For many, it is the best of times, with medical advances leading to more effective therapies that treat patients based on their own genetic codes, new drugs that can cure diseases like Hepatitis C, and experimental vaccines to prevent infectious disease outbreaks like the Ebola crisis.
But for many others, it seems like the worst of times. Consider these facts:
Hospital and health facility medical errors are the third leading cause of death in the U.S.
Ninety percent of CFOs responding to a 2014 Harris Poll said healthcare costs prevent them from increasing employee compensation and investing in better technology, putting their companies at a competitive disadvantage globally.
Average annual healthcare costs are approaching 50 percent of the median U.S. household income.
All of this threatens the health of both businesses and individuals, with many wondering “why?” In my opinion, healthcare suffers from a supply and demand matching problem, one that supply chain professionals may be best prepared to solve.
To operate effectively, any society has finite resources (the supply) to meet the healthcare needs (the demand) of the people. In economics, when demand exceeds supply, costs go up, which on the surface appears to be the problem with healthcare in the U.S. But we need to look deeper, at how the system is designed and what will best meet the demand.
Historically, healthcare has been organized around the supply — the hospital and the doctor — when many argue that it should be centered on the patient, or the demand. Here, too, the healthcare system has been misaligned, devoting more resources and attention to fixing problems than preventing them in the first place. As any good supply chain professional will tell you, building quality into the system delivers better results.
A major tenet of healthcare reform — and one that has bipartisan support — is a move to reward healthcare systems and clinicians for the value they deliver to patients, not the volume of services they provide. This has led to an increasing focus on population health, or what it takes to improve the health of defined populations, be they patients with similar conditions or entire communities. Along the way, we have discovered that the social determinants of health (SDOH) — whether someone makes a livable wage and has access to good food, transportation, safe housing, etc. — have a far greater impact on health status than the clinical care received.
Social determinants play an important role in both the incidence and effective management of chronic disease, which consumes the vast majority (86 percent) of U.S. healthcare expenditures. According to the Centers for Disease Control and Prevention, chronic diseases are some of the most common, costly and preventable health problems. Sixty percent of Americans have at least one chronic disease; one in four have more than one.
But what’s this got to do with supply chain? The impact of SDOH on health status and cost of caring for populations has gotten the attention of clinicians, healthcare system executives and lawmakers, leading to a number of strategies with promising results. What’s missing is the effective use of supply chain resources and skill sets to extend those benefits.
Take food insecurity as an example. The inability to acquire food — due to lack of funds, transportation, knowhow or the like — increases the likelihood of becoming diabetic. A Pennsylvania health system has contracted with a local county food bank, among others, to help provide nutritional meals and educational programs to patients with Type II diabetes. Early test results show better disease management among patients, while emergency room visits and hospital admissions appear to be down, all of which could reduce more serious and costly health problems in the future.
Given the success of the first pilot, the program is being expanded into other counties, but that requires contracting with other food banks. As the physician in charge notes, she does not have experience in contracting, price negotiation or logistics. She looks to a future where healthcare supply chain professionals play a broader role, securing products and services for a wide range of clinical and social needs.
Founded more than 20 years ago, Health Leads began identifying patients’ unmet social needs, for which physicians write prescriptions for everything from food and clothing to childcare and job training. If they are prescribing these things, shouldn’t somebody be building a sustainable supply chain to support their work? The skill sets required are the same, whether you are sourcing and procuring a traditional medical supply or a community service.
Not-for-profit hospitals in the U.S. have to conduct a community health needs assessment every three years, documenting what is needed to optimize population health and identifying community resources that can help meet those needs. But simply identifying a need and a resource is not enough. As supply chain professionals know, there are a variety of hurdles that need to be overcome, to make sure that the right products or services get to the right place at the right time.
Take the case of a single mother, with a family of four, who is given a prescription for healthy food. Does she have the transportation to get the food and bring it home? Does she have a refrigerator and stove to store the food and prepare the meal? Does she know how to cook? These are the challenges that a program like Health Leads identifies, and creative supply chain professionals can help solve.
Of course, there’s always the question of funding. In 2017, the Centers for Medicare and Medicaid Services launched the Accountable Health Communities pilot to test the viability of new payment models that would support hospitals and healthcare systems meeting the SDOH. Meanwhile, the Pennsylvania health system mentioned previously is undertaking a randomized, controlled trial to scientifically test that its program really works. Similar studies are underway across the country related to other SDOH, such as housing and transportation.
As researchers and public policy makers work to prove out what appear to be successful strategies, it’s time for healthcare supply chain professionals to get their supply chain brains in gear. If these programs do indeed work, the role of supply chain will become increasingly important in meeting healthcare’s supply and demand challenge and improving the health and wellbeing of patients, populations and the U.S. economy.
Karen Conway is vice president of healthcare value for Global Healthcare Exchange (GHX).