At Infosys, our focus on Healthcare is aimed at radical progress in affordability, wellness, and patient-centricity. We believe technology is a catalyst for game-changing healthcare solutions. In this blog, we discuss challenges, ideas, innovations, and solutions for the healthcare economy.

« Chronic Disease Management scene in India? | Main | What bare minimum features should a Hospital BI tool provide? »

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

Challenges/Improvement opportunities

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


With the current economic situation and the current rhetoric about the cost of healthcare, I hear little discussion of why healthcare is so expensive. Most public discussions center around who will pay.
Supply chain efficiency alone won’t resolve these issues without collaboration with the revenue cycle. I’ve seen cases where materials managers feel they negotiated the most favorable cost for a supply item only to find out later when they examine their cost versus reimbursement that they are losing money each time a procedure is performed that uses that particular supply item.
It’s seems to be true that most supply chain systems are designed to accommodate a wide variety of business processes, whether or not these processes are providing the most cost effective solution. Opportunities may exist in many provider facilities for increased utilization of existing technology.
Collaboration between Supply Chain and Revenue Cycle functions makes good sense to assure that revenues exceed cost.
Frequently the process improvement skill set is not present in the back office departmental toolbox. Even when a facility identifies what needs to be changed, lack of change management skills subvert effective implementation and sustainability of the new processes.
The complexity of the interactions among so many different departments will hinder successful implementation of the necessary changes without C-level support to communicate the message and remove obstacles to success.
Failure to implement a multi-disciplinary value analysis team with clinical and physician participation and representation from Finance, Materials Management and reimbursement to oversee supply chain utilization and new product acquisition decisions will further hinder success.

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)

Please key in the two words you see in the box to validate your identity as an authentic user and reduce spam.

Subscribe to this blog's feed

+1 and Like

Follow us on

Blogger Profiles

Infosys on Twitter