Elevating the Supply Chain Profession and Futurecast An Executive Thought Leaders Event

AHRMM11 Executive Thought Leader Forum

October 03, 2011 | Content Areas: Leadership | Tags: Cost Management, Group Purchasing Organizations, Physician Preference, Reimbursement | Formats: White Paper
Authors: AHRMM


More than a year has passed since the Patient Protection and Affordable Care Act (ACA) was signed into law. One critical objective of the ACA is to shift from a healthcare system that pays based on volume to one based on providing value, defined as delivering high quality care in a cost-effective manner. Hospital leaders are attempting to define strategies that will enable success and mission fulfillment in the face of changes in government reimbursement methodologies and implementation of new regulations and requirements. Their challenge is made even more difficult by a recessionary environment.

Changes in the healthcare environment are driving increased focus by hospitals on the integration of care across the continuum and other innovations in care delivery. The supply chain is no longer a discreet function housed within the four walls of the hospital. Today, supply chain management is accountable for a broad network of resources often spread across many facilities and providers. The challenges of supply chain success require supply chain executives to be adept strategic leaders, able to navigate in a geographically-dispersed, highly complex, and rapidly changing healthcare environment.

On August 8, 2011, the Association for Healthcare Resource & Materials Management hosted an Executive Thought Leader Event, sponsored by VHA. Held during the AHRMM11 Conference in Boston, Massachusetts, 26 seasoned healthcare supply chain executives discussed a broad range of strategic issues and challenges confronting supply chain executives today. The skills, experience, and expertise of supply chain professionals are essential resources for healthcare organizations seeking leading-edge solutions to increasing cost pressures. Jamie Kowalski, Jamie C. Kowalski Consulting and 2011 recipient of AHRMM’s George R. Gossett Leadership Award observed, “If we ever had an opportunity as a profession, it is now.”

Following a summary presentation of findings from the 2011 National Executive Survey on Supply Chain Management, supply chain executives’ discussion focused on:

  • Elevating the supply chain profession
  • The supply chain forecast for the future
  • The AHRMM “Value Proposition.”

Throughout the executives’ discussion of supply chain issues and opportunities, participants responded to a series of questions posed using an electronic opinion polling process. The polling results provided an added dimension of information and insights for this Executive Thought Leader Event.

Thought Leaders Profile

The perspectives presented by thought leaders participating in this AHRMM event were derived from their many years of supply chain experience. Nearly 70 percent of participants have worked in the supply chain profession for more than 20 years, and more than twothirds of the participants are vice presidents. All participants work in either multi-hospital organizations or in single-hospitals that are part of integrated delivery networks with multiple sites of service. Nine out of ten of the participants are responsible for budgets exceeding $100 million. Of those, more than one in five have budgets over $250 million and two in five are responsible for budgets exceeding $500 million. More than one-third of the participants came to the healthcare supply chain field from another industry.

Findings of the 2011 National Executive Survey on Supply Chain Management

In collaboration with the Marquette University College of Business Administration, the Center for Supply Chain Management and Jamie C. Kowalski Consulting, LLC, AHRMM conducted a 2011 National Executive Survey on Supply Chain Management. The Executive Thought Leader Event discussion began with a presentation by Jamie Kowalski, who summarized the survey’s findings for event participants. The survey was designed to gauge hospital executives’ perceptions of the importance of supply chain management within their organizations, developing issues, and industry trends.

The survey was distributed to CEOs and COOs (not all of whom have supply chain responsibilities) and supply chain leaders. A wide range of organization sizes and types (hospitals and integrated delivery networks) was represented by survey respondents.

Supply chain not well-valued by C-suite. Kowalski presented survey results to the question “How important is supply chain management?” On average, supply chain importance was rated by C-Suite respondents at 3.7 on a 5 point scale (1 = Unimportant, 5 = Important). Kowalski questioned thought leaders about why the supply chain is not considered more important by C-suite respondents. In discussing this result, participants identified studies projecting that non-labor costs will surpass labor costs in the next ten years, a fact they believe should be driving greater consideration for the importance of supply chain. About one-third of participants have come into the healthcare supply chain profession from other industries, and it is the perception of thought leaders that other industries hold the supply chain at a higher level of importance than does the healthcare field.

