A Business Case for SCM Business Intelligence for Healthcare

Most healthcare provider organizations require significant amounts of information on their financial operations and their clinical efficiency. Not all of these organizations, however, are realizing the full value of their investments in operational systems such as Supply Chain Management (SCM) which contain a wealth of untapped “intelligence.”

As hospitals increasingly need to make complex decision on how to optimize operations, Business Intelligence (BI) analytics is playing a mission critical role. While operational applications effectively serve each department, clinical and administrative staffs need an integrated view of the information simply and rapidly.  BI for healthcare solutions enable a single view of the organization’s information with a predefined enterprise data warehouse and architecture based on proven best practices in healthcare.  

A recent study by the Hackett Group entitled Key Issues Study for Procurement (2011) reinforces the importance and interrelationship of BI Analytics and SCM.

2011_priorities

Why such a need today: price increases and volatility are the “new normal.” The implications of these forces for procurement are urgent, profound and far reaching.  As I have noted in previous Blogs, the current state of BI deployments and issues impacting BI adoption in Healthcare can be summarize as:

  • Economic pressures and healthcare reform being cited by providers as the issues having the greatest impact/influence on their adoption of BI/analytics technology
  • Achieving and maintaining a competitive cost structure in a hypercompetitive environment with continuing evolving regulatory changes are driving technology adoption
  • Increasing complexity and volatility of the business environment

However, BI today in healthcare is:

  • Project focused where BI technology was deployed as either a part of “solution initiatives” or on a “project-by-project basis for data warehousing”
  •  “Standardized on several core BI vendors” and many are “decentralized and deployed at the department level” (i.e., Quality, Finance, etc…)

An enterprise SCM BI enables spend visibility and is a critical determinant of Procurement’s success within the organization. Every Chief Purchasing Officer knows that achieving Best Practice performance requires controlling and leveraging an organization’s existing spend. However, Best Practice results can only be achieved if spend management performance can routinely be measured within the context of continuous improvement.

As more and more hospitals begin forming/joining consolidated healthcare systems, the opportunity to improve negotiating, leveraging with payers, capture economies of scale in administrative services, as well as improved capital access just grows. Bottom-line: SCM BI positions a healthcare entity to gain from these economies of scale.  Consider Thomson Reuter Healthcare 2009 – RC Healthcare 2011 data below, costs are just projected to go up.

supplies_drugsBI analytics in SCM empowers your Value Teams to conduct value analysis on steroids, where the aim is to decrease supply costs and keep them lower. Instead of just measuring departments/facilities individually, the teams can come up with system-wide metrics.  Monthly performance numbers can be quickly created and shared with all managers so they can monitor how the system is doing, e.g., supply expense per Case Mix Index adjusted discharge.

Other key areas of cost savings include:

  • Information Technology: enterprise BI systems plus optimized infrastructure reduce overall IT spend (via rationalization)
  • Shared Services: Further improving transaction processing efficiencies by implementing  group-wide shared services (leveraging BI support teams)
  • Payer Leverage: Gaining greater negotiating power with payers through increased volumes/scale (analytics driven negotiations)
  • Use of next-generation consolidation and reporting tools provide consistent, timely analytics for proactive decisions
  • Ability to emphasize and analyze electronic exchange of invoice, payment and banking data to reduce administrative costs
    • Emphasis on electronic exchange of catalog, price, ordering & shipping data with top suppliers further empowers your ability to gain additional discounts and get betters terms
    • Ability to rigorous monitoring and adjustment of PAR Cart inventory levels
    • Enforce process standardization improved efficiency through adoption of best practices
      • Provides the foundation for procurement and spend analytics which gives buyers and managers dashboards, best practice type reports, and self-service custom reports that allows them to improve key metrics such as increased net contract discounts, early payment discounts, and key processes such as improved contract negotiation
      • Analysis of rules-based workflow automation to maximize buyer productivity,  including auto-sourcing of all possible routine orders
      • Determine the impact of changes in supply use over time
      • Drive accountability for strategic operational measures
      • Optimize contract negotiations
      • Reduce overall inventory “safety stocks” across organization (including O.R.s)  – via improved inventory monitoring tools & analytics
        • Reduce maverick spend
        • Increase spend under strategic sourcing
        • Improve preferred vendor spend
        • Reduce inventory holding costs
        • Ability to leverage investments in supporting IT technologies—such as Identity Management, Employee Provisioning Systems, and Portals—in order to optimize efficiency across all key operations
          • Deployment of web-based, user-friendly requisitioning systems to maximize user compliance with ordering processes (and to reduce maverick spending)

Most hospitals today just lack the strategic information and management tools that are needed to identify, implement and monitor performance improvements that lead to success. From a tactical near-term Return-On-Invest, SCM BI improvements include:

  • Monitoring rental equipment: many hospitals spends a sizeable amount of money on rental equipment like wound vacuums
  • Manage Inventory volumes: many hospitals faces the problem of how much to stock for low-volume procedures like open-heart surgery
  • Manage utilization at the floor level
  • Monitor compliance
  • Expose utilization patterns: An advantage of using a system to help streamline supply chain efforts is having the ability to key in your true utilization patterns: right-size your inventory for the right volume of activity (expectation)
  • Streamline standardization for a strong value analysis process:making sure you don’t duplicate products in your supply chains, developing an analysis process that looks for opportunities, especially where some may be using a different manufacturer for achieving the same functional requirements.  It is looking at what you can do to reduce those number of overall lines
    • Don’t forget about the data. If you’re not tracking it and you don’t have your utilization activity through your system or your point-of-sales system, you need that utilization data on everything

An enterprise SCM BI solution enables healthcare organizations to identify improvement opportunities and track progress across the entire enterprise to:

  • Ensure efficacy of care
  • Increase efficiency and profitability
  • Improve operational management
  • Drive strategic decision-making
  • Extend the value of existing information systems
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