May 17, 2020

FEATURE: Driving Out Costs through Health Care Supply Chain Transformation

Big Data
Hospital Finance
Cloud Services
Big Data
6 min
Supply chain leaders need to be bold and demonstrate to the C-suite how they can have a positive impact on their organization’s bottom line.
Its well known that the U.S. health care system is in crisis mode. U.S. hospitals and health systems are facing declining revenues due in large part to...

It’s well known that the U.S. health care system is in crisis mode. U.S. hospitals and health systems are facing declining revenues due in large part to health care reform measures, with provider organizations being pushed to achieve certain patient care quality metrics or risk cuts in Medicare reimbursements.

Some in the industry are embracing major changes to control costs and increase business efficiencies – both paramount to the future of health care. And they are using their supply chains to help drive that transformation. By making their supply chains a strategic asset, forward-thinking organizations are finding new ways to meet operational, clinical and financial imperatives.

Challenges to Transformative Change

Health care as an industry has been slow to embrace change in the supply chain. While many leading organizations view their supply chains as strategic assets and have taken steps to automate processes, improve data quality and increase access to information on which to base business decisions, others are still plagued by inefficient manual processes, inaccurate data, lack of visibility and poor business intelligence and reporting.

Key challenges to transformative change in the health care supply chain include:

  • Number of industry players: Unlike other industries in which there are just a few big players, in the U.S. alone there are nearly 5,300 acute-care hospitals, each of which has hundreds – and sometimes thousands – of vendors.
  • Vast amounts of ever-changing data: The health care supply chain must deal with a tremendous amount of data, such as contract information, that changes frequently. Every year, on average, changes are made to one-third of the 30 million plus medical-surgical products on the market in the U.S., and each GPO is estimated to make as many as 30,000 changes to contract data each month.
  • Disparate IT systems and lack of data standards: Disparate IT systems that don’t share infor­mation, and the difficulty of incorporating global data standards for unique organization, location and product identification into procurement processes, add to the complexity.

Turning Challenges into Opportunities

Despite the obstacles, many health care organizations, confronted by compel­ling reasons to change, are beginning to break down the barriers and build the supply chain of the future.

That supply chain will be lean, quick to respond to opportunities and challenges, and viewed as a strategic imperative for the financial health of the entire organiza­tion. And perhaps more importantly, it will be sustainable.

As the largest business community in health care, GHX connects hospital supply chain, finance and clinical professionals with their suppliers and partners, providing services and solutions that enable them to improve operational efficiency and drive down costs. The company does this by automating supply chain processes, increasing visibility into information and providing business intelligence tools that enable providers and suppliers to make more informed decisions.

GHX has identified seven steps to health care supply chain transformation. By following these steps, hospitals and health systems can turn the weaknesses in their supply chains into strengths, creating viable solutions for the long-term success of their organizations.

1. It All Begins at the Top

Because supply chain touches a broad range of functions within a health care organization – operations, clinical departments, finance, value analysis, and so forth – true transformation requires a clear mission set forth by upper management. Significant improvements in business processes, technologies and data require the C-suite to serve as champions for this change and build support within the organization.  

2. Start with a Goal and a Vision

Health care organizations that have successfully cut costs and improved efficiency through their supply chains all began with a vision that was aligned with organizational objectives. In today’s health care environment of cost-pressures and sweeping reforms, most hospitals and health networks have established organization-wide goals for cutting costs while maintaining the quality of patient care.

Health care executives are increasingly turning to their supply chain departments to play a pivotal role in these efforts. Supply chain leaders need to be bold and demonstrate to the C-suite how they can have a positive impact on their organization’s bottom line.

3. Break out of the Silos

Traditionally, the various departments within health care organizations have functioned in separate silos, as they do in many other indus­tries. Finance, procurement, accounts payable, physicians, clinicians, and IT develop tight-knit groups and become isolated in their work. Breaking down the silos by putting people with different backgrounds and perspec­tives together and enabling them to understand each other’s issues is a critical component of supply chain transformation.

4. Technology as an Enabler

Health care providers traditionally have invested less in information technology. The money they do invest primarily goes for clinical IT systems. Despite a federal government requirement that encourages this trend, a recent study by Oracle Healthcare Insight makes an argument for greater investment in back-office automation and process improvement, stating that organizations can realize operating cost ratios that are 2–4 percent better than those of their peers.