Thought leaders questioned if the lack of perceived importance and interest in the supply chain: 1) stems from being viewed as a component of other aims, service lines, functions, etc. vs. existing as a stand-alone function; and/or 2) is a result of when the supply chain is well-managed, it essentially becomes invisible to the organization.

Thought leaders acknowledged that failure to be viewed as important may limit opportunities for supply chain leaders to make strategic contributions at the C-suite level and to elevate the standing of the profession.

Supply chain not well supported. Kowalski also presented survey findings related to support for the supply chain. While support was generally considered to be high, C-suite respondents’ support was significantly lower than other respondents (just over 3 on a 5 point scale, where 1 = Very Unlikely and 5 = Very Likely). In response to questions regarding satisfaction with supply chain performance and leadership, supply chain leaders were only moderately satisfied (3.3 on a 5 point scale, where 1 = Strongly Disagree and 5 = Strongly Agree), and C-suite respondents were even less satisfied (2.65 on the 5 point scale).

Finding the “silver lining.” Kowalski and thought leaders reviewed the challenges to supply chain strategy identified by the survey. The top challenges identified included physician preference items and nurse and physician resistance to change. Recession and healthcare reform may offer supply chain professionals a “silver lining” to demonstrate their vital strategic importance in reducing costs and standardizing the use of supplies and equipment across the organization. Reimbursement and revenue changes, persistent unemployment, and growing numbers of self-pay patients are demanding that leaders and supply chain professionals focus on those products that increase quality while controlling costs. These environmental factors are motivating executives to engage physicians in supply chainevaluations and decisions. Survey respondents recognized that supply chain professionals are able to deliver reductions in expenses that improve the bottom line.

Securing a place on executive agendas. Another area of the survey focused on the American College of Healthcare Executives’ (ACHE) Congress, held every March in Chicago. Kowalski estimated that of the 250 sessions offered at each Congress, only a limited few are related to the supply chain. The survey questioned why the supply chain is not more prominently featured on ACHE Congress agendas. Results indicated that most survey respondents do not believe that the supply chain is strategic, nor do they believe that it is as important or relevant as other topics. Results also indicated a failure to recognize the impact of the supply chain on improving financial margins.

Thought leaders were then challenged to consider the implications of these survey results. Those implications include ineffective communication and positioning regarding the scope of supply chain responsibilities and the depth of supply chain professionals’ knowledge, skills, experience, and expertise. Without this knowledge, Kowalski and thought leaders believe C-suite executives will fail to realize the importance of the supply chain to organizational success. As a result, C-suite executives and their organizations may fail to benefit from the significant strategic contributions the supply chain offers.

Managing to metrics. In an attempt to quantify a potential source of satisfaction or dissatisfaction with the supply chain, survey participants were asked if they have the metrics needed to manage supply chain performance. Only slightly more than one-third of C-suite (36.5 percent) and supply chain (35.3 percent) leaders believe they have the metrics necessary to manage supply chain performance. More than one-third (34.1 percent) of C-suite executives responding either disagree or strongly disagree that they have the metrics needed to manage supply chain performance. Kowalski emphasized the critical importance of taking advantage of the opportunities presented by the current environment to demonstrate and communicate the significance of the supply chain to the strategic success of their organizations.

“What’s in a name?” In addition to the survey results, thought leaders discussed the pros and cons of the term “supply chain.” The concerns of some professionals are whether “supply chain” is truly representative of the full scope of non-labor resource management responsibilities encompassed by the supply chain and whether it contributes positively to the positioning of the supply chain in an organization. Leaders acknowledged that the concept and function of the supply chain has evolved far from “materials management.” Included in the discussion was acknowledgement that name alone cannot advance the profession; education about and communication of the principles, concepts, and enterprisewide value of the supply chain are also important.

Leaders wanted. Historically, many healthcare supply chain leaders have risen through the ranks of the supply chain. Today, however, many supply chain leaders are emerging from other fields. Survey participants were asked about the selection criteria they use when seeking supply chain leaders. Respondents indicated their criteria are leadership-based as opposed to seeking technical supply chain experience. The qualities respondents are seeking include: demonstrated success, leadership qualities, certification, communication skills, collaboration capabilities, integrity, ability to engage C-suite executives, experience with physicians, masters degrees in supply chain, and resourcefulness. An example was cited of an organization whose new hiring strategy is to seek individuals with leadership skills over technical supply chain experience.

