Will technology, supplier disruptors actually drive healthcare development, progress?

Shortly before the COVID-19 pandemic wreaked havoc around the globe on the health and lives of people as well as the ways people conduct business, supply chain being no exception, Leaders & Luminaries asked members of the Bellwether Community what they foresaw as the most disruptive technology, supplier and service company (such as consulting firms, group purchasing organizations (GPOs), etc.) to affect the healthcare supply chain within the next five years – through 2025.

Not surprisingly, technology, suppliers and service companies centered on information technology (IT) represented the common thread woven throughout the tapestry of commerce.

On technology
“Disruption seems to be the common theme in all parts of healthcare in the 21st century. Sure, we have seen many disrupters in the past, but the pace of disruption over the last 10 years has been tremendous. I believe technology and artificial intelligence (AI) will be at the forefront and will create a huge challenge for supply chain for many years to come. Care delivery via technology and the sourcing of such new tech using traditional methodologies and value analysis could hinder or delay the implementation into the provider setting. The technological rate of change continues to accelerate, and our industry must adapt our processes to ensure the best patient care. Last, but by no means least, I believe AI will be a major driver in healthcare. I’m not sure any of us yet understand the impact of AI, but I do know we need to stay on top of new developments to ensure supply chain can provide our clinicians with the products and tools needed for care.”

On supplier/service company
“This could go many different ways, but my belief is the government will be the major disrupter for many years to come. As we look to our current healthcare system, our aging population, growth in chronic disease, insurance coverage, access to care and both major parties [having] completely opposite views on how to solve the conundrum, how can this not be the driver in everything healthcare? Healthcare costs simply cannot be 20% of our nation’s GDP and continue to be sustainable, but our nation is on a fast track to that very thing. Thus, as our governmental leaders try to solve this enigma, our providers continue to bob and weave with little ability to develop long-term strategic plans or budgets, which in turn, results into increased mergers and acquisitions of both providers and suppliers.”
Tim Bugg, President and CEO, Capstone Health Alliance, Silver Sustaining Sponsor

On technology
“This could be answered from two perspectives. First, in terms of medical device technology and pharmaceutical development we will continue to see advances with fairly significant cost/reimbursement implications. Most notably, pharmaceuticals developed to treat or cure some of the more challenging diagnoses with pricing in the six figures will continue to have financial and utilization management implications on the healthcare supply chain management.

“Another perspective is the implications associated with information technology and systems for healthcare supply chain management. The next few years will be one where healthcare organizations will be increasingly migrating to software-as-a-service and cloud-based applications.  This will be required as organizations migrate to digital applications to support the automation of key business processes, increase efficiencies, manage content and data and build robust analytical capabilities.”

On supplier/service company
“Market leading suppliers will be the most disruptive over the next few years. Those companies that enjoy greater than 50% market share will increasingly call into question the need for access level agreements with GPOs. This coupled with the continued merger activity of healthcare organizations and the use of more innovative sourcing strategies, such as committed contracting, will fundamentally change the role and importance of GPOs in the future.”
Jim Francis, Bellwether Class of 2017, Chair, Supply Chain Management, Mayo Clinic

On technology
“Internet of Things: I believe the continued advancement of networks and connectivity fueled by digital technologies that bridge all elements of the E2E [enterprise-to-enterprise] supply chain will be the most disruption over the next five years. With the exponential speed by which these technologies are growing, the complexity of our supply chains will be easier to manage through better data visibility, enhanced customer service, exposed channel optimization, and cost transparency on a real time basis. When so many of the technological growth in microprocessing, storage, networking, software and sensors merge, connectivity becomes so fast, easy and commonplace that supply chain complexities will be broken down to become fast, easy and even invisible to use.”

On supplier/service company
“Cybersecurity: There is no question that as the amount of data increases, so does the need to protect that data. Advancements in medical technology that collect this data will continue to pose more serious threats as unauthorized users or hackers impose attacks on corporate data networks and their data warehouses. Emerging companies aimed to mitigate these data risks will become even more essential as part of the product\technology costs. As our supply chains become even more interconnected, threats to patient data privacy, business intelligence and data networks will become increasingly at risk. Insurance risks and consequential premiums could be on the rise as well that will could make these technology advancements more expensive to acquire.”
Tom Lubotsky, Senior Vice President, Supply Chain, Allina Health, Bronze Sustaining Sponsor

On technology
“I believe that the ability to eliminate unnecessary clinical variation through fact-based technology and sound benchmarking will drastically change the way many people focus on pricing alone versus the entire cost of supply chain, including hospital-acquired infections, readmissions, length of stay, etc.”

