Hospital systems that have acquired physician practices and outpatient treatment centers are wrestling with how to integrate them into their existing supply-chain distribution system. The goal is to extend the low prices achieved through bulk purchasing to these geographically dispersed facilities.
In some cases, that's led supply-chain officials to serve their expanded network's need for drugs, vaccines, tests and other supplies from their own warehouses. They are saving money by buying in bulk and creating, in effect, a van-based distribution system to replace the services offered by distributors such as Henry Schein Inc. or McKesson Corp., which specialize in shipping to physician offices and other non-acute locations.
But others have chosen to outsource distribution. That often means their newly acquired facilities continue their long-standing relationships with existing distributors, who for years have specialized in serving the geographically dispersed physician and ambulatory surgical center market. But sometimes they forge new relationships to capitalize on growing competition in distribution, which can even come from combined manufacturer-distributors such as Medline Industries or Cardinal Health.
Either way, supply-chain officials are under pressure to quickly integrate purchasing and delivery for their newly acquired ambulatory-care facilities. They need to leverage their size and purchasing power to lower supply costs for the newly acquired physician offices and ambulatory surgical centers, which can help make the acquisitions pay off more quickly.
And they need to help demonstrate the benefits of system ownership to the formerly independent practices. Centralized purchasing and distribution can contribute to that effort by freeing physicians from mundane supply-chain tasks and allowing them to focus on what they do best.
Systems should “manage as much of the supply chain as possible (and) take the end user out of that supply-chain role,” said James Spann, global leader of the supply-chain practice and logistics practice at Simpler Consulting, a part of Ann Arbor, Mich.-based Truven Health Analytics. They should let physicians “get back to taking care of patients.”
There's been significant growth in hospital system spending on supplies from medical-surgical distributors for their non-acute-care facilities since 2014, said David Hargraves, vice president of strategic sourcing for Charlotte, N.C.-based Premier. Alternate sites were up 165% in 2015 and physician practices were up 536%. However, those orders still account for a fraction of supply spend. Acute-care spending remains 12 to 13 times higher than the rest of the continuum.