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UPS Healthcare Supply Chain Vital SignsU.S. Hospitals Study Executive Summary
2017 UPS Healthcare Supply Chain Vital Signs Survey © 2017 United Parcel Service of America, Inc. 1
UPS® Healthcare Supply Chain Vital SignsU.S. Hospitals Study Executive Summary
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September 2017
UPS Healthcare Supply Chain Vital SignsU.S. Hospitals Study Executive Summary
2017 UPS Healthcare Supply Chain Vital Signs Survey © 2017 United Parcel Service of America, Inc. 1
An industry facing disruptive change:managing consumerization, clinical outcomes and costsHospitals are confronting mounting pressures around operating margins and positive patient outcomes. The following trends create ripples through supply chains and necessitate creative solutions to address marketplace disruptions.
This section of the UPS Healthcare Supply Chain Vital Signs is focused on understanding the business priorities, supplier satisfaction and logistics challenges of hospitals in the U.S., while providing valuable insights and implications for their clinical product suppliers, including medical device and pharma manufacturers and distributors. Amidst industry uncertainty, U.S. hospitals are being challenged to increase efficiency while digesting acquisitions and implementing new concepts in care delivery. Margin pressures are driving price sensitivities and efforts to reduce cost throughout the supply chain. Meanwhile, outcome-based reimbursement models mean hospitals must focus on coordinating patient care across a broad spectrum of care-delivery groups while remaining accountable to better outcomes. These factors, combined with the ambiguity surrounding potential regulatory changes, are causing hospitals to re-evaluate their supply chain and logistics strategies.
Potential regulatory changes from evolving governmental policies create uncertainty about future impacts on hospital operations.
Regulatory uncertainty Changing demands and increased decision-making by consumers are driving the need for a more patient-centered supply chain that supports the delivery of care where and when the patient needs it, which is not always in the hospital.
Patient consumerization
Technology is changing clinical workflows and operations, including focusing on virtual care. Plus, the deployment of EHR across extended care networks offers the promise of improved interoperability but comes with short-term challenges that tax IT infrastructure and resources.
Technology and innovation
Issues around manufacturers’ struggles to maintain regulatory compliance, operate resilient supply chains and make strategic decisions to reduce low-margin products have caused systemic drug shortages. Hospitals are diversifying their purchasing beyond usual channels to reduce the risk of future shortages.
Drug shortages Hospitals continue to face increased pressure to demonstrate improved patient outcomes, leading to new decision-making processes that weigh both clinical benefits and cost.
Outcome-based reimbursements
Hospital consolidation continues as more outlying surgical facilities, clinics and ambulatory care centers are merging with larger healthcare systems, driving the need for consistency across more points of care.
Continuing consolidation Introduction > An industry facing
disruptive change
� About the survey
Business priorities
Supplier satisfaction and support
Logistics challenges
Key survey insights
Hospitals
Introduction
UPS Healthcare Supply Chain Vital SignsU.S. Hospitals Study Executive Summary
Who we surveyedIntroduction
62%Network
38%Standalone
Since 2008, UPS has surveyed the healthcare and life sciences industry about supply chain issues to better understand marketplace needs. This year we are introducing a new global survey with a new perspective. The 2017 UPS Healthcare Supply Chain Vital Signs provides the healthcare industry with insights into supply chain issues impacting dispensers, hospitals and laboratories. We surveyed 750 participants from 19 countries across the United States, Europe, Asia-Pacific and Latin America representing executives and managers with purchasing, supply chain or materials management responsibilities across dispensers, hospitals and medical labs. The survey, which provides a 360-degree view of the industry, including manufacturers, distributors and providers, was conducted by PwC on behalf of UPS. This executive summary is focused on survey responses from 100 participants representing U.S.-based hospitals.
About the survey
Hospital respondents
Hospital type Organization type
Hospitals (n=100)
This executive summary is focused on U.S. hospitals. Here’s a snapshot of the survey respondents and their organizations:
45%Private pay
55%Government pay
Introduction � An industry facing
disruptive change
> About the survey
Business priorities
Supplier satisfaction and support
Logistics challenges
Key survey insights
2017 UPS Healthcare Supply Chain Vital Signs Survey 2
Managers83%
Executives/ VPs/Directors
17%
38%Profit
62%Non-profit
© 2017 United Parcel Service of America, Inc.
