It is time for a revolution in healthcare supply chain management
August 04, 2020
By Daniel J. Vukelich
Many healthcare workers will never take hospital supplies for granted again. Forced reuse of disposable respirators, gowns and face shields have heightened attention to inefficient and wasteful practices in healthcare. COVID’s impact requires immediate attention be given to hospital finances, securing and building a more resilient supply chain and addressing the enormous amount of medical waste created.
We now can hit reset. I imagine a revolution in healthcare where providers insist that medical devices and supplies be designed and built to be reused or reprocessed and ultimately recycled. This transformation requires healthcare providers to adopt a new mindset, that medical devices and supplies are valuable assets, not consumable, disposable, and easily replaced.
From my position representing single-use medical device reprocessors for 20 years, I am all too familiar with inefficiency and waste in healthcare. In 2018 alone, our members helped hospitals prevent nearly 16 million tons of medical waste through reprocessing. I am also intimately familiar with the immense untapped potential we have before us.
Near-term challenges
Financial
Health Affairs reports that the direct cost associated with the pandemic could be $654 billion. “Hospitals’ already-thin margins plunged into the red as volumes and revenue fell and organizations prepared staff, supplies and capacity for a surge of coronavirus patients,” according to James Blake, author of a Kaufman Hall report. Further, hospitals have lost revenue because of their inability to perform elective procedures -- a revenue stream that normally keeps hospitals afloat. These factors have created a financial disaster for U.S. hospitals, which has led to layoffs and furloughs. The healthcare industry lost 1.4 million jobs just last April. This will likely mean hospital closures, and sadly perhaps include up to a quarter of all rural hospitals.
Supply chain
The healthcare supply chain was not prepared to deliver the PPE needed to protect our healthcare workers. This put our healthcare workers at risk. This is nothing short of a national tragedy. And while we were underprepared with PPE, we overspend in the supply chain generally. The American Hospital Association’s (AHA) Sustainability Roadmap for Hospitals indicates that the “second largest expense on a hospital's balance sheet (following labor) is supply chain costs.” And much of that is made up of billions on unnecessary spending. A 2019 Navigant analysis found over $25 billion being spent on unnecessary hospital supply chain spending” — each year!
Environmental
The COVID response is creating a staggering amount of medical waste, in part due to unprecedented levels of used PPE. But healthcare was creating a staggering amount of waste before COVID. AHA also reports that hospitals generate “nearly 7,000 tons of waste every day and $10 billion annually in disposal costs.” Spending money to dispose of needless waste, is itself, also costly.
Solutions
To address the immediate challenges of healthcare -- while simultaneously building a better system for the future -- previous assumptions and practices must be re-thought and re-evaluated to prioritize reuse, reprocessing and recycling. These efforts can
- Reduce costs, freeing up resources to fight COVID or protect against future disruptions, protect healthcare jobs and, for many hospitals, keep the doors open.
- Build a more resilient supply chain so that we have a controlled, reliable system of ensuring we have supplies, especially when disruptions occur.
- Reduce the environmental impact of healthcare.
Immediate savings opportunity
Looking through the lens of single-use medical device reprocessing, while reprocessing has been saving hospitals a tremendous amount of money and reduced the per-use cost of medical devices, we’re doing a drop in the bucket of what we can. Often, complacency and inertia have led hospitals to simply throw away their single-use devices because the manufacturer says so. This is despite FDA’s conclusion that these devices can be reprocessed safely and effectively. That means hospitals are throwing away billions of dollars of assets. For those not intimately familiar with these devices, laparoscopic surgical instruments costing upwards of $500 and diagnostic cardiac devices, sometimes costing over $3,000 are labeled for single use and often thrown away after only one use.
By some internal industry estimates, the average U.S. hospital is leveraging reprocessing only to about a third of the potential. The immediate savings reprocessing can provide for U.S. hospitals is in the billions of dollars. One specific estimate from a policy paper published by the Commonwealth Fund estimated that, on just one procedure type, based on existing data on price and procedure costs, US hospitals could save another $540 million annually, or $2.7 billion over five years. One AMDR member estimates peg nationwide A-fib case savings potential at over half a billion dollars a year.
Reprocessing is not a singular solution to our supply chain problems, but it is powerful, immediate, and still under-utilized. Maximizing the immediately available impact of reprocessing reduces costs to make up for lost revenue and extends the life span of existing assets, thereby reducing the need to buy more.
Long-term supply chain resilience
Reprocessing can also build resiliency into the supply chain. Strengthening the supply chain both saves money and can ensure we’re not in the future situation of unsafely reusing disposable PPE. Excessive and wasteful supply chain spending deprives our providers resources in other areas. Our front-line personnel are reusing N95 respirators right now, raising attention to things we took for granted in the past. Going forward, the use and the purchase of all device and supply assets must be given a hard look. Waste not, not want.
