Speaker 1: And we know how valuable supply chain here is at BYE. And executives are really being shown that now with the pandemic, with all the challenges, with costs rising in labor and law materials. Now more than ever, supply chain really needs executive support to be successful. And executives need to be paying attention and supporting supply chain so that they can work throughout the organization. Historically in health care, there's been a lot of silos and contracting that have been kind of outside the reach of supply chain, looking at agreements for physician services, IT agreements, agreements in administration, just some of the examples. And really, people are starting to see how much value a strong supply chain team brings to the table. And in order for them to really be leveraged throughout the organization, they need that executive support.

Speaker 2: Welcome to the Health Care Leadership Experience, a place where health care leaders will share proven strategies and innovative approaches to leading the clinical and business side of health care. This show is sponsored by BYE Health Care Consulting, who has proudly helped hospitals save over $700 million in non-labor costs since 1999. Here's your host, Lisa Miller, founder and CEO of BYE Health Care.

Speaker 3: Hi, welcome to the Health Care Leadership Experience. I'm Lisa Miller. And today, we're going to be speaking about the health care supply chain. And we have Brian Covert, who is our managing director here at BYE Health Care joining us. Welcome, Brian.

Speaker 1: Thank you for having me.

Speaker 3: And of course, we have our producer, Lisa Lauder. Lisa, thank you for being here today. Hey, my pleasure. Good to be here. Good to see you, Brian. You too, Lisa. So today, we're going to be speaking about the health care supply chain and some trends to be considering as we go into 2022. And really, we're proactive on aspects that are going to be important as we go into a new year with, unfortunately, continuing some challenges with the pandemic and now with supply chain. But I want to just take a step back before I ask Brian some questions. And the one area that I think has been a positive that has come out of the pandemic is that I'm seeing across the country supply chain leaders and leaders within the hospital building their supply chain. And here's what I have seen in previous years that was concerning. Supply chain departments that were outsourced to companies or aspects that were outsourced to GPOs or such a over-reliance on GPOs, which then caused hospitals to take away FTEs from the supply chain department. GPOs have a place in our ecosystem. However, as everyone has heard me say, we can't have an over-reliance on one aspect, one strategy. Remember, GPOs are an outsourced provider of services. So their agreements, their services, they also need to be analyzed. So when we have an over-reliance on GPOs, what ended up happening is that these departments were strict. They were really taken down to the bare bones. And what we need are departments that are strong, that we need to invest in supply chain. We need to build great supply chain departments because that investment and that ROI will be enormous. It'll be a 50 to 1, 100 to 1 ROI. Building capabilities, having a strong diverse team, and those capabilities include highly skilled strategic sourcing, logistics, critical thinking, negotiation, analytics. But having a really strong team bench and building that bench, looking for the future leaders. So I have seen our clients are investing in adding to the supply chain in really critical strategic positions in the supply chain. I'm so happy to see that. We've been able to support a lot of those hospitals and helping with training programs or analytics or just helping build their team. I've always said it when I started the company 22 years ago, our job is to support supply chain, support departments, make them better, and increase their skills because that will help the hospital. Offering to outsource the department, offering to take the department down to bare bones and rely on the GPO services, those are things that are not sustainable. And we saw that during the pandemic. And now, post really the initial shock of the pandemic as we are catching up, although still in it, hospitals are building their supply chain. And I think it's going to have a remarkable impact on the bottom line for those hospitals that have decided that their supply chain needs to be critical thinkers. Should this be part of a GPO agreement? Should we look at off-contract spend? Wait a minute, we have backorders. We're going to need to be proactive. How are we going to be anticipatory? How do we manage inventory? And I am so proud of the organizations that have now invested money in their supply chain. I think that's been a positive. I know a long intro, but I say we should be doing more of that. The value you'll get in increasing your team members on the supply chain will be just tremendous. So Brian, a couple of questions for you. Why should health care executives be paying super close attention to supply chain right now?