On supplier/service company
“I don’t think we have a clear vision into what will be the most disruptive supplier or service company. I believe it may not be in existence yet. I do believe that anyone that truly solves the clinical integration of supply chain, where decisions are made on total cost and quality of care, will be the major disruptor.”
Rand Ballard, Chief Customer Officer, Vizient Inc., Founding Sustaining Sponsor

On technology
“Whether you wish to call it AI or machine learning, I think the most disruptive technology will be the rapid rise of ‘intelligent’ and evolving algorithms that will impact every phase of Supply Chain. Whether it’s strategic sourcing, managing PAR locations, or risk identification and mitigation, everything that it is a math problem per se will be subject to these tools that can process large amounts of data and output recommendations and solutions.”

On supplier/service company
“With the increasing focus on the patient as consumer, I would think that the most disruptive force will be those organizations that already have found a way to capture and meet consumer needs, most likely in the retail space. And, as an adjunct, it’s probably a tech player that hasn’t even played much in healthcare yet or is just getting started.”
Shaun Clinton, Senior Vice President, Supply Chain, Texas Health Resources, Bronze Sustaining Sponsor

On technology
“We are beginning to see artificial intelligence play a role in the effective management of data. Thinking about the significant information that can be derived from this advanced approach is limitless. Having the ability to scan massive amounts of data and turning it in to actionable information has been the missing link to making data come to life.”

On supplier/service company
“The GPO model has the potential to become transformational and to serve as the disruption the industry needs to survive. If they do not lead the charge then the integrated health systems we are seeing emerge will find new partners with whom they can reshape and enhance delivery thus rendering the GPO model obsolete.”
Dee Donatelli, Bellwether Class of 2015, Vice President, Professional Services, symplr

On technology
“Wow! There are a lot of things out there that I think could change the way supplies are delivered to, and within the hospital/healthcare facility. Drones, self-driving cars/trucks and blockchain are just a few on the horizon. I also think data analytics are becoming more comprehensive and standardized, which will allow supply chain leaders to more quickly understand cost and drive further efficiencies.”

On supplier/service company
“It’s difficult to speculate, but I think blockchain will be pretty disruptive. This type of data exchange is particularly important to an industry like healthcare with the privacy and safety concerns providers face around data.
Mary Starr, Bellwether Class of 2019, Vice President, Member Services, Greenhealth Exchange

On technology
“As patient recovery at home picks up momentum, supply chain will be certain to face new logistical challenges. Hospitals are already on the hook for ensuring that patients are fully treated for all ailments beyond the primary diagnosis when they are admitted. Hospitals must do everything they can to ensure that patients are not readmitted within a specified period. This includes ensuring that patients get the drugs and supplies they need in recovery. Telemedicine to check on the patient’s recovery will be coupled with automatic supply and drug replenishment to ensure that recovery is a success. Home healthcare companies are subcontracting with hospitals to handle post-acute care in the home. Time will tell how effective they are with the products and services they offer to patients. Based on readmission rates, hospitals may not be willing to sub-contract post-acute care. Sophisticated software and logistics processes may become necessary to help manage and monitor patient care from a supply perspective. Supply chain professionals will join efforts to clinicians monitoring patients at home to reduce the burden of readmission.”

On supplier/service company
“GPOs already pushing the quality agenda will continue to focus on supply chain effectiveness. Performance groups within GPOs will challenge supply chain professionals to select the most effective products for patients. Comparative outcome data will help to measure the effectiveness of medical devices. This will increase accountability in the medical device selection process. It has often been said that cost and quality are two sides of the same coin. Insurance companies will also weigh in using payment as the big stick to influence technology decisions. All of these forces on supply chain operators will be an awakening from the status quo of current contracting methodologies.”
George Hersch, Bellwether Class of 2019

On technology
“I do not believe that there is one, rather a combination of related technologies that will be disruptive. The three that intrigue me are AI, RPA and Blockchain. They are all early in their ‘hype cycle,’ but together I can envision significant impact on our operational efficiencies and opportunity to lean out our trade relationships. Imagine learning RPAs, enabled by a blockchain-secured and trusted community item master, embedded in the supplier – provider procure-to-pay cycle. The way that we express and fulfill demand today is fraught with inaccuracy and inefficiency. I'd submit that there is at least 10% waste elimination opportunity within most healthcare trade relationships.”

