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Seize these Six Opportunities to Improve Healthcare Supply Chain and Optimize Reimbursements

Authors: Seema Nagwani - Healthcare Consultant, CitiusTech and Dr. Simran Mittal - Sr. Healthcare Consultant, CitiusTech

Healthcare providers are under incredible pressure to reduce costs while delivering high-quality medical care is the paramount priority. In fact, mastering that dual reality, as value-based reimbursement becomes the new normal, is critical to joining the narrow networks, the highest quality ratings, and the most profitable contracts. With nearly one-third of all hospital operating budgets dedicated to supply chain management, it’s an often overlooked and undermanaged, area to assess first.

A study found that hospitals could save more than $25 billion a year by eliminating unnecessary supply chain costs. Coupled with evidence that provider organizations pay an average of 11% more for products experiencing shortages, the impact on patient safety and critical profit must be closely managed.

Both data standards are available through the Global Unique Device Identification Database (GUDID) that contains key device identification information submitted to the FDA about medical devices that have Unique Device Identifiers (UDI), including:

Facing New and Persistent Healthcare Supply Chain Challenges

  1. Product Data Changes: Product information changes daily as suppliers introduce new products to the marketplace, discontinue old products. On average, changes are made every year to one-third of the 30 million-plus medical-surgical products on the market in the U.S.
  2. Technology Limitations: Materials management staff sends out thousands of purchase orders (POs) to suppliers and most don’t have time to ensure every product description is accurate or complete, leading to back-end issues when the supplier can’t process the PO or the invoice data doesn’t match. This causes traceability problems across the supply chain.
  3. Linking Chargeable Supplies and Devices: Managing multiple points of contact between purchases, how they’re used clinically, and how they are reimbursed is a complex. Most hospitals struggle to accurately link purchase history data in the Item Master. Inadequately linking hospital supplies with manual overhead leads to significant revenue capture issues, which is further compounded by a lack of reconciliation between a variety of supplies.
  4. Cost Band Misalignment: Cost levels, or cost bands, are created once and audited infrequently. Continuous cost changes and order or supplier updates can result in misalignment with standard price policy.
  5. Product Errors: Making decisions based on old or inaccurate information is costly. Inconsistent descriptions, missing vendor data, duplicate items, incorrect or missing catalog numbers, mismatched or missing prices and units of measure all add a layer of complexity.
  6. Fluctuating Demand: The pandemic has revealed issues with sustaining global supplies of critical items -- diagnostic kits, medicines, medical supplies, and equipment. While supply chains have worked diligently and creatively to meet demand from existing inventory and work with new (and potentially risky suppliers), the imperative that companies must activate advanced analytics and data simulation modelling to have a comprehensive, more accurate and timely view of their supply chains and make cost-effective decisions that keep up with evolving clinical needs.

Seize these Six Opportunities for More Effective Supply Chain and Revenue Cycle Management:

  1. Adopting the Right Data Standard: Improve supply chain efficiency by ensuring data flows seamlessly and automatically from providers to distributors and manufacturers in real-time. The Global Data Synchronization Network (GDSN) is a network of interoperable data pools that established the GS1 Global Registry. GS1 developed a global data standard that uniquely identifies products and locations to streamline processes and improve operational control. GS1 data standards include:
  • Global Location Number (GLN) to identify the location of transacting entities
  • Global Trade Identification Number (GTIN) to identify specific products

We outline how properly accounting for supply purchases, and ensuring consistent charging for those purchases, will allow for better control of the revenue cycle and provide greater consistency and reliability to the supply chain. Together, these provide a timely de-risking strategy.

  • GTINs and secondary product information, such as serial numbers, lot numbers and expiration dates
  • Specific manufacturing plant information where the product was produced, providing accurate and cost-effective traceability
  • The hospital’s GLNs, as well as specific locations inside the hospital like the cardiac intensive care unit (CICU) supply cabinet on a specific floor
  • Device Identifier (DI) information and the package DI, including standard units of measure for a device or medicine type
  1. Create and Maintain a Clean Item Master: The item master has been described as a healthcare organization’s process foundation. The goal of implementing a master data management strategy is to clean up the item master and maintain its integrity over time through data synchronization and automation.
  2. Assign UNSPSC Codes: Assigning United Nations Standard Products and Services Codes (UNSPSC) to products within the item master gives organizations the ability to analyze spend by product type, class, or category and determine which vendors they are purchasing from within each category more accurately.
  3. Leverage HCPCS Codes: Drive greater accuracy in the billing process and optimize reimbursement by assigning HCPCS codes to products within the item master. Integrating the item master with the charge master will give users easy access to detailed product descriptions.
  4. Streamline and Integrate the Healthcare Supply Chain: Create and maintain active links among the supply item master, operating room supply inventory, charge description master files, and POs is critical. Mastering this ensures correct billing of CPT/HCPCS codes to optimize reimbursement.
  5. Real-time Medical Equipment Captioning: Devices like IV pumps, wheelchairs, and heart monitors are always on the move throughout the hospital. Encoding the GS1 identifier to these frequently-used and mobile pieces of equipment with a Wi-Fi or RFID tag enables real-time location information. This not only enhances staff efficiency but also staff satisfaction, eliminating the time spent by nurses, aides, or administrative staff searching for assets

Our Step-by-Step Approach to Improving Supply Chain Accuracy and Optimizing Reimbursements

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 Figure: Improving Supply Chain Accuracy

How Should You Find and Control Your Supply Chain Management Waste?

Supply chain waste and inefficiency is eating up 25-30% of administration time on data cleansing and corrections. Identifying waste in the supply chain management function and tightening control is estimated to reduce supply chain expenses by 17.7% or $11 million annually per hospital on average.

While the challenges are many, the data, technology, and automation solutions are readily available. Following a structured approach to finding the mitigating the waste is paramount to not only ensuring adequate supplies and equipment are at the ready, but to maximize cost savings and making timely decisions based on accessible and accurate data.

References:

  1. https://www.intalere.com/Portals/4/Documents/Item-Master-Efficiency-and-Clean-Data-Article.pdf
  2. Vizient | The Gold Standard for Item Master Management
  3. U.S. hospitals wasting about $25.4B on supply chain every year | FierceHealthcare
  4. mckinsey white paper - building new strengths in healthcare supply chain vf.pdf
  5. https://revcycleintelligence.com/news/98-of-hospital-leaders-say-supply-chain-optimization-ups-margins

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