Through its work with hospitals and the suppliers, GHX has found that the following technologies are necessary for successful supply chain transformation:

  • Purchasing automation
  • Contract and price management
  • Content management
  • Requisitioning workflow and price control/ contract compliance
  • Invoice and payment automation
  • Business intelligence and reporting across all levels of the organization

While technology can be a powerful enabler, it’s also recognized that technology is only as good as the data that feeds it. Data plays a key role in providing the foundation on which health care supply chain management technol­ogy is built. Without great content (right item, right description, right price), the focus of a technology solution shifts from process automa­tion to workflow enablement as more players must participate to ensure that the right data goes to the supplier when a product is ordered.

5. Doing Business a Different Way

Too often, organizations make isolated tech­nology decisions rather than focusing on a plan to implement an entire solution. Leading organizations, however, look at things more pragmatically, focusing on the implications of supply chain transformation for the entire organization. More importantly, they recognize that the benefits of technology can only be fully achieved by incorporating process changes into the transformation.

6. Align to Win

Successful supply chain transformation requires strict alignment of resources throughout an organization to ensure proper execution. This includes alignment with IT, clinicians, administration and other key stakeholders to ensure new supply chain initiatives integrate seamlessly with existing technologies and processes.

7. Change Management is Imperative

A key component for the success of any supply chain transformation initiative is gaining buy-in from everyone involved. The most successful organizations invest in communicating the value, testing the solution, creating the right initial experience for users, and sustaining the change. This requires a robust change management and communication effort. A detailed plan that addresses concerns about how the new system will alleviate current issues and how it will affect job tasks while providing a clear long-term strategy that can be understood and embraced by everyone is imperative.

Change is happening everywhere in health ­care. Organizations that don’t embrace the change and reengineer their business processes accordingly run the risk of failing to achieve their mission – pro­viding high-quality patient care. But true transformative change is not easy. It requires time and a commitment to sustaining the change, even when leadership of an organiza­tion changes.

The health care supply chain is evolving to address the challenges facing the industry. Now, more than ever, supply chain leaders have an opportunity to play a strategic role in their organizations by providing greater spend visibility and identifying effective ways to cut costs.

Through process automation, tech­nology improvements and greater resource alignment, health care organizations can build the supply chain of the future, one that will be leaner, more efficient and able to withstand the challenges ahead.

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Jun 20, 2021

Medical device companies: how to prepare for Brexit

Ed Ball
6 min
Ed Ball, Senior Associate at RQM+ , explains how medical device companies can prepare for post-Brexit compliance

Over the last decade, medical device businesses have been no strangers to regulatory changes and new compliance requirements. Companies with devices in the EU market have been working hard to achieve conformity with the requirements of the EU Medical Device Regulation 2017/745 (MDR) and In Vitro Diagnostic Regulation 2017/746 (IVDR), but the UK’s exit from the EU, effective as of 1st January 2021, demands yet another change: to comply with the new UK regulatory regime.

The Medicines and Medical Devices Act passed into law on 11 February 2021 does just that; it enables the UK to build its own regulatory system, although when this new framework will be fully in place is not yet known.

The transition to the UK’s new regulatory regime officially began on the 1st of January 2021, and with it a series of deadlines and phases that medical device manufacturers exporting to GB and Northern Ireland would do well to take close notice of. During the transition period, the UK Medical Devices Regulations (UK MDR) 2002, not to be confused with the EU MDR, will continue to apply in England, Scotland and Wales, whilst CE marked medical devices will still be accepted up to 30th June 2023.

The conformity assessment processes defined in the UK MDR 2002 (as amended) will require that medical devices carry the UKCA mark for entry in the GB market or the UKNI mark for entry in Northern Ireland (where the devices are not CE marked for the EU). In Northern Ireland, where the rules for placing a device on the market differ, the EU MDR and IVDR will apply in 2021 and 2022 respectively, in line with the EU’s implementation timeline. 

