Fixing the weak links in hospital supply chain
February 22, 2021
by Lauren Dubinsky
, Senior Reporter
During the initial COVID-19 surge last April, the personal protective equipment (PPE) shortage got so dire that some nurses in New York resorted to wearing garbage bags. Cases have currently skyrocketed to new heights, but protective gear seems to be more readily available now, which raises the questions: How did things get so bad and how did hospitals pull themselves out of the trenches?
It turns out that a multitude of factors contributed to the PPE shortage — one being the “just in time” approach to inventory. Hospital supply chain budgets have historically been under pressure to keep costs down and an effective way to accomplish that is reducing inventory on an as-needed basis.
“They were not stockpiling — they were basing their supply storage on historical patient volumes,” said Barry Dyer, senior vice president of consulting at TractManager. “Then when COVID-19 hit, obviously patient volumes dramatically increased in a very short period of time.”
Another major factor was that many manufacturers of PPE products have their production facilities in China. The Chinese government was focused on stockpiling their own supplies first and there were a number of export and import delays.
“It was hard for the distributors or group purchasing organizations (GPOs) to get their hands on those supplies,” said Dyer.
In fact, many healthcare organizations became frustrated with GPOs because they felt that being a member should have prevented them from experiencing a supply shortage, according to Dyer. A number of large health systems are actually leaving their GPOs now and bringing more of those supply chain operations back in-house.
Collaborating in-house and close to home
The sourcing team at Banner Health is made up of five nurses that search for products and collaborate with the clinical leaders to determine if the items are acceptable. To say that group was “busy” during the start of the pandemic would be a gross understatement.
“That is our long-standing process, but when [COVID-19] came about we needed to find alternatives quickly,” said Darcy Aafedt, supply chain information systems (IS) program director at Banner Health.
In order to make conversions to alternative products, it can take six to nine months while a product category is being considered. Since they didn’t have that kind of time, they came up with a new strategy.
The health system changed its protocols to hold daily group calls for brainstorming and identifying areas at risk of shortages. The team members homed in on the highest risk areas to research substitutes and reconvene. What they found, according to Aafedt, was that moving quickly made all the difference.
The health system has their own consolidated service center that already had a fair amount of PPE in stock and it’s now their strategic initiative to build up that inventory supply.
“We have continued to build that up knowing that there would be a potential additional surge expected,” said Aafedt.
Banner Health also worked to identify local sourcing instead of offshore sourcing and partnered with Prestige Ameritech, the largest U.S.-based manufacturer of face masks, including N95 respirators and surgical masks. The health system also acquired a minority stake in the organization.
At the height of the initial surge, Banner was using nearly a million disposable gowns per month. They decided to implement reusable isolation gowns and partnered with a laundry provider to clean them. They found that one reusable gown can account for roughly 75 disposable gowns. After switching to this option, they reduced the use of disposable gowns to roughly 200,000 per month.
Leveraging analytics for real-time intelligence
Adrian R. Bissette and his team at Children’s Healthcare of Atlanta have succeeded in the face of many adversities. From product recalls to new regulatory mandates, their program relies on data-driven reporting to improve inventory performance and make the most of a tough situation.
“The past several flu and respiratory seasons prepared us for sudden substantial demand increases and an unpredictable supply chain environment,” said Bissette, whose title is senior supply chain engineer. However, he added, with COVID-19 they “faced a major challenge getting to a place where we could be proactive.”
Ultimately, they were able to overcome that by building dynamic dashboards and leveraging advanced analytics. That gave the supply chain team the ability to drive process and performance improvement instead of continually reacting to disruptions.
“The biggest lesson learned was constantly looking at how to adapt to a drastically changing environment,” said Bissette.
For instance, as more items were put on allocation, they had to enhance their demand model to account for those changes. Allocated items can vary daily in some cases and source data often needs to be scrubbed and converted before buyers can create a purchase order.
Adapting the analytics helped them to see allocation changes in close to real-time, explained Bissette. When that was coupled with their collaborative process, it led to a dramatic decrease in the time from getting an allocation report to submitting a purchase order.
These strategies were deployed due to the pandemic, but Bissette believe they will still play an integral role post-pandemic.
“Healthcare, by its nature, is volatile, and the supply chain feels a lot of that burden,” he added. “Relying on integrated data-driven analytics to make fact-based decisions will ultimately help reduce that burden.”
The rise of dubious PPE distributors
During the most extreme periods of the PPE shortage, thinking outside the box was critical to averting potential disaster.
“While we were getting really close to running out of stock, we did make an extremely large purchase of hooded ponchos from Walmart,” Kelli McCrory, enterprise director for clinical strategic sourcing at Jefferson Health, said during a session at this year’s Association for Health Care Resource & Materials Management (AHRMM) virtual meeting. “Thank goodness we never had to use them, but we’re ready for the next flood.”
McCrory and her team avoided having to use ponchos because they turned to alternative medical equipment suppliers to stock up on protective gear. At the height of that initial surge, many dubious and unreputable PPE dealers emerged to make a profit on the shortage.
“I think one of the strangest phone calls or emails I got was from a jet broker who was now selling PPE,” McCrory recalled. “Many of these suppliers also wanted to get paid upfront. There were hospitals across the country that paid a huge portion of the money — between 50% and 100% — upfront, and did not get the product.”
TractManager’s Dyer also noticed an increase in alternative authorized suppliers. Last March and April, almost every healthcare facility in the country was trying to vet out lesser or unknown suppliers.
“They went through a credentialing process to ensure that they were reputable and who they said they were and were distributing authentic supplies and not knockoffs,” said Dyer.
TractManager looked at their data repository of contractual agreements that U.S. hospitals had with a known supplier over the previous 12 months and posted a few known-supplier lists on its website for providers. If similar situations arise in the future, Dyer suggests vetting the suppliers through peer organizations or AHRMM.
A more price-transparent future
The data analytics at TractManager have a unique insight into the deal-making that takes place between suppliers and their healthcare provider customers, because hospitals send them quotes from a given supplier and they analyze and benchmark it and then send back their recommendations.
According to Dyer, suppliers sometimes come in with their bids higher than the benchmark and that requires the hospital supply chain staff to go back and negotiate. It can take two or three rounds of negotiations to get to the price they end up settling on.
But that may now be changing now, as transparency becomes more critical in terms of how the suppliers are dealing with the hospitals.
“There is a higher dependency on electronic transactions and electronic communication with the suppliers,” said Dyer. “You no longer have the supplier’s representative come into the hospitals to visit, and all of those sales calls are now virtual.”
The hospitals no longer have the time nor the staff to go back and forth in negotiations. Instead, they want their quotes to be fully-informed with all of the information they need to make a decision the first time.
“Healthcare supply chain executives are recognizing this issue and are saying they don’t have time for it,” said Dyer. “They want the best and final price and if it’s reasonable and in line with the benchmark, then they will transact with the supplier, but if the supplier forces them to play the games back and forth then they will move to someone else.”