UPS Healthcare Supply Chain Vital SignsU.S. Hospitals Study Executive Summary
2017 UPS Healthcare Supply Chain Vital Signs Survey © 2017 United Parcel Service of America, Inc. 3
Top priorities for hospitalsQ: Over the next 3 years, how important will the following areas be to your
hospital/physician network’s business results? (% rating very or extremely important)
Eighty-two percent of hospital provider networks ranked improving operating efficiency as the most crucial priority for achieving their business goals over the next three years. The strong focus on efficiency is driven by multiple factors, with margin pressures and declining reimbursements taking the lead. According to American Hospital Association financial data, the average margin for U.S. hospitals is less than 10% and three out of ten are operating with negative margins. Hospitals have not fully adopted and implemented supply chain best practices found within the industrial, automotive and high-tech industries. Now the trend is changing, supply chain efficiency is being elevated to strategic importance as a means to combat the challenge of declining reimbursements.
Prioritizing efficiency and cost control
Business priorities
Making capital investments66%
Managing declining payment/prices for clinical services
69%
Navigating changes in regulations63%
Introduction
Business priorities > �Prioritizing�efficiency�
and cost control
Supplier satisfaction and support
Logistics challenges
Key survey insights
78%Controlling supply chain and logistics costs
82%Improving hospital/physician network operating efficiency
Industry insight – supply chain best practices
Leading hospitals implement best practices to improve operating efficiency and manage supply chain cost.
· Visibility and Collaboration – Increased visibility and control of product inventory will help reduce expiry and inventory scrap.
· Performance Management – Tools to efficiently monitor patient outcomes will be critical to assessing performance which will drive reimbursements.
· Data Standardization and Interconnectivity – Standardizing product data across manufacturers, distributors and providers will aid the transition to outcome-driven decisions.
· Process Standardization – Standardized supply chain processes across the care network will help leaders identify cost reduction opportunities.
UPS Healthcare Supply Chain Vital SignsU.S. Hospitals Study Executive Summary
2017 UPS Healthcare Supply Chain Vital Signs Survey © 2017 United Parcel Service of America, Inc. 4
Introduction
Business priorities
Supplier satisfaction and support
> Seeking the “right” support from clinical suppliers
� Exploring why hospitals switch suppliers
� Taking advantage of key supplier opportunities
Logistics challenges
Key survey insights
Hospitals found customer service lacking among their suppliers, citing it as often unavailable or unresponsive. In fact, customer service was the most requested type of support cited by 49% of hospital survey respondents, followed by training at 38%. Training and clinical support was highly valued by hospitals as 23% reported they would switch suppliers who failed in this area. To clarify, hospitals are seeking support from dedicated trainers or medical professionals with specialist expertise versus sales representatives whose primary job responsibility is to promote new products and services. To improve training efficiency, hospitals and suppliers must be shrewd about using nurse and physician time in this effort. As hospitals are embracing technology to enable a more patient-centric supply chain, it makes sense that respondents are seeking additional support, specifically training on new types of equipment and medical devices being introduced into the marketplace.
Seeking the “right” support from clinical suppliers
53% of hospitals expect additional support from product suppliers
Overall Supplier Satisfaction
Q: What type of additional support is desired from your clinical product suppliers, healthcare distributors, pharma and medical device manufacturers?
Supplier satisfaction and support
“guide (us on) how to use equipment and products so that it lasts long and also equipment
maintenance support” “from product maintenance to post-sales support to new
product introductions and 24-hour customer service”
“how to handle or use the product efficiently,
maintenance support and taking good care of products
so that products do not spoil”
49%Customer service
38%Training
13%Product availability
33% of hospitals could not say that they are very or extremely satisfied with their primary clinical product supplier
Extremelysatisfied
Implementation monitoring
Maintaining medical device
services
UPS Healthcare Supply Chain Vital SignsU.S. Hospitals Study Executive Summary
2017 UPS Healthcare Supply Chain Vital Signs Survey © 2017 United Parcel Service of America, Inc. 5
One in four survey respondents were dissatisfied with product availability from their primary clinical supplier and would be very likely to switch suppliers due to issues in this area. Recent generic injectable drug shortages may be influencing the response to this question. Shortages cost hospitals more than $200M annually, according to The Pew Charitable Trusts. Respondents also identified the ability to track supplies in transit as an area likely to drive a switch in suppliers. Outside of price, product availability and the assurance of timely delivery are the most frequent complaints from hospitals regarding suppliers and are a necessity to ensure positive patient care. If the wrong product is delivered or a critical device needed for surgery arrives late, the procedure will likely be delayed or canceled. Canceled surgeries can have a significant impact on hospitals, which receive most of their revenue from surgical procedures. In addition to potentially affecting a hospital’s bottom line, product availability issues will likely erode overall satisfaction and could cost suppliers future business.
