Executive Briefings

A Changing Healthcare Industry Demands a Changing Supply Chain, Says MIT Logistics Research Director

A massive shift in the way that healthcare is delivered in the United States is causing an equally dramatic change in the way that the industry manages its supply chain. The trend, according to Mahender Singh, research director at the MIT Center for Transportation & Logistics, is from acute to chronic care. The reason, he said, has a lot to do with the health of today's patients. Increasingly, those seeking treatment are hampered by a sedentary lifestyle, obesity, stress and chronic disease. The response of healthcare providers must change in accordance with such conditions. By 2020, 80 percent of total healthcare costs will stem from chronic disease, Singh said at the first annual Biotech Supply Chain Academy near San Francisco. Current payment systems aren't designed to handle that additional demand. Meanwhile, the industry must support the usual levels of emergency, primary and acute care. As a result, Singh said, "cost is really going through the roof. This train is headed for a wreck."

Complicating matters is the unique nature of the healthcare supply chain. Unlike that of other industries, its three primary flows - products, information and money - are handled by different entities. And they operate under different incentives, Singh said. Supply chain managers must think beyond the delivery of product to include the unique service demands of each type of treatment. Acute care, for example, usually occurs in a highly controlled environment, while a significant portion of chronic care takes place outside healthcare facilities, and is of much longer duration. In the case of the latter, new portable technologies, allowing for in-home monitoring, testing and treatment, could help to stem the rise in cost. "The healthcare system," said Singh, is getting slowly disintermediated." The supply chain must respond in kind, with a greater emphasis on deliveries outside of clinics, hospitals and doctors' offices. To make that model work, providers must adopt new approaches for collaborating with supply chain partners, as well as modern-day sales and operations planning tools, Singh said. In addition, they must "embrace global supply chain design and management skills as a strategic competency." That includes the ability to track product throughout the supply chain, well beyond the basic capability offered by small-package carriers such as UPS and FedEx.

Visit http://ctl.mit.edu

A massive shift in the way that healthcare is delivered in the United States is causing an equally dramatic change in the way that the industry manages its supply chain. The trend, according to Mahender Singh, research director at the MIT Center for Transportation & Logistics, is from acute to chronic care. The reason, he said, has a lot to do with the health of today's patients. Increasingly, those seeking treatment are hampered by a sedentary lifestyle, obesity, stress and chronic disease. The response of healthcare providers must change in accordance with such conditions. By 2020, 80 percent of total healthcare costs will stem from chronic disease, Singh said at the first annual Biotech Supply Chain Academy near San Francisco. Current payment systems aren't designed to handle that additional demand. Meanwhile, the industry must support the usual levels of emergency, primary and acute care. As a result, Singh said, "cost is really going through the roof. This train is headed for a wreck."

Complicating matters is the unique nature of the healthcare supply chain. Unlike that of other industries, its three primary flows - products, information and money - are handled by different entities. And they operate under different incentives, Singh said. Supply chain managers must think beyond the delivery of product to include the unique service demands of each type of treatment. Acute care, for example, usually occurs in a highly controlled environment, while a significant portion of chronic care takes place outside healthcare facilities, and is of much longer duration. In the case of the latter, new portable technologies, allowing for in-home monitoring, testing and treatment, could help to stem the rise in cost. "The healthcare system," said Singh, is getting slowly disintermediated." The supply chain must respond in kind, with a greater emphasis on deliveries outside of clinics, hospitals and doctors' offices. To make that model work, providers must adopt new approaches for collaborating with supply chain partners, as well as modern-day sales and operations planning tools, Singh said. In addition, they must "embrace global supply chain design and management skills as a strategic competency." That includes the ability to track product throughout the supply chain, well beyond the basic capability offered by small-package carriers such as UPS and FedEx.

Visit http://ctl.mit.edu