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Supply Chain Performance in Healthcare:

Study assesses readiness to implement metrics and standards

By Sarah Friesen

Medical Metrics

THE SUPPLY CHAIN management is considered a priority area by numerous stakeholders in the broader public sector (BPS), in direct response to rising costs and funding pressures, an ongoing requirement to do more with less, and a need to ensure “value-for-money” is achieved. The private sector has long recognized that supply chain management is a source of cost savings and productivity gains. The public sector increasingly understands the benefits that can accrue from a robust supply chain, guided by strong performance management and enabled by appropriate technology.

The BPS Supply Chain Secretariat (the Secretariat), within the government of Ontario, has been working with a group of healthcare supply chain professionals, collectively the Hospital Supply Chain Metrics Working Group, to develop an excellence framework to measure and drive hospital supply chain transformation. The first report, “Performance Measurement: A Report by the Hospital Supply Chain Metrics Working Group” published in November 2006, assessed the current state of hospital supply chain performance metrics and proposed a six-part balanced scorecard framework, made up of metrics and standards considered essential for high-performing hospital supply chains. The second report, “Performance Measurement: Phase II – A Framework for Action” and its accompanying user guide, published in January 2009, provided detailed technical worksheets for a subset of those metrics and standards, to assist Ontario hospitals with their implementation. The report also established performance targets and identified key implementation challenges.

Subsequently, the Secretariat introduced the Supply Chain Guideline (SCG) which identifies and details foundational supply chain principles that are to be uniformly adopted by BPS organizations across the healthcare and education sectors. It is intended that the SCG be incorporated into the funding and operational agreements of broader public sector organizations receiving more than $10 million in annual funding from associated line ministries.

As part of SCG planning, the Secretariat established a project to assess the readiness of healthcare organizations to implement certain priority metrics and standards. The overall objective of this assessment was to test, evaluate and document the current practices, level of adoption and perceived usefulness, readiness to implement 24 supply chain metrics and 14 operating standards across a sample of eleven Ontario healthcare organizations (“pilot sites”). In addition, one college, one university and one school board was included to provide greater insight into the implementation readiness of the education sector. The Healthcare Supply Chain Network (HSCN) was engaged to govern and manage this assessment on behalf of the Secretariat. Through a competitive RFP process, HSCN subsequently selected Deloitte as its partner in performing this important work.

During the project, pilot sites provided initial data and documentation and then participated in a series of on-site consultations. Throughout the project, a number of analyses were conducted to identify commonalities and insights across the healthcare and education sectors. These analyses, combined with an external scan of leading practices in performance metrics and standards, resulted in several recommendations, including:

  • Establish clear and detailed definitions for metrics;
  • Set performance targets and conduct peer to peer benchmarking comparisons against relevant peer institutions;
  • Provide additional support to small institutions and/or encourage collaboration through established partnerships to enable the implementation of metrics and standards;
  • Develop key process protocols to collect performance data and address performance gaps;
  • Conduct periodic audits of the performance measurement processes as well as the implemented standards to promote consistency across all institutions; and
  • Create a central repository of sample Operating Standard templates to help minimize the amount of duplicative effort across organizations.

In addition to the above recommendations, a very high-level, province-wide, cost-benefit analysis was undertaken to provide directional insight into the financial implications of implementing the defined metrics and standards across the healthcare sector. It identified a number of opportunities to achieve benefits in a relatively short time frame by focusing on those metrics and standards that are easy to implement or are expected to yield higher benefits. For example, implementation of only a subset of the defined metrics, or implementing manual tools instead of automated solutions would reduce implementation investments. Similarly, targeting implementation of a subset of metrics that drive the majority of benefits would accelerate the payback for implementation costs.

Effective supply chain performance management requires a holistic view of end-to-end supply chain organizations, processes and performance. This assessment provided important insights into the readiness of healthcare organizations to implement a supply chain excellence approach and underscored the need to raise the importance of supply chain performance management with leaders in the healthcare and education sectors, so that Ontario is achieving its best value-for-money through supply chain efforts.

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