Survey finds healthcare supply chain needs improvement
FAYETTEVILLE, Ark. A comprehensive survey conducted by researchers at the University of Arkansas revealed that the American healthcare supply chain have efficiency barriers and have not implemented universal standards for data.
The report, entitled "The State of Healthcare Logistics – Cost and Quality Improvement Opportunities", surveyed 1,381 professionals from all major sectors of the healthcare supply chain. More than 75% of the respondents worked for a healthcare provider. The remaining participants worked for manufacturers, distributors, group-purchasing organizations and other health care supply-chain organizations. The respondents generally had significant experience in the industry; 2-in-3 had worked in the healthcare supply chain for more than 10 years, and almost half of the respondents had more than 20 years of experience in the field.
“Right now, all manufacturers, distributors and providers do not use the same system to identify items, whether they be surgical scissors, heart monitors or cafeteria trays,” said Heather Nachtmann, associate professor of industrial engineering and conductor of the study. “In short, the healthcare supply chain is starved for accurate and accessible data, which are the primary barriers to efficiency, collaboration and standardization. Perhaps, needless to say, this is an extremely expensive problem. In our survey, the average healthcare provider spends more than $72 million a year on supply-chain functions, nearly one-third of their annual operating budget.”
Nachtmann and Edward Pohl, also an associate professor in the department of industrial engineering, conducted the industrywide study for the university’s Center for Innovation in Healthcare Logistics and for the Association for Healthcare Resource and Materials Management, a national association for healthcare supply chain and materials-management professionals. The goal of the survey was to assess and describe the current state of the healthcare supply chain, identify inefficiencies and investigate opportunities for improvement.
“Everyone knows healthcare costs are rising at an alarming rate,” Nachtmann said. “A significant cost driver is the universal complexity of the healthcare supply chain. We believe that healthcare logistics is an area in which costs can be significantly reduced and efficiencies gained to provide better and safer healthcare delivery at a reasonable cost.”
The Center for Innovation in Healthcare Logistics is an industry-university partnership that leads a nationwide effort to identify and foster systemwide adoption of ground-breaking innovations in health care supply chain and logistics. The center facilitates collaboration among researchers at the University of Arkansas, health care provider organizations and industrial sponsors, including Wal-Mart Stores, regional Blue Cross Blue Shield companies, Veterans Health Administration, the Association for Healthcare Resource & Materials Management, Procter & Gamble and IBM. The center, which began operations in May 2007, is housed at the University of Arkansas and has sustaining funding of more than $3 million for five years.
Nearly half of the respondents indicated that their organization’s supply chain was unstructured, had loosely defined supply-chain management practices and no process measures in place – or “defined,” where basic supply-chain-management processes were defined and documented, and procurement and other processes went through a formal procedure. Fewer than 1-in-20 respondents reported that their organization operated at the “extended” level, the highest of five levels on the maturity spectrum. “Extended” means that supply-chain management and processes are routine and so well established that the transfer of responsibility among all entities within an organization is smooth and seamless. At the extended level, there is a high level of trust, collaboration and mutual dependency among all entities.
“It is our hope that 10 years from now people will look back at this study and attribute many of the new and innovative changes made in the healthcare supply chain to the opportunities identified in this report,” Nachtmann said.