Is healthcare experience overrated in supply-chain hiring?

The hiring of Julius Heil stunned a few people in healthcare supply chain circles. Last May he replaced longtime CEO Brent Johnson at Intalere, the St. Louis-based group purchasing organization owned by Intermountain Healthcare, a 22-hospital integrated health system based in Salt lake City.

Heil had very little healthcare experience before getting the job. His most recent work was as a supply chain consultant in multiple industries. Before that he was running logistics for a refrigerated warehousing company based in New Jersey.

Healthcare supply chain experts say that kind of journey should be more common, because the industry needs an infusion of new ideas.

Heil has surrounded himself with direct-reports with significant healthcare knowledge to help him absorb the important nuances of the industry. But he considers his lack of personal experience more of an asset than a deficit. “I'm not bound to any supply chain-related paradigm in healthcare,” he said. “I naturally can challenge (the status quo) because there's nothing telling me not to.”

Hospital and health system executives have been reluctant to hire top supply chain leaders from outside of healthcare. The job has evolved from a simple purchasing and logistics role to one that requires leaders to consolidate physician preferences for products and consider quality and long-term value beyond a product's sticker price. Some would say that the transformation calls for more healthcare acumen than ever. But despite these more complex demands, healthcare supply chain leaders aren't using advanced technologies and best practices that have become commonplace in other industries, experts say.

“Today (supply chain) looks more like engineering, a STEM-based field, than it ever was from a blocking-and-tackling perspective,” Heil said. “If you can't handle the math, you can't actually be a visionary or a thought provoker in the supply chain industry today.”

Supply chain VPs or chief purchasing officers at hospitals have traditionally worked their way up from initial jobs on the loading dock. In more sophisticated industries, supply chain executives often have formal degrees in supply chain or logistics. The changes that have taken place in healthcare mean legacy supply chain professionals may need more formal education or advanced experience to deal with modern challenges, said Mehrab Deboo, an executive recruiter and a principal in the Global Supply Chain Center of Expertise at Korn Ferry.

“The big thing right now is there's just not enough talent in healthcare for the demand,” Deboo said. “The talent usually grew up in hospital systems, and they just haven't seen what best-in-class might look like.”

As hospitals have consolidated and health systems have grown, they've developed more complex needs than legacy supply chain executives are used to handling, Deboo said. He encourages his health system clients to seriously consider job candidates from outside of the industry. But few have done so.

“They always seem to gravitate to what they know,” Deboo said. “But when you get the right kind of talent and when you talk more generally speaking about what they think they should be doing, they gravitate to outside.”

Despite Deboo's experience, data show the industry may already be making progress toward hiring more outsiders, said Eric O'Daffer, a vice president of research covering healthcare supply chain at Gartner. Last year, roughly 20% of healthcare supply chain leaders came from outside the provider space in a sample of 40 health systems with strong supply chain departments, according to the research and advisory firm's data.

While Gartner doesn't have historical data, O'Daffer said it's widely recognized that the ratio has grown over the past few years. There was 35% turnover among leaders at those 40 systems last year—an unusually high rate.

Good management of a hospital or GPO supply chain relies on pretty much the same tools, techniques and strategies used in other industries to negotiate, procure and move products, said supply chain expert Mohan Tatikonda, a professor of operations management at Indiana University's Kelley School of Business. While clinical outcomes (and costs) rest on executives' evaluation of product quality and effectiveness, that task is just as important in other industries, he noted. In automotive, for example, the quality of car parts could mean life or death in a crash.

Despite the commonalities, anyone running supply chain in healthcare for the first time has to absorb some important nuances, including the use of GPOs and, compared to other industries, significantly less transparency into the logistics and manufacturing of products the hospital has ordered.

Most notably, healthcare supply chain leaders are under increasing pressure to consolidate the different brands of items they purchase because of variation in physician preferences. Working with physicians and encouraging them to let go of their allegiances is one of the hardest parts of the job.

Nevertheless, healthcare supply chain leaders are looking beyond the industry when they hire direct-reports, and they think C-suite executives should do the same when hiring their supply chain chiefs.

“I think we'd be foolish not to hire from outside of healthcare,” said Mike Rivard, chief operating officer of St. Louis-based Mercy's supply chain organization, ROi. “I think to assume that your industry is so unique and different that you only have to hire from within is very myopic.”

Ed Hardin, senior vice president of supply chain management at Southfield, Mich.-based Beaumont Health, has a master's degree in healthcare administration but worked as a consultant before taking supply chain roles at three different health systems over the past few decades.

At any level, Hardin said he'd look for someone with healthcare expertise—like a consultant or hospital finance manager—or someone with significant supply chain experience from another industry. “I wouldn't necessarily want someone with deep healthcare supply chain knowledge,” he said, because the industry “desperately needs people who can think outside of the box.”

Hardin, who was recruited by Deboo, the Korn Ferry principal, acknowledged that smaller systems may not be able to attract outsider candidates for their top role—they're best served by hiring middle managers from hospital supply chain departments.

Hardin said he's interested in people with unconventional backgrounds, such as longtime consultants, supply chain leaders in other sectors or even healthcare finance managers. Experienced healthcare supply chain managers may be able to move to more sophisticated health systems by getting a formal degree in the field, leaders say.

Dallas-based Baylor Scott & White Health recently hired 15 new supply chain employees, includes two vice presidents, the majority of whom came from other industries, including energy, telecommunications, manufacturing and transportation, according to Tony Johnson, the system's senior vice president and chief supply chain officer. The only challenge for them is adjusting to a supply chain that isn't as advanced as the ones in the businesses they came from.

“There's a huge upside,” Johnson said. “They really get it. They understand the financial aspects of operating a supply chain—understand the power of operating a supply chain.”