Moving Up: Elevating the Supply Chain Profession

Before focusing discussion on elevating the supply chain profession, thought leaders responded to a series of questions designed to gauge their views on how the supply chain profession is perceived. While more than one-third of the participants (36.4 percent) believe their most important C-suite relationship is with the CFO, an equal number believe it is with all C-suite executives (CFO, COO, CEO, and CIO). Few selected the CEO as the single, most important relationship for supply chain leaders.

Two in five thought leaders believe they engage very effectively with senior leaders on strategic issues, but more than one-quarter (27.3 percent) view their engagement with senior leaders as only somewhat or not very effective.

Those that effectively engage with senior leaders believe their success is the result of presenting innovative ideas for cost reduction and efficiencies, and the strong peer relationships they’ve established as a member of the senior leadership team.

Most of the participants are involved in their organization’s strategic planning process with more than half of those reporting having a “seat at the table.” “At the table” was interpreted by participants as collaboration among senior leaders in which the supply chain leader understands and participates in the entire process.

Significantly, only a few thought leaders (15 percent) indicate they are highly involved with their organization’s physician practice development, indicating an opportunity for supply chain leadership.

With reform comes opportunity. Clinical integration, acquisition of physician practices, and recruitment of employed physicians have raised challenges for supply chain professionals. Commonly, the supply chain has not been brought into the recruitment or acquisition process early-on. Expectations of standardized vs. physician preference items have not been set early in these processes, which often raises operational issues later on. The thought leaders recognized the need to become an integral part of recruitment and hospital/physician partnership processes, ensuring physician understanding of hospital commitments to standard products and equipment. Some of the thought leaders are beginning to receive requests for meetings from physician practice leaders who are well-attuned to the new practice environment, who recognize the need for an understanding of supply chain dynamics, and who appreciate the role of the supply chain.

Thought leaders believe their ability to plan, develop, simplify, and execute process efficiencies is the supply chain competency that can most benefit other areas of their organizations. This capability has even greater significance when coupled with the supply chain’s ability to analyze and evaluate return on investments. These competencies are particularly significant given changes in reimbursement and the increasing attention being focused on delivering value, high-quality, cost-effective care.

Wide-angle perspectives of care. Another advantage for supply chain leaders are their working relationships that span the healthcare delivery system. The supply chain interacts with physicians, food and nutrition executives, office and administrative staff, and multiple other areas. These working relationships provide supply chain leaders with insight into nearly every facet of the organization. This insight across an organization uniquely positions supply chain leaders as a resource with the ability to grasp the complexity of the organization and an ability to provide valuable feedback, information, and knowledge about the efficiency and effectiveness of the organization.

Supply chain thought leaders believe that a key barrier to elevating the supply chain profession is the limited perception of many C-suite professionals that supply chain is strictly about buying equipment and supplies and managing GPOs. Thought leaders suggest that CEOs and COOs who understand that the supply chain impacts over 50 percent of total operating expenses or who have served as CFOs are more likely to value and strategically use the talents and skills of supply chain professionals. C-suite executives who consider the supply chain as more transactional than strategic are less apt to recognize or benefit from the same opportunities. The thought leaders believe that supply chain professionals must take personal initiative to “market” to their CEOs and other C-suite executives the skills and expertise of the profession and how those can be strategically put to use to benefit the organization. Supply chain professionals working as Csuite executives are able to apply their skills and expertise in contract negotiation, project management, utilization, and more to areas beyond general supply chain management, including clinical products, IT, nutritional supply, clinical engineering, and more.

Manage GPO relations. Thought leaders see both opportunity and possible risk in their hospitals’ relations with GPOs. Although highly valued by supply chain professionals, some leaders question if GPO dependency and competition limits development of hospital supply chain expertise. Others believe that demonstrated supply chain leadership within the GPO relationship is communicated to CEOs to the benefit of supply chain executives.

Focused on a higher mission. Successful supply chain executives think beyond traditional supply chain responsibilities. The mindset of these professionals is focused on how the supply chain can positively affect the delivery of safe, high-quality patient care. These executives want to help achieve the Institute of Medicine’s (IOM) six aims (care that’s safe, timely, efficient, effective, patientcentered, and equitable) and align with others in contributing strategic value to their organizations.

