels and order supplies when they are needed.
Maintaining a consumer-first mindset and strengthening the bond between the physician and the patient can lead to a dramatic transformation in care delivery, and may just be the solution to fix the overall issues that plague the healthcare industry.
Mariel Paige is an experienced project manager for Sentara Healthcare and is proficiently trained in lean strategies, strategic planning, and account management. She currently overseas the $53M hospital renovation and expansion project for the central utility plant, surgical services department, and two inpatient at Sentara Virginia Beach General Hospital.