Healthcare Needs More Mud: A Supply Chain Perspective

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If ever a layman’s view of the holy war over healthcare reform had a chance to be heard, well, as a guy who’s covered the space for the better part of a decade, here goes nothing. (My disclaimer: I hold both political parties in equal contempt.)

Obama succeeded in throwing the first bucket of mud against the wall, and it would seem that Trump has now gained a reluctant appreciation for his achievement. Because the fact is, some of that mud actually stuck. Notwithstanding Nancy Pelosi’s famous gaffe, recent happenings on the Hill indicate that our lawmakers finally read ACA 1.0 and are slowly recognizing that a total repeal is nonsensical, which is why I fear they’ll still do it. But I digress. Obviously — and I use that word in its most literal sense — we need to fix what’s broken.

From a supply chain management perspective, for example, there’s more fat on the healthcare bone than Arby’s latest pork belly sandwich. Origins of that old adage “doctors don’t make good businessmen” have roots in many places. But their collective decision to fully outsource their procurement and supply chain management needs (in fact, to establish healthcare’s group purchasing organization oligarchy) may be the quintessential example.

Hospital leadership didn’t just acquiesce but helped create a business arrangement so inherently conflicted (i.e., supplier-paid kickbacks to GPOs) that a congressional safe harbor was required to make it legal. In other words, not just doctors but a combination of doctors and lawmakers came up with that solution, and the supply side has been whistling Dixie ever since.

The situation was so bad for so long that the GPOs were actually forced to fix the industry’s data issues, even if only to satisfy their own interests. And the irony is, their progress has led to increasingly virtuous arrangements between their hospital members/customers and the supply-side, creating benefits that are also likely to stick. Healthcare’s GPOs are now part of its SCM fabric. They aren’t going to be repealed and replaced, but their shortcomings can be fixed.

For perspective, if you’re not a member of the healthcare industry — if you’re a procurement professional working on projects aimed at improving contract compliance via P2P — you should know that a majority of your peers practicing in healthcare (although a shrinking number) still don’t even know if purchasing activity is on or off contract. Again, the situation is improving, largely driven by ACA-born initiatives that financially penalize hospitals if they don’t get their acts together (e.g., alternative and bundled payment models are being trialed throughout the industry, so they don’t have any choice).

Replacing “fee for service” with “pay for quality” is a fundamental tenet of the ACA. From a taxpayer’s perspective, that’s about as arguable as mom and apple pie. Similarly, no one wants a return to the day where people with preconditions are uninsurable. And who wouldn’t like to see the hogs in the market get slaughtered?

Everyone knows we’re ultimately headed toward some form of hybrid-single payer system where an economy seat will be available to those who can’t afford to fly first class and privately insure. No, I’m not suggesting that’s the solution — I’m merely pointing out that we need to let our lawmakers know that we’re OK with trial and error and recognize that it’s going to take time. They need to know that their successes and failures will be tolerated, but their lack of action will not be.

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