Leaders believe that by contributing value to their organizations and earning trust and respect, supply chain professionals have and will continue to successfully elevate the supply chain profession.

Futurecast: Healthcare and the Supply Chain in the Near and Long Term

Leading into a discussion about the trends driving the supply chain’s influence on organizational success, thought leaders were asked what they see as the most valuable role for the supply chain in enabling healthcare organizations to successfully adapt to reform pressures and opportunities. Almost half (47 percent) believe their most valuable role is applying “systems thinking” across the enterprise, while one-fifth believe their most valuable role is to improve quality and patient safety.

When asked what directions hold the greatest opportunity for supply chain executives, over one-third of the thought leaders indicated the greatest opportunity lies in the increased emphasis on the relationship between supply chain management, clinical outcomes, safety, and sustainability. Nearly half believe the most significant opportunity is related to strategy, and 25 percent of respondents believe the biggest opportunity is the accelerated conversion of role from transactional to strategic; just under one in four believe the demand for strategic metrics linking supply chain to strategic initiatives is the greatest opportunity.

Thinking broadly. Leaders expressed their beliefs that system thinking, linking everything across the enterprise, is important to reducing costs. An example was cited in which evidence demonstrated that application of diagnostic supply chain processes reduced length of stay and patients’ recovery long term, thereby reducing cost per patient per day. Reduced cost per patient is a measure of efficiency being considered for implementation by CMS as part of its value-based payment program. Thought leaders believe that to succeed in the future, supply chain professionals must be able to envision and embrace the “bigger picture.” Applying systems thinking and demonstrating cost efficiencies will position supply chain professionals to contribute strategically to hospitals’ efforts to manage population health, coordinate care across continuums, and prevent readmissions as well as contribute to hospitals’ financial strength and stability.

Finding opportunities in reform. Nearly all thought leaders (over 95 percent) agreed that healthcare reform is an opportunity for supply chain professionals to elevate the visibility and value of the supply chain field. Specifically, thought leaders believe that value-based purchasing offers an opportunity for the supply chain to elevate its contribution to organization success and elevate the image and position of the field. Observing that the continued escalation of healthcare costs is unsustainable, thought leaders believe that cost pressures will force a greater reliance on the supply chain to find and deliver efficiencies and savings throughout the system of care. The ability to interface electronic medical records across the continuum represents significant cost to the healthcare system, cost that is increased by variability. The supply chain’s ability to contribute to efforts to drive out variability and standardize supplies and processes represents an important reform-driven opportunity for the profession. Reducing variability must extend beyond supplies and equipment to activities and processes as well. In one example, an organization with multiple facilities experienced difficulty balancing staffing among hospitals.

Different processes and products in each hospital required additional education and training. The organization was able to reduce costs and improve efficiency when the supply chain assisted in standardizing processes and products among the different hospitals. Leaders also forecast opportunities to identify new technologies and other means of improving patient care. To be successful, thought leaders believe the supply chain must assume an active, energetic role in coordinating multi-disciplinary, integrated teams to identify opportunities, analyze impacts, and deliver results. Challenging individuals and teams to embrace new, different, and innovative perspectives that look beyond cost are key elements to developing these opportunities, and wellaligned incentives and efficient metrics will be important to achieving success.

Looking to academia. Supply chain leaders are developing new relationships with colleges and universities to ensure the depth of supply chain talent needed to succeed in the future. In reaching out to representatives of college and university supply chain degree programs, some supply chain executives have discovered that these programs had not considered healthcare as a potential career opportunity for their supply chain graduates. As a result, new partnerships, programs, and internships focused specifically on healthcare are being developed with academic organizations. Unable to find the depth of needed talent in their region, some leaders have turned to academia to find not only new talent, but also seasoned supply chain professionals to hire.

The Value Proposition: Delivering Real Results for Organizations and Supply Chain Professionals

Thought leaders considered two questions designed to help identify and focus attention on the supply chain’s value and opportunities for promoting the profession and its contributions to the C-suite. When asked which two issues interest the C-suite most and most dominate their time and attention, thought leaders identified improving reimbursement and improving quality and patient safety as the top issues. When asked in which two areas the supply chain has an opportunity to play the most significant role, reducing costs through smarter decisions and greater efficiency was selected over improving reimbursement and improving quality and patient safety. Despite the apparent discrepancy in responses between C-suite priorities and supply chain opportunities, the choices are both intricately and inextricably related.

