Collaboration

Negative (adj. - pessimistic or tending to have a pessimistic outlook).
Tone (noun - the way somebody says something as an indicator of what that person is feeling or thinking).

Regular readers of the healthcare industry press know that almost every article concerning supply chain is written in a negative tone, often describing a broken system that somehow needs to be fixed. And that suppliers and physicians are the co-conspirators/villains that keep the system broken. Why?
For starters, almost every writer in the industry press comes from the hospital side or writes to a hospital audience. Suppliers will hardly write articles critical of their customers (at least not suppliers desiring to stay in business), and physicians who publish tend to stick to matters of science (or tort reform). This leaves hospitals free to point the finger in any direction they choose without challenge. For some reason this dynamic brings to mind the parent and child in some public place where Johnny carries on, but the parent decides to ignore their charge – somehow believing that the child’s behavior will improve through neglect, except Johnny’s behavior never improves. It only gets worse until the parent addresses the problem. Bad behavior left unchecked only begets more bad behavior. After serving this industry for over 30 years I feel qualified to flatly state that many hospitals are in desperate need of an attentive parent.

Strategic Supply Chain Management (SSCM), a clearly defined set of disciplines and behaviors, is as pertinent to healthcare as it is other industries and it is no more difficult to implement in healthcare than it is in other industries. Some hospitals get it, but most do not. Unfortunately, most cannot even articulate the five (5) requisite disciplines or attributes of SSCM. This is not surprising. While supply chain has long been recognized as a factor that separates the winners from the losers in most human enterprises, it is not easy or intuitive. Otherwise it would not be a factor. Further, supply chain is a dynamic process, requiring continuous attention.

Henry Ford was the father of the modern supply chain concept in industry, which resulted in his firm having a cost advantage over his competition. His successors lacked his vision and as a result Ford now trails industry leaders like Toyota. Every serious observer of the auto industry attributes the changing fortunes of these two firms to their different approaches to supply chain. Toyota, the acknowledged market leader, continues to evolve and improve its underlying SSCM processes – choosing to not assume that what worked in the past will work in the future.

Increasingly in healthcare, just like other industries, the winners can be clearly distinguished from the losers by their openness to adopt the disciplines of SSCM. Of the five (5) core SSCM disciplines (not all of which are reported here), one of the least understood or applied in healthcare is the building of a collaborative model. To the contrary, the usual situation in healthcare is to create an antagonistic model. Two on one alliances are regularly created: physician and supplier vs. hospital, physician and hospital vs. supplier, or hospital and supplier vs. physician. It doesn’t have to be this way, and ultimately doesn’t work for anyone.

The Altoona Regional Health System (ARHS) located in Altoona, Pennsylvania provides an example of how things can be turned around - and quickly. The system was formed via a merger of two (2) hospitals in 2004: Altoona and Bon Secours-Holy Family. Both predecessor hospitals utilized what can be called the traditional hospital/supplier relations model: mutual distrust. Jim Barner, ARHS President and CEO, and Charles Zorger, CFO recognized that improving supply chain performance was critical for the system to continue its track record of profitability and to fully realize the system vision: “….to be a world-class health care organization.” From late 2005 through mid-2006 I was privileged to work with this organization as they retooled their supply chain operations.

The first order of business was the hiring of a new VP of Supply Chain. Gary Zuckerman took over the reigns in February, 2006. What he has accomplished relative to collaboration in 6 months should be a primer for other organizations seeking to improve their position. In this period ARHS has launched a full redesign of their old value analysis approach to a resource management model that incorporates executive leadership and participation by physicians and management at every level. Supply Chain is no longer viewed as a department, but instead as a core management function. An executive council and at least three (3) standing committees have been organized and actuated.

Gary and the Director of Pharmacy, Nick Genovese, have launched a formal supplier relations program and in three (3) months provided an in-person orientation to over two-hundred (200) supplier representatives and fifty (50) internal staff members (they require staff who meet with suppliers to sit through the same orientation as the suppliers.) This orientation provides their suppliers with clear expectations and a how-to for improving their firm’s position with the system. They have used a team approach to tackle one of their highest expense lines and have already realized savings in the 20-25% range. Note this was done by creating a supplier and physician and hospital collaborative approach.

Gary Zuckerman and the ARHS executive team are rebuilding their supply chain function based upon the disciplines of SSCM - the same core disciplines used by Toyota and every other successful organization. They get it! And because they get it, ARHS is reaping the benefits – quickly! Better yet, their process includes continuous improvement – not one-time savings or reductions. ARHS is building true strategic relationships with suppliers, physicians, and internal staff. The bottom line here is in lieu of ARHS moaning about what could not be done and how things were broken, they set about to make right whatever they could. And they have done this in an open and forthright manner. They understand that only the customer i.e. the hospital can initiate the relationships needed for a true collaborative model. And they are discovering that their suppliers can be vast resources for improvement and change. The kind of change needed if you are “….to be a world-class health care organization.” World class organizations tend to avoid negative tones.

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