How Do We Heal the Healthcare Value Chain? Over the last decade, as shown in figure 1, the hospital supply chain has been one of the few that has improved operating margin, reduced inventory and improved revenue/employee. In contrast, the manufacturing suppliers to the hospital organization have grown inventories and struggled to preserve margins. Across the value chain from the patient to the raw material suppliers, total inventories have grown and costs have escalated. With pending regulations, hospitals are being forced to rethink processes, redefine value and work more holistically to improve sourcing practices. The suppliers to the hospital systems are having to rethink their systems to rethink the customer (from selling to the physician to selling to a more formal buying organization based on patient outcomes) and adapt to the new processes within the hospital for value analysis. Supply chain processes within the hospitals have matured. Hospitals have made more progress on improving cash-to-cash cycles than their upstream manufacturing trading partners. They have reduced inventories and attempted to work with suppliers. As shown in figure 2, it is notable to see that this industry is one of the few where downstream trading partners have actually improved payable terms for their suppliers. The future lies before the healthcare provider. As the provider of patient care, they have the greatest potential to lead in the healthcare value chain’s redesign to improve value. They have come a long way, but the changes have been incremental. They have focused primarily on traditional sourcing techniques; not a redesign of the healthcare value chain from the outside in, and the redefinition of complex and antiquated processes.

1. Healthcare Study:
Healthcare Providers
Summary Charts
Feb-Apr 2013

2. Supply Chain Insights LLC Copyright © 2013, p. 2
Agenda

3. Supply Chain Insights LLC Copyright © 2013, p. 3
Study Overview

4. Supply Chain Insights LLC Copyright © 2013, p. 4
Most Respondents Work
Within the Hospital Supply Chain

5. Supply Chain Insights LLC Copyright © 2013, p. 5
Over Half Have Over 20 Years Experience
in Healthcare and Supply Chain

6. Supply Chain Insights LLC Copyright © 2013, p. 6
Agenda

7. Supply Chain Insights LLC Copyright © 2013, p. 7
Top Way to Measure Value is
Lower Costs Without Reducing Quality of Care

8. Supply Chain Insights LLC Copyright © 2013, p. 8
Negotiating Lower Prices is
Most Important Cost-Cutting Effort

9. Supply Chain Insights LLC Copyright © 2013, p. 9
Negotiating Lower Prices is
Top Performing Cost-Cutting Effort

10. Supply Chain Insights LLC Copyright © 2013, p. 10
Important but Low Performance:
Improving Product Utilization
and Working Across Functional Silos

11. Supply Chain Insights LLC Copyright © 2013, p. 11
Important but Low Performance:
Improving Product Utilization
and Working Across Functional Silos

12. Supply Chain Insights LLC Copyright © 2013, p. 12
Other Cost-Cutting Efforts
(Open-Ended)

13. Supply Chain Insights LLC Copyright © 2013, p. 13
Other Cost-Cutting Efforts, Continued
(Open-Ended)

14. Supply Chain Insights LLC Copyright © 2013, p. 14
Other Cost-Cutting Efforts, Continued
(Open-Ended)

15. Supply Chain Insights LLC Copyright © 2013, p. 15
Value Analysis Group:
Nearly Three-Quarters Have a Formal Program or Group

16. Supply Chain Insights LLC Copyright © 2013, p. 16
Value Analysis Group:
Supply Chain is Primary Leader;
Changing/Adding Products are Most Common Decisions

17. Supply Chain Insights LLC Copyright © 2013, p. 17
Value Analysis Program:
Supply Chain Costs, Physician Preference and Infection Rates
are Top Decision Factors for Product Changes/Additions

18. Supply Chain Insights LLC Copyright © 2013, p. 18
Value Analysis Program:
Two-thirds Rate Program as Successful

19. Supply Chain Insights LLC Copyright © 2013, p. 19
Collaborative Programs:
Over Half Have Any Collaborative Programs for Increasing
Financial Performance When Buying Supplies/Equipment

20. Supply Chain Insights LLC Copyright © 2013, p. 20
Collaborative Programs:
Collaborative Programs with Suppliers
Are the Most Common

21. Supply Chain Insights LLC Copyright © 2013, p. 21
Collaborative Programs:
Collaborative Programs with Suppliers
Are the Most Common

22. Supply Chain Insights LLC Copyright © 2013, p. 22
Collaborative Programs:
Nearly Half Rate Them as Effective

23. Supply Chain Insights LLC Copyright © 2013, p. 23
Other Efforts to Reduce Costs
(Open-Ended Responses)

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Other Efforts to Reduce Costs, Continued
(Open-Ended Responses)

25. Supply Chain Insights LLC Copyright © 2013, p. 25
Agenda

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Reducing Costs and Managing Data
Are Top Business Challenges in 2013

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Top Supply Chain Roles in 2013:
Reducing Costs, Improving Value-based Outcomes
and Improving Inventory Turns and Cost

28. Supply Chain Insights LLC Copyright © 2013, p. 28
Three out of Five Rate Their Supply Chain
as Successful in Meeting Goals

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Reasons for Rating Supply Chain as
Successful (Open-Ended)

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Reasons for Rating Supply Chain as
Somewhat Successful, Continued (Open-Ended)

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Reasons for Rating Supply Chain as
Less Successful (Open-Ended)

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Inventory, Compliance and Customer Satisfaction
Are Where Supply Chain Performs Best

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Agenda

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Supply Chain Organization:
Three-Quarters Have a Formal Supply Chain Organization

35. Supply Chain Insights LLC Copyright © 2013, p. 35
Supply Chain Organization:
7 Functions Report Through It on Average;
Reports Primarily to Chief Financial Officer

36. Supply Chain Insights LLC Copyright © 2013, p. 36
Supply Chain Organization:
Most Likely to Contract and Manage for
Medical & Surgical Commodities

37. Supply Chain Insights LLC Copyright © 2013, p. 37
Supply Chain Organization:
Purchasing is Primarily Done Corporate-Wide