Can the Latest Supplier Relationship Management Tools Deliver the Clinically Integrated Supply Chain?

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On healthcare’s supply side, you’ll meet some of the most sophisticated procurement practitioners you’ll find across industry. On the buy side, talking specifically now about acute care providers, however, you have a group that has carried the reputation of “laggard” for as long as anyone has paid attention.

Hospitals outsourced their supply chain management (SCM) and procurement operations to the industry’s group purchasing organizations (GPOs) many years ago. In many ways, the arrangement worked, as the GPOs (e.g., Premier, Vizient, HealthTrust) delivered on their stated mission. What cannot be argued is that they took on individual hospitals and health systems that barely knew what they were buying — hard to believe, I know — organized their underlying data, installed the requisite management systems and assumed responsibility for maintaining them.

Who paid for it? The GPOs did, via supplier paid “administrative fees” authorized under a safe harbor provision enacted by Congress. Essentially, the suppliers paid the GPOs a fully authorized kickback, which they used to raise up the SCM infrastructure of their customers. As you may guess, there were a lot of folks back then who didn’t like the arrangement and even fewer who like it now. But I digress.

Here’s the point: The market’s consolidation has resulted in the largest of health systems getting even larger. In terms of net patient revenue, the market is now defined by multibillion-dollar businesses. And while these giants still depend to varying extents on their GPOs, the trend is clear. Health systems are rapidly taking back control of their respective supply chains. Put another way, hospitals are rapidly learning how to manage their GPO, distributor and manufacturing relationships, as opposed to being managed by them.

While there are all kinds of interesting SCM dynamics in play here, the role of supplier relationship management (SRM) caught my attention, because as said, the supply side has been the one managing the buy side all of these years. The market’s intermediaries, manufacturers and distributors have been managing the non-patient facing flow of business, a unique feature of healthcare’s supply chain that, frankly, had to change — and finally is.

In fact, the SRM tool market in healthcare is exploding. And it couldn’t be more timely, as the latest solutions are a light year ahead of where they were just a few years ago. The latest SRM solutions connect the buy and sell sides in ways that were never before thought possible. In near real time, these solutions are capable of delivering unprecedented levels of transparency, enabling key performance indicator (KPI) “connectors” that hold the network’s players accountable — to each other — and facilitate the kind of “collaboration” the framers had in mind.

Traditionally, health system SCM professionals have used a “value analysis” process to stimulate their change management conversations with clinicians. With today’s SRM tools, however, value analysis can become a continuous improvement process inclusive of SCM professionals, clinicians and suppliers. Better studies can be developed and deployed more expeditiously, accelerating the creation of clinical evidence, which means the “latest and greatest” technologies and practices can find their way to patients for improved outcomes more quickly and with more certainty.

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