Speaker 1: Thank you, Lisa. That is a great intro. You touched on a lot of important topics there. And we always felt like supply chain, and we know how valuable supply chain here is at Bayh. And executives are really being shown that now with the pandemic, with all the challenges, with costs rising in labor and law materials, now more than ever, supply chain really needs executive support to be successful. And executives need to be paying attention and supporting supply chain so that they can work throughout the organization. Historically in health care, there's been a lot of silos in contracting that have been kind of outside the reach of supply chain, looking at agreements for physician services, IT agreements, agreements in administration, just some of the examples. And really, people are starting to see how much value a strong supply chain team brings to the table. And in order for them to really be leveraged throughout the organization, they need that executive support.

Speaker 3: Absolutely. I think there's another addition to why it's so important. Because if you think about how much costs go through the supply chain, and there's lots of things to pay attention to, and whether that's infusing technology, automation, just different strategies to get a handle on, just not cost and pricing, but maybe inventory, looking at engaging clinicians. What's really important that supply chain has this direct connection to clinicians to have great conversations. And what's that data flow look like? Clinicians could be nurses on the floor. They're very protective about supplies. And their patients, for good reason, they have to trust inventory levels. If they don't trust that, of course, we know that they're going to find a way to make sure they have their supplies and kind of hide them on us. So those conversations with clinicians, you've worked on some really interesting projects with analyzing inventory, A, B, C, D inventory, and being able to track that on different floors as a good way to show nurses why they can have supplemental stock not on the floor, and they can trust the data. So, you know, and as well as having those conversations with physicians, how do you infuse physician conversations that's data or new products or value analysis, all those aspects? How is that strategy for supply chain being executed? And there's so many aspects. I actually think that, you know, whether you can whiteboard it or you could do some kind of mind map of it, but if you really sat down and drew a supply chain in the middle and had those arms layered out, you'd see so many aspects. And so those arms could be, you know, whether it's strategic sourcing or managing the spend to physician-clinician contacts, and then developing those strategies like that. I think it's a lot bigger of a topic and, you know, as well as everybody on this podcast notes. Brian, what are some of the trends that executives need to be aware of and concerned about?

Speaker 1: There's a number of trends right now. First and foremost on everybody's mind is the high inflation, constraints on raw materials, difficulties hiring. All of these things are happening right now and vendors are gonna use this narrative to raise costs, whether it's warranted or not warranted. A lot of the effort now is gonna be around controlling costs and trying to find those areas where you can lower costs. Another thing that really came to the forefront, you know, during COVID and the trend now is organizations being more aware of secondary inventory sources, managing inventory. A lot of organizations have done a really great job driving down costs by relying on just-in-time inventory, using large vendor commitments, sole source vendors. And a lot of these organizations that followed this strategy had difficulty getting supplies during the pandemic because they're too reliant on one source. They're too reliant on inventory coming in that day. So it's really making a lot of organizations kind of take a step back and say, you know, what are our secondary sources for these products that we need every day? What do we do in case of emergency? How do we keep everything running? The last trend that's really just started well before the pandemic and just continues is consolidation. These successful healthcare organizations are expanding, they're purchasing new hospitals, they're growing their footprint, and then the pressure to execute and be successful, a big portion of that falls on the supply chain. When you're taking in an existing hospital, you're taking on all of their agreements, all of their practices, and then supply chain is really critical to bringing that into your organization and make sure these things are successful and looking for areas you could standardize and improve. Departments really are a lot of pressure to do this and do this successfully. And that's where there's a lot of push towards looking for technological solutions, working with partners, anything that's going to drive efficiency, but there remains a need for a strong supply chain team to get this executed because those technological solutions are only going to bring you so far.