This easing-in period of transition is valuable time that should be used productively by manufacturers to ensure that they get up to speed, keep up with relevant updates and prepare strategies and product portfolio for the next phase. To do this, businesses should make sure they consider the following areas as they assess their strategy for UK market access:

Potential Overlap with EU MDR and IVDR
Medical device manufacturers have been working to implement measures to ensure they comply with EU MDR and IVDR for quite some time. The experience, processes and objective evidence that they have gathered in these efforts are certain to be of use when applying for UKCA marking. 

Rigorous Planning
Product portfolios and new product pipelines should be evaluated against both overall compliance risk and commercial and strategic value. By identifying the regulatory compliance status for each product for the UK market and the efforts required to maintain that compliance, manufacturers can plan to use the grace period up to June 2023 to complete their activities. These plans should also be evaluated in consideration of the commercial importance of the individual products to help prioritise the workload. This may well result in the decision to discontinue certain products in the UK or to introduce new products on the UK market ahead of other markets.

Engage with Approved Bodies
This activity cannot take place too soon; as of the 1st of January 2021, UK organisations that were acting as EU Notified Bodies have become Approved Bodies in the UK, while EU Notified Bodies are no longer able to provide conformity assessments under the UK regulations. As there are currently only three UK Approved Bodies offering this service, there is a very real risk that latecomers will struggle to find a UK Approved Body to carry out the conformity assessment required to attain their UKCA mark in time.

Authorised Representatives
Just as EU Notified Bodies are no longer relevant to pursuing UK certifications, UK-based Authorised Representatives are no longer valid when CE marking against the MDR or IVDR. Manufacturers using UK-based EU Authorised Representatives must switch to an EU-based Authorised Representative.

For the UK market, the role of the EU Authorised Representative is also no longer applicable. Non-UK manufacturers must have a UK-based Responsible Person (UKRP), which is equivalent to the EU Authorised Representative in terms of roles and responsibilities. Only one UKRP may be appointed, unlike EU Authorised Representatives, and they must have a registered place of business in the UK in order to register with the MHRA. Approved Bodies may be able to provide details of organisations acting as UKRPs and once this role has been assigned it will be critical for manufacturers to determine exact procedures for managing documentation and that clear communication channels are established. 

Labelling and Import/Export
New UK regulations require that medical devices bear a UKCA mark in addition to the name and address of the UKRP for non-UK based manufacturers. Manufacturers who use the same products/packs for the EU and UK markets will need to consider the impact of adding more content to their labels in terms of usability for the supply chain and end-users. 

While CE marking and certificates will continue to be recognised by the UK until June 2023, import/export administration is likely to change and become more burdensome. Manufacturers using separate products for GB (UKCA) and the EU and Northern Ireland (CE marked) will need to plan for how to ensure that the CE marked product is not shipped to GB post June 2023. Ensuring that processes and resources are in place to deal with developing situations will help manufacturers hit the ground running.

Clinical Investigations
Many businesses will find that clinical investigations are carried out across multiple sites, some of which are outside the UK. In these instances, manufacturers will do well to have a plan for implementation and management of investigations, in compliance with local requirements. It is likely that the MHRA will also continue to update their requirements for clinical trials in the UK.

Data Protection and Standards
New tensions are emerging between the EU and the UK concerning UK data protection rules and the EU’s General Data Protection Regulation (GDPR), suggesting that maintaining ‘equivalency’ may involve a number of different phases.

Compliance with applicable standards also requires close attention; the list of designated standards for medical devices issued by the UK’s Department for Health and Social Care is based on the list of harmonised standards published in the Official Journal of the EU, which in turn are harmonised to the MDD, AIMDD and IVDD. More recently published standards, however, have not been harmonised to the latter European directives and are thus not in the UK’s designated list, despite being considered state of the art. It would be prudent for manufacturers to monitor the state-of-the-art standards and apply where applicable, rather than rely on superseded and outdated standards.

As the UK moves into a new regulatory regime, medical device manufacturers who have already invested time and resources to comply with EU MDR and IVDR can use this to attain their UKCA mark. However, a dynamic compliance environment combined with the new onus relating to export policies means that close attention needs to be paid on numerous fronts. Keeping pace with this changing environment will ensure that manufacturers face the future with confidence and do not lose important space on their markets.

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