Exploring why hospitals switch suppliers
Supplier satisfaction and support
Introduction
Business priorities
Supplier satisfaction and support
� Seeking the “right” support from clinical suppliers
> Exploring why hospitals switch suppliers
� Taking advantage of key supplier opportunities
Logistics challenges
Key survey insights
Industry insight – Optimizing supply management in the operating room
Historically, the operating room (OR) supply chain has received less oversight because hospital leadership has been reluctant to challenge surgeon and staff practices. Estimates indicate the OR represents 40-60% of total hospital supply expenditures, but optimizing its supply management has long been a challenge. Poor inventory management, physician preference items, lack of good data, lack of standardization and inefficient practices all contribute to a system that is costly, ineffective and a potential area for savings. Given declining surgical profits and the new economic landscape, healthcare organizations are examining how improving supply management in the OR could improve the bottom line.
Product availability satisfaction
Q: How satisfied or dissatisfied are you with the product availability of your primary
clinical product suppliers?
Why hospitals switch suppliers
Q: If your supplier were to fail on any of the following factors, which one or two are
most likely to make you switch?
25%Could not say they were
very or extremely satisfied
50%Product availability
35%Ability to track
supplies in transit
23%Clinical support
and training
UPS Healthcare Supply Chain Vital SignsU.S. Hospitals Study Executive Summary
2017 UPS Healthcare Supply Chain Vital Signs Survey © 2017 United Parcel Service of America, Inc. 6
Introduction
Business priorities
Supplier satisfaction and support
� Seeking the “right” support from clinical suppliers
� Exploring why hospitals switch suppliers
> Taking advantage of key supplier opportunities
Logistics challenges
Key survey insights
Suppliers searching for opportunities to quickly improve customer satisfaction and differentiate themselves should focus efforts on their inventory management programs and regulatory compliance support efforts, if applicable. Both of these areas are strong drivers of hospital satisfaction but are significantly below median satisfaction performance levels. Hospitals want Just-in-Time inventory management and are looking for supplier support as they work to reduce costs and improve their inventory management programs. It’s critical to have products in stock to avoid unanticipated delays that impact patient care. This is even more critical for hospitals with the rise of value-based payments. Because hospital storage space is minimal, inventory management can be a competitive differentiator for suppliers. Continued uncertainty surrounding potential changes in federal regulations is impacting U.S. hospitals, with 63% citing navigating regulatory compliance as a business priority over the next three years and 79% saying they value help from their clinical suppliers in maintaining compliance. Therefore, suppliers should maintain or enhance their regulatory compliance, if applicable, to support hospital relationships.
Taking advantage of key supplier opportunities
Prime opportunities for suppliersSupplier satisfaction and support
79% of respondents stated they value help from their clinical suppliers with maintaining regulatory compliance
Industry insight
Suppliers have an opportunity to differentiate themselves from competitors by improving inventory management programs and regulatory compliance support, two key drivers of hospital supplier satisfaction that are not being delivered to satisfaction.
Inventory management programs
Regulatory compliance and/or industry accreditation support
Currently: High importance/Low satisfaction
Opportunity: High importance/High satisfaction
UPS Healthcare Supply Chain Vital SignsU.S. Hospitals Study Executive Summary
2017 UPS Healthcare Supply Chain Vital Signs Survey © 2017 United Parcel Service of America, Inc. 7
Given current market realities, hospitals are considering a broad plan of attack to achieve their goals. Several approaches to improve efficiency rated highly, including inbound freight management, cost controls for physician preference items and alternative forms of distribution. When asked which logistics support methods are the most important for improving the supply chain, providing standardized product kits and quantities to help reduce waste received the highest rating. As an example, a manufacturer of endoscopy devices researched the user experience and successfully created an optimized kit, making it easier for hospitals to pack out and clean up. Hospitals also value how identifying and isolating STAT shipments can expedite receiving, eliminating the need to search through hundreds of items on their receiving dock to find a STAT product needed for surgery. Suppliers must also be aware that hospitals are redistributing products to varied points of care like patient homes, ambulatory surgery centers and urgent care sites. Manufacturers who design and package products with this new reality in mind are likely to gain market share.
