Transformation Model succeeds in the US hospitals by María García

Transformation Model succeeds in the US hospitals aiming to balance cost control with patient outcomes.

Hospital administrators strive to improve operations in their facilities because of the far-reaching impact it can have on patient experience, staff moral, and overall costs, as well as quality of care. In seeking to improve operational performance, administrators should look first to streamline and optimize their hospital’s supply chain, which accounts for between 20 to 30 percent of a hospital’s budget. Hospital typically go through three stages of supply chain—from getting supplies to the hospital at the most basic level, to elevating the hospital’s quality of care at the most advanced level.

The Foundation Model is first and most basic model aims simply to ensure supplies are in stock. The Optimization Model is the more advanced model, it uses a hospital- wide approach to reduce costs and improve efficiency. This model mandates close collaboration among departments to reduce costs via hospital-wide synergies and economies of scale.

Organizations that operate under this model typically have engaged in cost optimization efforts and now realize the importance of focusing on increasing overall value for the hospital. The goal is to engage clinicians in identifying items that offer the best outcomes for patients based on evidence compared to costs. In sum, hospital warehouse managing models can evolve and shift focus from simply ensuring required items are in stock to developing integrated processes and systems that aim to reduce costs, improve efficiency, and enhance patient safety and clinical outcomes.

One healthcare system, based in the United States, is a prime example of a well-functioning hospital supply chain that has implemented the transformation model. The organization faced increasing costs and had disparate systems and an abundance of suppliers. In 2002, the healthcare system created a separate division focused on streamlining supply chain operations and gaining efficiencies for all its hospitals, eventually turning the division into a separate for-profit subsidiary of the hospital.

The division implemented an advanced approach to materials management to manage supply needs for its facilities. It defined a sourcing strategy, based on clinical empirical data. That strategy focused on leveraging volumes from all hospitals, and managing its physicians’ preferred items. Other parts of the plan included rolling out an integrated IT system and focusing on customer service through continued system and process automation. For example, one highly successful initiative involves bar-coding repackaged medications; stocking them in automated, computer-controlled cabinets in nursing wards; and distributing them to patients using advanced technology such as hand-held scanners and unique identification on patients’ wristbands.

As a result of its initiative, the healthcare system reduced its supply base by almost one-third and achieved cost savings throughout its supply chain. The system continues today to balance innovation, costs, efficiency, and growth— while keeping its focus on its main goal of providing the best possible patient care.