By Connor Smith

Hello everybody! Welcome to the conclusion of my series on how COVID-19 is changing medical supply chains. In Parts I & II I talked about how the pandemic is forcing U.S medical supply chains of the future to embrace digitization and automation, rep-less sales models for high cost implantable medical devices, and the influence that domestic manufacturing and value-based healthcare are having on their evolution. Before I conclude this series, I’ll add the caveat that medical supply chains will evolve in a myriad of ways far beyond just the six I addressed. These are simply what I believe are the most profound changes on the horizon for these complex systems. Now, let me dive into the two final transformative forces that will reshape U.S medical supply chains in the post-pandemic era.

5. Sophisticated Risk Analysis & Disaster Planning Software

COVID-19 is far from the first environmental disruption global supply chains have faced in recent times. There was the SARS outbreak in 2003, the Ebola virus in 2014, and natural disasters like earthquakes and hurricanes that occur frequently and can have devastating economic impacts. In fact, as many as 85% of supply chains experience at least one major disruption per year. The reality of the modern era is that globalized supply chain networks allow us to consume goods and services at incredibly low  prices, but they are also riddled with ‘achilles heels’ that can shake global economies if perturbed.

As I mentioned in Part II, one way U.S based providers and manufacturers will look to mitigate such interruptions in the future is by ensuring geographic redundancies throughout supplier networks and logistics partners and leveraging domestic manufacturing. While this approach will be one core component of U.S medical supply chain architecture in the future, an overall proactive, strategic approach to supply chain design will be paramount. Hence, medical supply chains of the future will be designed using sophisticated risk analysis software that leverages predictive analytics and advanced simulations to model for possible disruptions like pandemics and natural disasters before committing to suppliers and plan accordingly.

Academics have been developing operational supply chain risk analysis models that leverage AI and advanced computational methods for well over a decade, and supply chain experts across all industries have known the benefits of proactive supply chain risk mitigation for some time. A 2017 study conducted by Deloitte found that taking a proactive approach to supply chain risk management can save firms up to 50% when managing major disruptions. As medical supply chains become increasingly transparent and digitized, investments into proactive risk assessment technologies will be one of the best ROI that medical supply chain management teams can make. Using tools like predictive analytics, supply chain management teams will be able to quantify the risk of using a particular supplier by modeling scenarios like the spread of a virus to a particular region, losing a key manufacturing plant to a natural disaster, and more. Some researchers have already started developing simulation based analyses for global supply chain disruptions resulting from the spread of COVID-19, and it is reasonable to expect that using such models for supply chain planning in the future will become the norm. 

6. Integrating Population Health Analytics 

Originally posited by David Kindig and Greg Stoddart as “the health outcome of a group of individuals, including the distribution of such outcomes within the group”, population health has become a fairly nebulous term used to describe the overall health of patient populations. ‘Pop health’ research encompasses everything from studying how socioeconomic factors like income levels, race, or education level influence the prevalence of certain conditions to the prevalence of various genes in communities and how that affects disease spread and more. Depending on who you talk to, they likely have a different view as to what population health is and the responsibility that providers and manufacturers have in improving outcomes.

Regardless of your thoughts around what population health ecompases, as healthcare continues to evolve towards a value-based model it is inevitable that population health will play an increasingly vital role in how providers deliver care. Value-based incentive structures are designed to drive healthcare towards what the Institute of Healthcare Improvement refers to as the ‘Triple Aim’: improving the patient care experience, improving the health of populations, and reducing the per capita cost of healthcare. An overview of the triple aim is pictured below.

Prior to the pandemic, providers were starting to integrate population health initiatives with supply chain management to combat the increasing strain they felt from over half of the U.S adult population having at least one or more chronic diseases. For example, Indiana-based Eskenazi Health extended its partnership with Meals on Wheels in 2017 to deliver healthy meals to patients discharged from the hospital at their home in an effort to reduce readmission rates. A recent analysis published by Providence Health System found that COVID-19 is accelerating this transition to a distributed care model in which patients receive personalized care from their homes or local clinics instead of at a Health System. They found that the use of virtual care technologies coupled with the desire to reduce unnecessary visits because of the pandemic is forcing medical supply chains to become more personalized. 

It is reasonable to suspect that the medical supply chains of the future will become increasingly patient-centric and account for the socioeconomic, genetic, and other key factors that influence a patient population’s well-being. The Internet of Medical Things market is growing at over 20% year over year and technologies and will likely increase due to the rapid adoption of telehealth & remote patient monitoring technologies because of the pandemic. These platforms will enable providers to gather more information about their patient population than ever before and construct truly personalized care plans. Medical supply chain teams of the future will integrate this information with predictive analytics models to not only ensure that patients receive the best possible care, when and where they need it, and at the lowest cost, but also make cost effective population-level interventions that improve overall societal health levels. 

In Conclusion
I hope you enjoyed the final installment of my series on the future of U.S medical supply chains! Interested in learning more or ways your medical supply chain could be improved? Feel free to contact us at Consensus Networks, where our HealthNet technology is being used to reinvent medical supply chains for the post-pandemic era.