Speaker 3: No, it's true. And we love technology, right? I mean, we have our own patented technology that extracts the invoice line item details from purchase services, invoicing, and analyzes them on the line item detail, right? And provides this great cost savings map by a spend map. So we love technology. However, there is this aspect of technology that either doesn't get used or it's underutilized or overutilized too, because people obviously have to do the thinking. There's always a thinking person behind data and analytics, which brings me to this really important topic of spend analytics. And I feel like that's a big opportunity for hospitals and supply chain is their spend analytics capabilities, right? And their spend analytics capabilities isn't a dashboard, isn't Tableau, Power BI, or any other kind of GPO dashboard. Spend analytics is really platform neutral because it could be done in Excel or Access, but spend analytics is a thinking, it's the structure. It's what things you want to look at as a hospital. Is your spend analytics platform or your spend analytics focus around physician preference items? And are you tracking by physician? Are you tracking by implant? Is it, how are you tracking purchase services by line item detail or physician subsidy requests or the renewals or year over year increases, month to month over increases? I think the biggest opportunity and the biggest growth for supply chain in healthcare is building a really solid spend analytics capability. And you can get help from that. We know we help a lot of hospitals with spend analytics. So we're pushing that out, but they're making the decision. They're doing the thinking. We can contribute some of our thoughts, but we're just doing the roll up your sleeve, time-consuming work, and then we push it out to the hospitals. And now they're able to have the spend analytics in front of them so they can make those decisions. They're not spending time in that data wrangling, pulling disparate data together, right? We're giving them those opportunities. So I think that's a really great opportunity for hospitals to really think about, is your spend analytics strategy, right? What is your spend analytics strategy? So other than that, Brian, what do you think are three proactive things that hospitals should be doing in regards to their supply chain?

Speaker 1: I think number one is just organization, making sure that you have that analytics platform in place, that you understand the key components of your agreements, where you're spending money and where you can improve. Working with a partner could really help categorizing, prioritizing your spend, getting that structure in place. And then the next part would be using that organization to be proactive, not just coming up and analyzing agreements when they're up for term, but really evaluating where you're spending money, where the market's changing and where you have opportunities. I thought you made a great point, Lisa, when you just talked about, it's an area where a lot of people aren't focused, especially in supply chain, but position subsidy. So one of the big impacts of COVID has been decline in elective procedures, decline in revenue. And a lot of these physician subsidy agreements really push the risk of collections back onto the hospital. So regardless of whether they're coming up for expiration or not, agreements like this that push risk back to the hospital need to be evaluated because just because collections are down, that doesn't mean the hospital should just pay more. There could be opportunities to right-size those agreements, right-size the utilization, maybe change the staffing model or the hours of operation of those services and reduce costs that way. Other areas that are really impacted by that are areas where you've outsourced services with labor and they're responsible for hiring. So looking at EBS or food services, it's been a major strategy of these vendors to kind of establish a fixed price that saves the hospital money. And then the vendors actually take on the risk of lowering costs. But now with all the challenges, what's happening when they can't fill positions at the rates that were agreed upon three years ago? You just have vacant positions, are you getting a reduced service? So you need to be proactive in your agreements once you have this organized and realize what are your opportunities and with the services you're getting, are you getting the quality service that you were promised? And has that been impacted in your vendor's ability to provide that been impacted by the new challenges of today? So once you have those done, you really need to have a good organizational strategy, develop your cost savings pipeline, and you really need to be results focused, not just in your clinical agreements, but also in your purchase service agreements, make sure you have KPIs that ensure you're gonna get the quality and you're not just focused on cost because that's gonna be important when I'm moving forward more than ever.