By transitioning to a focus on medical device and supply reuse or reprocessing, hospitals can reduce costs, build supply chain stability, and reduce waste. To do so:
- Hospital executives and purchasers must begin by making it a priority to purchase devices and supplies that can be reused by hospitals or reprocessed by reprocessors.
- Incremental changes made by manufacturers need to be evaluated closely to ensure subsequent iterations of existing device and supply stocks will not adversely impact medical device reuse or reprocessing operations.
- Healthcare professionals must treat devices and supplies as assets, not garbage, taking care of such products so they can be reused or reprocessed.
- Health professionals must prioritize proper reuse in central sterile departments and fully maximize reprocessed device usage to extract the greatest value. As with all belt tightening, first using what you already have alleviates the need to tap into the supply chain for more new equipment.
- Healthcare organizations can better control their inventory of medical device assets and supplies if there is greater internal coordination and cooperation with reprocessing firms. By doing so, hospitals are less reliant on outside firms having to ramp up production and ship from across the globe.
- Medical device makers should be encouraged and incentivized to consider device reuse or reprocessing in the earliest design phases of research and developing and in the marketing of new products.
- Regulators, such as FDA, and payors, such as CMS and insurers, should incentivize total life-cycle assessment of products to ensure those with longer value are used more than those with lesser value.
Environmental
Green Hospitals may be better prepared to deal with COVID and, at the same time, not contribute to making people sick with the environmental pollution they create. Incinerated medical waste is considered a top source of dioxins. “Exposure to dirty air, carcinogens produced by burning waste, and neurotoxins such as mercury has caused significant harm to people, including birth defects, brain damage, and learning disabilities,” according to the Boston Globe. And “given the health care sector’s enormous impact, its healing mission, and its Hippocratic oath, hospitals ‘have an extra responsibility compared to other industries...’ says Gary Cohen” who co-found the group, Health Care Without Harm. This holistic view, from cradle to grave, of our medical equipment improves environmental sustainability, and improves health.
Conclusion
Medical device reprocessing is not a silver bullet that will control all healthcare spending, but reprocessing is a powerful example of an immediate solution to reduce costs, promote a more resilient supply chain and reduce environmental waste. Reprocessors are eager to move forward with our healthcare partners to build a more holistic view of medical technology utilization, shifting from viewing single-use devices as disposables to renewable assets.
About the author: Daniel J. Vukelich, Esq., is the president of the Association of Medical Device Reprocessors, or AMDR. AMDR represents single-use medical device reprocessing companies. Reprocessors are regulated as device manufacturers, ensuring all products are safe and effective. AMDR’s mission includes promoting reprocessing a cost saving and environmental solution for hospitals.
Many healthcare workers will never take hospital supplies for granted again. Forced reuse of disposable respirators, gowns and face shields have heightened attention to inefficient and wasteful practices in healthcare. COVID’s impact requires immediate attention be given to hospital finances, securing and building a more resilient supply chain and addressing the enormous amount of medical waste created.
We now can hit reset. I imagine a revolution in healthcare where providers insist that medical devices and supplies be designed and built to be reused or reprocessed and ultimately recycled. This transformation requires healthcare providers to adopt a new mindset, that medical devices and supplies are valuable assets, not consumable, disposable, and easily replaced.
From my position representing single-use medical device reprocessors for 20 years, I am all too familiar with inefficiency and waste in healthcare. In 2018 alone, our members helped hospitals prevent nearly 16 million tons of medical waste through reprocessing. I am also intimately familiar with the immense untapped potential we have before us.
Near-term challenges
Financial
Health Affairs reports that the direct cost associated with the pandemic could be $654 billion. “Hospitals’ already-thin margins plunged into the red as volumes and revenue fell and organizations prepared staff, supplies and capacity for a surge of coronavirus patients,” according to James Blake, author of a Kaufman Hall report. Further, hospitals have lost revenue because of their inability to perform elective procedures -- a revenue stream that normally keeps hospitals afloat. These factors have created a financial disaster for U.S. hospitals, which has led to layoffs and furloughs. The healthcare industry lost 1.4 million jobs just last April. This will likely mean hospital closures, and sadly perhaps include up to a quarter of all rural hospitals.
Supply chain
The healthcare supply chain was not prepared to deliver the PPE needed to protect our healthcare workers. This put our healthcare workers at risk. This is nothing short of a national tragedy. And while we were underprepared with PPE, we overspend in the supply chain generally. The American Hospital Association’s (AHA) Sustainability Roadmap for Hospitals indicates that the “second largest expense on a hospital's balance sheet (following labor) is supply chain costs.” And much of that is made up of billions on unnecessary spending. A 2019 Navigant analysis found over $25 billion being spent on unnecessary hospital supply chain spending” — each year!
Environmental
The COVID response is creating a staggering amount of medical waste, in part due to unprecedented levels of used PPE. But healthcare was creating a staggering amount of waste before COVID. AHA also reports that hospitals generate “nearly 7,000 tons of waste every day and $10 billion annually in disposal costs.” Spending money to dispose of needless waste, is itself, also costly.