By Connor Smith

Hello everybody! Welcome back to my series on how COVID-19 is forcing medical supply chains to change. In Part I I talked about how the pandemic is forcing the medical supply chains of the future to embrace digitization and automation and rep-less sales models for high cost implantable medical devices. If you have not checked out the first part of this series, you may do so here. Without further delay, let’s dive into two other ways medical supply chains will evolve.

3. Building Resilience through On-Shoring Production

It’s no secret that China is the world’s largest producer and distributor of medical supplies. Prior to the pandemic, China manufactured 48% of the United States’ personal protective equipment (PPE) and over 90% of certain active pharmaceutical ingredients (APIs). When factoring in other foreign suppliers, the U.S imports nearly $30 Billion worth of medical supplies every year, or roughly 30% of all its medical equipment. While this may seem like a fairly trivial portion of U.S total medical supplies, the pandemic has illustrated the profoundly negative consequences of relying entirely on foreign sources for particular items. There are over 25 drug shortages related to COVID-19 (17 of which are from increased demand) and critical shortages of PPE over six months into the pandemic.

Aside from the public health consequences posed by such disruptions, failure to make domestic supply chains more resilient pose a national security threat. Accordingly, shoring up medical supply chains is a priority for both presidential candidates for the upcoming election. President Trump recently announced an executive order aimed at increasing U.S domestic manufacturing and onshoring supply chains for pharmaceutical and medical supplies to protect against potential shortages. Similarly, Democratic Presidential Nominee Joe Biden put forth a 5 page plan articulating actions he will take, if elected, to rebuild domestic manufacturing capacity and ensure U.S medical supply chains remain resilient and geographically redundant in the future.  

Likewise, the commercial sector has expressed similar sentiments. A recent study conducted by McKinsey & Company found that 93% of surveyed supply chain experts listed increasing resiliency across the chain as a top priority with an emphasis on supplier redundancy and near-shoring production. The U.S medical supply chains of the future will emphasize  localization to mitigate as many disruptions as possible. Such regionalization will also make it easier to shorten the distance between suppliers and customers. As pointed out by Brad Payne of PCI Pharma Services, “Shortening the distance in the supply chain expedites deliveries and lessens room for complicating factors, like customs clearance”. 

Forward looking supply chain leadership on both the provider and vendor sides will be investigating ways to leverage these new logistics and distribution paradigms to reduce their bottom line and improve the quality of their services. For example, technologies like Predictive Analytics can be used to improve last mile delivery for medical supplies manufacturers. Other industries have leveraged logistical data analytics in this manner to reduce fuel costs and improve the quality and performance of their deliveries. Healthcare supply chains of the future will leverage these technologies and other tools like RFID to provide more efficient deliveries and optimize procurement strategies.

4. Use Value-Based Procurement Strategies

Historically, providers received payment through a fee-for-service model in which they are reimbursed based on the number of services they render or procedures they order. This strategy made sense when it was instituted as the reimbursement mechanism for Medicare & Medicaid in 1965, but it has perversely affected the way healthcare is paid for today. Physicians are incentivized to provide as many billable services as possible and take a ‘defensive’ approach to healthcare, ordering procedures and tests just to be safe. Consequently, they may order unnecessary tests and procedures without hesitation, as neither they nor the patient are financially responsible, increasing the cost of care. Over the past decade, insurers have started implementing ‘value-based’ payment models that link reimbursement to patient outcomes in an effort to reduce the overall cost of care and improve patient outcomes. Early results suggest that value-based reimbursement can reduce the cost of claims by nearly 12% and improve chronic disease management. The benefits of value-based models by stakeholder may be seen below.

Prior to the pandemic, pure fee-for-service was expected to account for less than 26% of all reimbursements in the U.S by 2021. Given the immense financial impact of the virus, the impetus to reduce costs by transitioning to value based care has never been greater. Hence, value based procurement, or ensuring that the right product is delivered to the right patient at the right time and at the lowest cost, will be the norm of medical supply chains of the future. As members of HIMSS have pointed out, the future of the healthcare supply chain will emphasize connecting cost, quality, and outcomes to help realize the Triple Aim and optimize provider  performance.  

Similar to the adoption of rep-less sales models I described in Part I, the foundational technology underlying value-based procurement will be clinical supply chain integration. Connecting supply chain and clinical data sources enables providers to redefine how they administer care. Once integrated, predictive analytics can be used to guide procurement decisions based on the cost of the material and its outcome for the patient. Some hospitals have already saved over $15 Million from clinical supply chain integration. Additionally, EHR integration with supply chain data allows providers to assess clinical variance in treatment with granular detail. Such functionality will be critical as providers look to minimize the impact felt by the pandemic, and continue playing a key role in how they operate into the future.

In Conclusion

I hope you enjoyed the second installment of my series on the future of U.S medical supply chains! I will be back next week with my final two insights as to what the future of these systems will look like. Interested in learning more or ways your medical supply chain could be improved? Feel free to contact us at Consensus Networks, where our HealthNet technology is being used to reinvent medical supply chains for the post-pandemic era. Until next week!