Speaker 3: One of the things that you do for us and our clients unique to you in particular, and I think Vi, is you will take MedSurge distribution spend, which is usually a very messy, a lot of work, complex kind of area spend. There's just thousands and thousands of vendors or suppliers in a distribution setting, and you will go through that and uncover unbelievable amounts of opportunity. So I don't wanna go into that in, I think that's a podcast of its own, but it's amazing that you take this big bucket of spend, which could be one of the biggest line item spend for a hospital, right? The distribution and putting supplies through a distributor, again, thousands and thousands of items, and you'll take that report and you do a number of things. So you're going to make sure that all the pricing's right. And you know what the interesting thing is, a lot of times it's not, and you uncover big cost savings opportunities in this distribution spend. You've uncovered big credits because they've fallen off or something has happened. You uncover opportunities for standardization because they could be buying direct and using a distributor, and then other aspects to consolidate or standardize. So can you just talk about that for a minute? Because I think that's a great strategy going into 2022 for hospitals to say, okay, what's an initiative we can give one of our team members? Maybe you'll call by and we can help you, but to give one of our team members so that they can really look at this as a spend initiative.

Speaker 1: That's a great point. That's one of the areas we always look at. It seems counterintuitive, you know, as a cost consultant, that you want to look at the MedSurge distribution report, because this is an area where you're going to have a GPO contract. You're going to be getting customer service from your GPO rep. You're going to have a MedSurge distribution rep who's helping you with this spend. You have materials. There's a lot of eyes on it, but inevitably there turns out to be a lot of mistakes here and a lot of opportunity, especially for organizations that have a lot of physical locations and different accounts. What tends to happen is all of these different eyes that are on this spend really don't have the same priority of the hospital, which is to get the best possible price. When they look at it, is there a contract? Not, is there the best contract? And also does every location pay the same for these items? There's also really kind of a focus on when an issue does come up, fixing it, move forward, and then move on with it. And there's not really a big importance on going back and get it corrected through credits and rebills. And part of the reason is because it's difficult. When you're dealing with a manufacturer who's going to a distributor and then you're buying from them, it's easier just to get it fixed and move on. You have to kind of navigate a lot of different components and contract terms to really get at the root of the problem that caused the pricing issue. And get it fixed and get it credited, but it's 100% worth doing. And we uncover enormous credits just going back 12 months and looking through these discrepancies and looking for purchases that really stick out as not being market competitive through our benchmarking database, flagging them, investigating why they're not getting competitive pricing, not only getting it fixed moving forward, but getting it fixed moving backwards and getting the check back to the hospital.

Speaker 3: And the cost savings do you're uncovering is just amazing. But the downside is this is very time consuming, a worthwhile effort, but it's very time consuming. Thank you, Brian. So I hope everyone's enjoyed this episode. I feel like we could talk so much about the supply chain. We are going to be having some healthcare supply chain leaders come on to the Healthcare Leadership Experience. And we have some interesting leaders outside of healthcare who we are now scheduling and we'll learn from some of the Fortune 1000 who are leading supply chains and what they can teach healthcare, what we can learn from what they're doing. So we're real excited about those upcoming podcasts. The other final thought is supply chain is a pillar of the hospital. And I do believe that years ago, supply chain was in the basement, kind of thought of as secondary operation to the organization, not as important as growth or rev cycle or marketing, but now it has been elevated to a pillar of the hospital, which really I've often said for years, it needs to be, we've often heard basement to the boardroom, but I feel like it's a pillar. And it's an operational pillar that as we move into 2022 is going to be probably one of the most important pillars because you're supplying the patients, you're supporting the clinicians and the physicians, and they're also tasked with controlling costs and being strategic with analytics and inventory. You think about the complexity of the supply chain, moving supplies and coordinating services and equipment, it's just a massive responsibility. So I personally, and those that buy, wanna thank the supply chain leaders and the supply chain team members for a really difficult, almost 18 months. And what you've been able to accomplish is remarkable. And we are looking forward to continue great things from supply chain and we're here supporting you in every single way we can. So thank you for listening. Please listen to our episode 25 on prioritizing purchase services and our next episode with Lisa and I, Why Your Hospital Needs a Podcast. Thank you, Brian, for being here. And we will look forward to your feedback and suggestions on future shows. Thank you. Hi, this is Leah. You are listening to my mom's podcast, The Healthcare Leadership Experience. Hi, this is Fernando. If you would like to speak with my mom, just email her.