We've grown a custom to the "first 100 days" syndrome, where a new administration's first weeks are put under a microscope for detailed analysis.  The media has wasted no time in doing just that with President Obama's first few months.  Not surprisingly, there has been a lot of activity in the area of healthcare, even with the delay in establishing leadership at the cabinet level.
 
It seems that Democrats plan to try and "fast track" healthcare reform by using the budget process.  Some have wondered aloud if this strategy, which removes the ability for both sides to debate and negotiate, may "win the battle" in the short run, only to "lose the war" in the long run when Republicans feel compelled to resort to "scorched-earth" tactics to defeat it. 
 
Time will tell.  In the meantime, we have taken a look at the initial proposals and developed a few early thoughts on how they might impact our industry and customers.
 
A little over two weeks ago The Senate Finance Committee released: Description of Policy Options - Transforming the Health Care Delivery System: Proposals to Improve Patient Care and Reduce Health Care Costs for public comment.  To read or download the entire document, visit our site by clicking here.
 
Interestingly, the themes in this document are more economic than social.  Whereas the campaign statements concerning healthcare focused on broadening access, this first set of proposals is largely about dollars.  Key phrases used to describe these recommendations include: improve efficiency, cut costs, engage in payment and delivery system reform, manage chronic care and combat fraud, waste and abuse. 
 
One of the first options discussed in this vein is the establishment of a hospital "value-based purchasing program."   This approach would be based on Medicare's Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program, which is also sometimes referred to as the hospital pay-for-reporting program, which was established through the Medicare Prescription Drug, Improvement and Modernization Act of 2005.
 
The Senate proposal advocates broadening that approach and building on what it has already labeled as a "successful RHQDAPU."  The expanded program would be a "hospital value-based purchasing program that moves beyond paying for reporting on quality measures and activities, to paying for hospitals' actual performance on these measures. This value-based purchasing program would provide value-based payments to acute care IPPS hospitals that meet certain quality performance standards beginning in FY 2012."  The proposal goes on to describe the need for public transparency in this process indicating, "Individual hospital performance on each specific quality measure; on each condition or procedure; and on total performance would all be publicly reported."
 
We draw at least one very important conclusion from this direction in public policy:  Data is more important than ever.  And where data is important, systems are critical.  Under this type of reimbursement approach a hospital's reporting could have both financial, as well as competitive and public relations ramifications.
 
Hospitals should engage in robust strategic and tactical technology planning to evaluate their core systems for their ability to capture and report costs accurately and in a timely fashion.  With lead times on system conversions in the months or years, now is the time to evaluate gaps in technology and consider capital expenditures to remedy weaknesses.   
 
This process is often aided by an outside perspective.  For help in deciding where to start, give NML a call.  Contact information is available by clicking here. 

 

The question being asked is, "is it better to outsource transportation or keep it in-house?"  The answer is both.  It really depends on which part of the supply chain process you're referencing - the inbound, outbound or in-between.  By in-between we are speaking of the movement of supplies, mail, lab samples, patient records, etc., between health system locations usually transported by a health system's in-house fleet and personnel, or a third-party courier, or some combination of the two.
 
There has been a trend in healthcare over the past five or so years to outsource the management of the inbound transportation process, mostly on direct, non-distributed supplies.  After speaking with a number of health systems who have outsourced this function, the results are mixed.  The critical issue is supplier compliance, and a third-party doesn't have the necessary influence to enforce compliance.  Industries outside of healthcare, especially retail, have evolved the inbound transportation management process.  Third-parties are used quite successfully for consolidating shipments, transporting them, then break-bulking or deconsolidating the shipments into individual deliveries. 
 
On straight inbound transactions, such as with FedEx and UPS, third-parties are less successful due to the supplier compliance issue.  Most health systems do have the necessary clout to develop an effective contract with FedEx or UPS, under which select suppliers can ship freight-collect and allow landed-cost savings on these direct shipments.  Consolidated billing by the carrier will reduce or eliminate the flood of accounts payable transactions feared by the hospitals accounts payable department.  This type of in-house program is not as difficult to implement and manage as one may think.
 
The functions most interesting for outsourcing are the outbound flow from offsite warehouse locations, and the in-betweens.  Why?  The reasons are many and varied, but two very critical ones are: focus and leverage.
 
Focus: Managing service, assets, risk, regulatory compliance, technology, and drivers specific to logistics are a 3PL's (third party logistics provider) core competency.  These same categories, but with a care delivery perspective focused on patient care and safety, are a hospital's core competency. Where the rubber meets the road, they are quite different.  A 3PL has the expertise and management resources to focus on optimally managing this process, which is usually an afterthought for health systems, relegated way down on the investment priority list.
 
Leverage: In addition to focus, leverage drives much of a 3PL's advantage since a 3PL has a greater economy of scale with which to secure and utilize effective technologies, acquire and manage assets, and hire, train, insure, manage drivers in compliance with regulations specific to transportation.  This specialized management can be leveraged across health systems and geographies.
 
All of this translates into financial and service benefits for a health system typically strapped for capital and in urgent need of cost reduction opportunities.  We'll address these two transportation models in greater detail in future issues of the NML newsletter. 

 

In the mean time, call NML to understand how your individual situation can best be addressed.  For contact information, click here.