Solutions
To address the immediate challenges of healthcare -- while simultaneously building a better system for the future -- previous assumptions and practices must be re-thought and re-evaluated to prioritize reuse, reprocessing and recycling. These efforts can
- Reduce costs, freeing up resources to fight COVID or protect against future disruptions, protect healthcare jobs and, for many hospitals, keep the doors open.
- Build a more resilient supply chain so that we have a controlled, reliable system of ensuring we have supplies, especially when disruptions occur.
- Reduce the environmental impact of healthcare.
Immediate savings opportunity
Looking through the lens of single-use medical device reprocessing, while reprocessing has been saving hospitals a tremendous amount of money and reduced the per-use cost of medical devices, we’re doing a drop in the bucket of what we can. Often, complacency and inertia have led hospitals to simply throw away their single-use devices because the manufacturer says so. This is despite FDA’s conclusion that these devices can be reprocessed safely and effectively. That means hospitals are throwing away billions of dollars of assets. For those not intimately familiar with these devices, laparoscopic surgical instruments costing upwards of $500 and diagnostic cardiac devices, sometimes costing over $3,000 are labeled for single use and often thrown away after only one use.
By some internal industry estimates, the average U.S. hospital is leveraging reprocessing only to about a third of the potential. The immediate savings reprocessing can provide for U.S. hospitals is in the billions of dollars. One specific estimate from a policy paper published by the Commonwealth Fund estimated that, on just one procedure type, based on existing data on price and procedure costs, US hospitals could save another $540 million annually, or $2.7 billion over five years. One AMDR member estimates peg nationwide A-fib case savings potential at over half a billion dollars a year.
Reprocessing is not a singular solution to our supply chain problems, but it is powerful, immediate, and still under-utilized. Maximizing the immediately available impact of reprocessing reduces costs to make up for lost revenue and extends the life span of existing assets, thereby reducing the need to buy more.
Long-term supply chain resilience
Reprocessing can also build resiliency into the supply chain. Strengthening the supply chain both saves money and can ensure we’re not in the future situation of unsafely reusing disposable PPE. Excessive and wasteful supply chain spending deprives our providers resources in other areas. Our front-line personnel are reusing N95 respirators right now, raising attention to things we took for granted in the past. Going forward, the use and the purchase of all device and supply assets must be given a hard look. Waste not, not want.
By transitioning to a focus on medical device and supply reuse or reprocessing, hospitals can reduce costs, build supply chain stability, and reduce waste. To do so:
- Hospital executives and purchasers must begin by making it a priority to purchase devices and supplies that can be reused by hospitals or reprocessed by reprocessors.
- Incremental changes made by manufacturers need to be evaluated closely to ensure subsequent iterations of existing device and supply stocks will not adversely impact medical device reuse or reprocessing operations.
- Healthcare professionals must treat devices and supplies as assets, not garbage, taking care of such products so they can be reused or reprocessed.
- Health professionals must prioritize proper reuse in central sterile departments and fully maximize reprocessed device usage to extract the greatest value. As with all belt tightening, first using what you already have alleviates the need to tap into the supply chain for more new equipment.
- Healthcare organizations can better control their inventory of medical device assets and supplies if there is greater internal coordination and cooperation with reprocessing firms. By doing so, hospitals are less reliant on outside firms having to ramp up production and ship from across the globe.
- Medical device makers should be encouraged and incentivized to consider device reuse or reprocessing in the earliest design phases of research and developing and in the marketing of new products.
- Regulators, such as FDA, and payors, such as CMS and insurers, should incentivize total life-cycle assessment of products to ensure those with longer value are used more than those with lesser value.
Environmental
Green Hospitals may be better prepared to deal with COVID and, at the same time, not contribute to making people sick with the environmental pollution they create. Incinerated medical waste is considered a top source of dioxins. “Exposure to dirty air, carcinogens produced by burning waste, and neurotoxins such as mercury has caused significant harm to people, including birth defects, brain damage, and learning disabilities,” according to the Boston Globe. And “given the health care sector’s enormous impact, its healing mission, and its Hippocratic oath, hospitals ‘have an extra responsibility compared to other industries...’ says Gary Cohen” who co-found the group, Health Care Without Harm. This holistic view, from cradle to grave, of our medical equipment improves environmental sustainability, and improves health.
Daniel J. Vukelich
Medical device reprocessing is not a silver bullet that will control all healthcare spending, but reprocessing is a powerful example of an immediate solution to reduce costs, promote a more resilient supply chain and reduce environmental waste. Reprocessors are eager to move forward with our healthcare partners to build a more holistic view of medical technology utilization, shifting from viewing single-use devices as disposables to renewable assets.
About the author: Daniel J. Vukelich, Esq., is the president of the Association of Medical Device Reprocessors, or AMDR. AMDR represents single-use medical device reprocessing companies. Reprocessors are regulated as device manufacturers, ensuring all products are safe and effective. AMDR’s mission includes promoting reprocessing a cost saving and environmental solution for hospitals.