June 2022

Ken Murawski

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Premier’s annual Breakthroughs Conference June 2022; three key takeaways

Our team attended Premier’s annual Breakthroughs conference recently.  It looks like in person meetings are back!  There were about 2,000 attendees and over 400 supplier booths.

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Four of our clients were exhibiting so we had a good opportunity to network with Premier members as well as a huge contingent of Premier employees and executives. Here are three key takeaways

 

Domestic Manufacturing

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Domestic Manufacturing is more than a fad; it’s a trend. Premier is actively engaged along with other GPO’s in supporting domestic manufacture of high-volume commodities as well as critical care products. Partnerships with suppliers via S2S, aka “Source to Spec”, accelerated with PPE products including N95 masks, isolation gowns and nitrile gloves.  We expect to see the trend continues as raw materials continue to be in short supply and the cost of container shipping from Asia, while reduced, is still 3- 5 times what it was pre-pandemic .  The key will be if automation can offset low labor costs.
 

Financial Challenges:

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Hospital system continue to suffer from lower reimbursement. While PPE prices have come back to reality, all manufacturers are seeing raw material increases; the labor savings from Asia is being somewhat offset by the container and shipping costs.  Don’t forget energy costs and labor. The cost of traveling nurses and bonuses is having a tremendous impact on costs and ultimately, patient care.  
 

I commented to a SC VP that we often read about record profits from large systems while six months to a year later we hear the same systems endure hundreds of million dollar losses. He explained that while the pandemic had an impact, the recent stock market turmoil has a lot to do with these swings.

 

Diversity:

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Diversity is here to stay. We heard from three large systems on a panel focused on community, diversity and equity inclusion: Common Spirit, Henry Ford, and Advocate Aurora.  Premier recently published a pledge where an additional 10 large Premier IDN systems pledged to support the diversity initiatives of Premier as well as supporting their local communities.  Although it may take years, all three systems have corporate commitment to increase diversity spend to 10-15% of their total supply expense in the next 3-4 years.  This is up from low single digits now.  Common Spirit increased its diversity spend by 200% in 12 months!
 

The pandemic shined a spotlight on many things including how existing suppliers behaved. The panel explained that some large companies and distributors let them down during the pandemic while small diverse companies came to the rescue. It was very refreshing to hear from Kathryn Carpenter, VP Sourcing, Contracting, and Clinical Strategy. She stated that those same companies will be retained as suppliers, not just filling orders. I explained to Matthew Franks, head of diversity for Common Spirit that we represent disruptive companies with best in class technology but it’s been difficult to be share the story for two reasons:  access to decision makers who are overwhelmed with day to day issues and broad contractual agreements favoring full line suppliers. He shared that commitment of 80% was often required but systems should be conscious of filling that 10 or 20% option with quality companies, providing better value along with comparable or often better clinical results.
 

In addition, Bill Moir, SVP SC at Henry Ford Health System shared that while supply chain tenets suggest fewer suppliers with a broader range, the pandemic proved that sole-source contracts or not always in the best interests of healthcare systems.

 

Bruce Radcliff, System VP SC at Advocate Aurora told the audience that diverse suppliers should realize they are a solution to supply chain challenges and they should continue to provide value and challenge health systems to support them, even if only 10% of their spend.

What about the patients? 

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It’s easy to forget that at the end of the day, it’s about the patients that we all serve. A futurist shared that because of administrative requirements of nursing and staff, productivity is 40% of capacity. If clinicians and support staff could spend less time on supply chain issues and more time on patient care, imagine what the impact would be on patient satisfaction and outcomes.

Imagine a future where patients don’t actually show up in the hospitals but well care, patient monitoring and improving social determinants such as food and shelter can also impact the healthcare system for us all, while  lowering the percentage of GDP that healthcare consumes.  In the meantime, let’s all work together to solve some of the issues.