Collaborative Performance : Making supply chain costs an hospital-wide responsibility
Over the past decade, hospitals have invested their resources in automation of both the clinical and non-clinical processes. The current economic situation will force hospitals to be more cost-efficient and improve operations. Hospital leaders may be restricted to new investments in information technology and will be mandated to reap benefits from current investments. Collaborating Supply Chain and Revenue Cycle functions provide single point of visibility of key metrics for hospital leadership, which will enable efficient real-time decision making; and improve hospital-wide performance.
Unlike other enterprises, hospitals have a unique revenue generation pattern; we will notice that the costs, utilization and revenues are mostly de-linked and many times increased cost does not proportionately translate into increased revenues/reimbursement. This takes us to the very basics of understanding factors that would push or pull revenue. There are many questions that needs to be addressed. However, the biggest question is - “Can we manage an enterprise where we understand the cost of product and service; have no control on utilization of resources and have a little visibility on expected revenues?”
Of the three factors that are mentioned above, only supply cost seems to have clear visibility and hence is being questioned time and again; and utilization and reimbursement linkage to supply cost is neglected.
Comparison between HFMA’s 2005 and 2008 supply chain benchmarking survey reveals that
1. Physician buy-in and Automation, are still persistent challenges over last three years
2. New improvement opportunities are emerging; such as Supply-Revenue integration, Data standardization and management of supplier contracts
Challenges/Improvement opportunities – Supply Chain Leaders
Performance in isolation – Challenges for Hospital Supply Chain
Hospitals currently boast of department achievements. For instance, Supply chain uses an ERP solution that reduces supply cost and monitors fulfillment SLA’s at 100%; Case management monitors patient outcomes and benchmarks at par with its peer group; Patient satisfaction is improving by every survey, at the cost of increased services utilization that many times are not reimbursed by payer. Hospital AR can only be as good as its charge capture methods and systems.
However, all these micro successes don’t seem to translate into an overall macro level success. Despite improved performances by individual hospital functions, many hospital report negative margins. One of the key challenges for hospital leadership is visibility of hospital-wide information at a single point
Collaborative Performance: Supply chain – Revenue cycle integration
Reducing supply chain costs is an organization-wide responsibility. Integrating supply chain and revenue cycle systems can help track cost, utilization and reimbursement metrics effectively.
Supply chain need to transform from fulfillment partner of the physicians to role in supply utilization. A collaborative dashboard like the sample below will help each department in the value chain to proactively reduce the costs. The collaboration should aim at not just reducing cost, but also make all the departments responsible for profitability of the hospital.
Illustration of transforming isolated performance to collaborative performance
Moment of truth
A collaboration dashboard will provide real-time alerts for each member of the value chain.
Supply chain – Participates in utilization decision making and is aware of real-time payer reimbursement
Physician offices – Is aware of reimbursement trends and supply alternatives, which effectively reduces denials and reduces cost , yet focused on providing best of patient care
Revenue Cycle – Keeps payer contracts updated, by accessing real-time utilization information and supply costs