Mitigating risk across the healthcare supply chain
The modern healthcare supply chain is a key driver for stripping out unnecessary costs in order to f...
The modern healthcare supply chain is a key driver for stripping out unnecessary costs in order to free resources to help ensure quality patient care. More than ever before, provider and supplier organisations are working in lockstep to automate and streamline previously manual and error-prone processes. But as the healthcare supply chain has broadened so, too, has the increase in complexity and potential risks for provider organisations.
Because the task for onboarding, contracting, managing, and paying trading partners most often falls to the supply chain department, savvy leaders know the supply chain function can no longer operate in a silo that fails to include compliance. Forward-looking provider companies have recognised that by closely linking supply chain and compliance functions, they can more efficiently and effectively comply with increasing regulatory demands, while enhancing patient safety, safeguarding patient privacy and protecting revenues.
What You Don’t Know Can Hurt You
Healthcare firms and employees interact with thousands of vendors on a daily basis through both face-to-face interactions on-site at their facilities and remotely via telephone, email, fax, text and other electronic means of communication. Not knowing the personnel with whom staff is interacting and who is coming in contact with patients, or patient information, presents significant risks.
For an organisation to maintain its accreditation with regulatory agencies, it must have policies and procedures in place to track who is in its facilities and where they are at all times. Furthermore, it is a provider organization’s responsibility to ensure those vendors classified as “business associates” have safeguards in place to protect patient healthcare data. Vendors that are not credentialed pose risk to an company; risk for noncompliance with regulatory requirements and, ultimately, risk to patient safety.
Non-credentialed vendors also present risks to the financial health of provider organisations. For example, if a group transacts business with a vendor that has been subject to a government sanction, such as those published monthly by OIG, and applies for government reimbursement for that vendor’s products, they will be denied payment. Other risks include Medicare fraud, vendor rep conflicts of interest, violation of the CMS Stark Law, and non-compliance with gift laws.
The Role of Supply Chain and Credentialing
Because a supply chain team is responsible for onboarding new vendors and managing existing business relationships, the task of vendor credentialing is a natural fit. What supply chain leaders need is the ability to access in-depth and timely information on vendors and their individual representatives. They need visibility into the entire pool of trading partners, with information on who is credentialed and who is not.
By combining supply chain and compliance functions, an organisation can more efficiently and effectively comply with increasing regulatory demands, while helping enhance patient safety, safeguarding patient privacy and protecting revenues. Specific benefits include:
Maintain Accreditation with Regulatory Agencies that Drive Reimbursements
Knowing who its business partners are and which ones operate within its facilities increases a firm’s ability to meet accreditation and regulatory requirements. By centralising all vendor data in one place, an organisation can quickly and easily access the information it needs in the event of an audit, including the percentage of vendors in compliance with its policies.
Protect Patient and Staff Safety
Through the credentialing process, a business can require vendor reps to have the same level of infectious disease vaccinations as onsite staff. It can also ensure that reps are following facility procedures, such as proper attire and other requirements, before entering patient care areas.
Protect Patient Data
Healthcare is the most targeted industry for cyber-attacks and patient data security is a growing concern. A credentialed supply chain helps a healthcare organisation comply with HIPAA Final Omnibus Rule and HITECH Act regulations by allowing it to identify vendors defined as “business associates”. It ensures its compliance policies are followed not only by vendor reps that come on-site but also those processes internal to vendor companies that have access to electronic protected health information (ePHI).
Safeguard Your Business
Credentialing the supply chain protects an organisation’s operations with monthly OIG and state sanction checks to ensure its vendors are clear of any government sanctions. It also provides a streamlined solution for vendor policy acknowledgment, including Stark Law disclosures, gift policies and conflicts of interest.
Vendors and their representatives play a critical role in healthcare, supplying products and services without which providers could not care for patients. But when healthcare groups do not have in place policies and procedures to effectively manage vendor relationships, they place its patients, staff and operations at considerable risk.
By aligning vendor credentialing with supply chain processes, an organisation can streamline the way it identifies which of its vendors are credentialed, which are not, and quickly and easily bring non-credentialed vendors into compliance with internal and regulatory policies. Effective vendor management significantly minimises risk, protecting healthcare organisations, its staff and its patients.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”