Collaborating for supply chain improvement
Strategies and support methods to improve supply chainLogistics challenges
Introduction
Business priorities
Supplier satisfaction and support
Logistics challenges > Collaborating for supply
chain improvement
Key survey insights
Q: How successful or unsuccessful has your provider network been at implementing the following
outbound and home health logistics?
Capturing and retaining accurate proof of delivery data
Tracking, intervening and addressing critical shipment issues while in transit
Ensuring specimen pickups at internal labs and clinical sites are completed timely
Packing and shipping Biological Substance (UN3373), Category A infectious substances, and radioactive shipments
56%
45%
50%
58%
Q: How important are the following logistical support methods in helping to
improve your supply chain?
Isolating and identifying “STAT” shipments for expediting
Leveraging advanced data capture and barcodes for
inventory
Providing standardized product kits and quantities to reduce waste
61%
Providing manufacturer consigned inventory
67%69%
Providing automatic reorder programs based on inventory
on hand
55%
71%
UPS Healthcare Supply Chain Vital SignsU.S. Hospitals Study Executive Summary
2017 UPS [INSERT NAME] Survey © 2017 United Parcel Service of America, Inc. 8
Key survey insightsThe following insights into hospital networks are based on the survey results and include some potential impacts and opportunities for suppliers and manufacturers.
Other than price, issues with product availability are the main reason hospitals will switch suppliers, followed by the ability to track products in transit. It goes without saying that having products in stock is crucial to hospitals, from both a quality of care and efficiency viewpoint. U.S. hospitals pay at least $200 million more a year than they ordinarily would to find drugs facing shortages.1 To help solve product availability issues and avoid losing customers, suppliers must have up-to-date visibility of their inventory and should work to improve transparency around communicating potential shortages.
Hospitals want additional support from their clinical product suppliers, particularly in customer service and training. By adding programs such as training on new equipment service and support for asset management, suppliers can help strengthen customer relationships. It’s important for suppliers to provide dedicated trainers or medical professionals with specialist product knowledge versus relying on sales representatives whose job responsibility is promoting new products and services.
Hospitals cited improving operating efficiency as the most crucial business priority for achieving their business goals over the next three years. Declining reimbursements drive a greater importance on this. Suppliers can be part of the solution by increasing transparency into inventory to enable JIT without putting undue risk on patient care, and collaborating to provide standardized product data, which will help facilitate transitioning to outcome-driven decisions.
Hospitals are leveraging supply chain strategies to help reduce waste and streamline operations. Manufacturers and distributors who collaborate with hospitals to better understand the user experience and adjust their products and processes accordingly will be the most likely to succeed. For example, if a manufacturer has been supplying kits containing 5 ml quantities to a hospital that normally uses 3 ml quantities, packing standardized kits with 3 ml quantities would be optimal and help the hospital achieve its goal of reducing waste.
Manufacturers and distributors should recognize that their products are increasingly being distributed by hospitals to varied points of care, such as ambulatory surgery centers, urgent care sites and patients’ homes. Manufacturers who design and package products with this in mind are likely to gain market share.
Uncertainty regarding potential regulatory changes are impacting hospital operations. To sustain customer relationships, suppliers should continue to provide programs that help hospitals maintain regulatory compliance, as applicable to the service provided. Based on our research, any reduction in regulatory compliance support would not be well received, as 79% of survey respondents value this type of support and 63% cited navigating regulatory compliance as a top business priority. Survey data suggests that regulatory compliance continues to be highly valued.
Key survey insights
Introduction
Business priorities
Supplier satisfaction and support
Logistics challenges
Key survey insights
Learn more about the ways UPS can help healthcare companies.
Collaborate to reduce waste
Enable multiple points of care
Enhance regulatory compliance support
Provide special training & support
Ensure product availability
Improve efficiency to create value
2017 UPS Healthcare Supply Chain Vital Signs Survey
1 Analysis finds shortages increased U.S. hospital costs by an average of $230 million annually,” February 2014. https://www.premierinc.com/drug-shortages-contin-ue-pose-patient-safety-risks-challenge-providers-according-premier-inc-survey/
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