With almost one-third of all U.S. hospitals losing money, even educators are examining ways to provide healthcare executives with new tools to cope with one of the most challenging issues confronting tomorrow's leaders-the bottom line.
For the first time, school officials say, an academic program in health services administration is focusing on the seemingly mundane area of supply chain management, a largely untapped sector of hospital administration that can produce quick and dramatic financial improvement if applied correctly.
While organizations such as the National Center for Healthcare Leadership are advocating major changes in curriculum and accreditation to help prepare future healthcare executives, officials at Arizona State University in Tempe have already modified their program by singling out supply chain management as a top priority. It's the only school in the country with an emphasis on this topic for the healthcare field, said Eugene Schneller, a professor in the School of Health Administration & Policy at ASU's W.P. Carey School of Business.
"We decided we would try to develop this as a focal point of our program," said Schneller, whose students earn a dual master's degree in business administration and health sector management.
Unlike manufacturing companies that long ago identified supply chain management as an important way to cut costs, healthcare executives have never attached the same importance to this area even though hospitals can achieve "obvious and profound" savings by tightening the purchasing process, Schneller said.
"For healthcare executives, the issue has been in the basement," Schneller said. "Many of the items are physician-oriented: stents, sutures. Suddenly, as the costs of many of these materials have gone up, the opportunities for standardization are tremendous. Managing that as a key function can transform an organization."
He said the average cost of materials per patient discharge runs about 20% of the patient bill. With effective management, organizations can save about 30% to 50% of supply chain costs-a huge potential savings, according to Schneller.
Like many other academic programs in health administration, ASU has redesigned its course offerings to reflect the changing mix of its students and the dynamic nature of the field, adding a standard business school element to a curriculum that had centered primarily around a hospital-focused plan for budding chief executive officers and chief operating officers. The program, complemented by the traditional MBA approach, includes a focus on one of several key areas-including finance; information technology and management; services marketing and management; and supply chain management.
Since ASU has one of the leading departments of supply chain management in the U.S., Schneller said, it was logical for professors in the health policy arena to partner with colleagues on the business side to try to create a "center of excellence" in health sector supply chain initiatives. Part of the effort, Schneller said, will be helping healthcare organizations improve the way they collaborate with group purchasing organizations, creating better systems that include more effective contributions from clinicians. That way, he said, clinical outcomes will improve along with the bottom line.
"As you look at issues of safety and outcomes, we see supply chain management moving much closer to the executive suite," Schneller said.