The Suite Life  

Kelly M. Pyrek is the founding editor of today's surgicenter magazine and serves as editor in chief; she is
also editor in chief of sister publication Infection Control Today magazine and has been with Virgo
Publishing for eight years. Recognized by the Society of Professional Journalists as an award-winning
practitioner, she has served as an editorial manager, editor, and writer for newspapers, magazines, wire
services, and public information bureaus for more than 25 years. She is a graduate of the University of
Southern California.

A survey conducted by researchers at the University of Arkansas reveals that the American healthcare supply chain is an immature and expensive system with significant barriers to efficiency. Specifically, stakeholders – manufacturers, distributors, group purchasing organizations and providers such as hospitals, surgical centers and long-term care facilities – lack accurate information because they have not implemented universal standards for data, despite a recent movement in this direction.

“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,” says Heather Nachtmann, associate professor of industrial engineering. “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 industry-wide 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. Their findings are important and timely as Congress considers potentially historic legislation on healthcare reform.

“Everyone knows healthcare costs are rising at an alarming rate,” Nachtmann says. “A significant cost driver is the universal complexity of the health care 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 healthcare supply chain is a network of information and logistics within the broad spectrum of U.S. healthcare. In addition to direct healthcare providers such as acute-care hospitals and long-term facilities, surgical and diagnostic centers, physicians’ clinics, pharmacies and other facilities, the healthcare supply chain includes laboratories, equipment manufacturers, suppliers and distributors. Group-purchasing organizations, which are businesses within the healthcare supply chain formed to increase purchasing or bargaining power for bulk supplies, also play an integral role in the healthcare supply chain.

The researchers surveyed 1,381 professionals from all major sectors of the healthcare supply chain. Most – more than three out of four – of the respondents worked for a healthcare provider. The remaining participants worked for manufacturers, distributors, group-purchasing organizations and other healthcare supply-chain organizations. The respondents generally had significant experience in the industry; two out of three 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.

Nearly half of the respondents indicated that their organization’s supply chain was immature – with unstructured and 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 one 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.