Strengthening AHRMM’s Value

Strengthening AHRMM’s brand awareness, collaborating with C-suite organizations on program development, and assisting with talent development are among the actions suggested for AHRMM to consider in advancing the supply chain profession.

Developing talent organically. Supply chain leaders value the resources AHRMM provides to educate their staffs. Of particular value are important messages about how the supply chain in many ways impacts how an organization is able to best care for its patients. The thought leaders want AHRMM to challenge and motivate the membership to a higher level of performance and expertise.

Collaborative programs for C-suite executives. To promote the profession and encourage C-suite appreciation for the significant contributions the supply chain can make in the areas of reimbursement, quality and patient safety, efficiency and more, thought leaders suggested that AHRMM collaborate with organizations like ACHE to develop new programs focused on the strategic role of the supply chain. The programs would be designed to educate and promote with executives the organizational value, opportunities, and benefits they can derive from utilizing the full range of expertise and perspective of their supply chain professionals.

Extending the knowledge of AHRMM’s value. Thought leaders questioned CEOs’ awareness of AHRMM, and whether CEOs understand the value AHRMM offers to supply chain professionals and, ultimately, to their organization. As supply chain leaders, they recognize the importance of their personal advocacy for AHRMM with C-suite executives. Leveraging AHRMM’s ties to AHA as a channel for promoting the organization and the profession was also recommended for exploration.

The thought leaders would like AHRMM to strengthen its position within the profession as well. Surveying the members to identify gaps in membership services, recruiting new membership to the organization, promoting active membership involvement, sharing innovative best practices, and creating a supply chain leadership development program were among the suggestions for building AHRMM’s organizational strength and recognition.

Finally, seven of ten thought leaders believe AHRMM should evaluate changing its name to something shorter, simpler, or more descriptive as a step in strengthening its brand position.

Action Initiatives

Thought leader event participants identified a number of initiatives or improvements they believe will advance the supply chain profession.

Promote Understanding

Supply chain leaders interact with a wide-range of departments and functions throughout their organizations. They offer invaluable skills and expertise, such as effective negotiation and cost/ benefit analyses, that can be readily applied in many areas throughout an organization. C-suite executives often fail to recognize and take full advantage of all that the supply chain can offer the organization. Leaders advocate better knowledge and understanding of their profession by C-suite executives through:

  • AHRMM’s collaboration with ACHE and other executive organizations to develop supply chain programs targeted to C-suite executives; and
  • Publication of well-written, informational articles in executive publications.

Strengthen the ARHMM Brand

A strong brand image for AHRMM lends credibility to the profession. AHRMM should be readily recognized by C-suite executives and others as a valued resource. Recommended activities for strengthening the
organization include:

  • Survey membership to identify gaps in membership services;
  • Ensure active, engaged members and promote membership growth;
  • Provide educational opportunities and leadership development programs;
  • Use AHRMM’s ties with AHA as a channel for promoting the organization.

Think Strategically, Focus on the Mission

Successful supply chain professionals look beyond transactional functions for opportunities to contribute value to their organizations. They couple their expertise and insights gathered through interactions spanning the organization with “big picture” thinking to make strategic contributions to their hospitals. Their primary focus is to seek out opportunities for the supply chain to help the organization provide high-quality, safe patient care.

Manage to Metrics

The 2011 National Executive Survey on Supply Chain Management results indicated that only slightly more than one-third of C-suite executives and supply chain leaders believe they have the metrics needed to effectively manage supply chain performance. Appropriate and accepted measures of supply chain performance would demonstrate and promote the strategic contributions of the supply chain.

Enhance Supply Chain Expertise

Today’s C-suite executives seek supply chain executives with demonstrated leadership skills and expertise over technical supply chain knowledge and experience. Providing educational opportunities and leadership development programs that raise the professional bar for the supply chain are essential components to ensuring respect and career opportunities for supply chain professionals.

Advocate for the Supply Chain

Supply chain executives know best the valuable skills, expertise, and knowledge they have and can contribute to organizational success in responding to reform and healthcare transformation. Underlying many of the discussions of the thought leaders event was the need to act with initiative, engage C-suite executives, and demonstrate and market the strategic capabilities and assets of the supply chain profession.