On supplier/service company
“I believe that disruption will necessarily emanate out of the provider sector. Suppliers and intermediaries in any supply chain respond to consumer demand. Providers need to own their role as proxy for the consumers (patients) and step up the requirements.”
Ed Hisscock, Past Board Member, Bellwether League Inc., Senior Vice President, Supply Chain, Trinity Health  

On technology
“Big Data and AI – as technology becomes more advanced, Big Data coupled with AI will be able to identify health issues prior to them becoming too advanced as the coupling of the data and AI will provide greater insight and foresight to the disease state and how to proactively provide preventive care to improve outcomes.

“It is my belief that we will see some of the larger systems – those with money to invest – develop their own programs, custom-tailored to the particular disease states or issues that they are trying to address. If successfully implemented, this will yield a competitive advantage in the marketplace – if they have proven better outcomes – as these larger players will be able to demonstrate that they are providing higher levels of care. Over time, as we have seen with healthcare e-commerce – now just GHX – and sales rep credentialing – now down to a few – these larger systems platforms will provide a foundation for eventual standardization of data standards – likely 10+ years out.”

On supplier/service company
“Not sure who it will be, but [I’ll say] the firm that figures out how to address the significant shortfall in Supply Chain Executive leadership. There will be significant retirements at the leadership level and most providers have invested little – if any – time or resources into succession planning and or staff development. The firm that can help to educate and develop talent and then facilitate these individuals being positioned for leadership will have a significant impact on Supply Chain moving forward.

“The big Tech companies, such as Amazon, Google, etc., are working to figure out how to get into healthcare, [because] it is the biggest industry in America after all. These firms face four really big challenges: The physical movement of product, the financial payment of product and the pricing of product and medical device supplier support of a new model. Let’s take them one at a time.

“Physical movement of product. In Kenosha, WI, Amazon has two 500,000 square-foot warehouses, servicing the eastern 2/3 of Wisconsin, northern Illinois and northeastern Indiana. While these facilities are far more efficient than a traditional medical/surgical distributor, they don’t have the space to handle similar geography. For example, less than 30 minutes south, Medline has roughly 2 million square feet, Cardinal has similar space, Owens & Minor has about 500,000 square feet and Concordance opened a facility. These facilities ship large custom sterile trays [and] large boxes of bulk items, in 53-foot trucks that in many cases deliver every day to a hospital at a margin that is between zero and 5% cost-plus. Amazon is currently not set up to handle this scope of business.

“As it relates to the financial payment for product, this is another significant challenge. Think of the last Amazon or internet order that you placed. The firm that you ordered from had charged your credit card before they picked the order off of their shelf. Med/surg distributors typically have payment terms from 30 to 60 days, and in some markets, 180 days. Amazon has publicly stated that they will not offer payment terms, and that is a big deal for CFOs under whom Supply Chain frequently falls.

“Regarding the pricing of product, everyone is dealing with GPOs for many logical and reasonable reasons, and the GPOs do not look kindly on third parties trying to eliminate them. This creates the classic chicken versus egg scenario for the suppliers [because] if they align with the new and emerging entrants, they risk losing their GPO agreements, which currently cover most of their volume. I don’t know of too many VPs of Sales that are willing to bet their career on a new model until it has market acceptance.

“Lastly, are the costs to the suppliers. At present the cost to utilize Amazon as one’s distribution channel is higher than using the traditional med/surg firms. So, you put the supplier into a situation: Do they take a risk of adding cost and simply shifting existing business, and potentially losing business to embrace a new model, or do they stick with what they know? Most will choose the latter.

“Today, while Amazon Business’s healthcare sales are growing significantly, it is important to understand how Amazon Business measures healthcare sales. These sales are any product bought by any healthcare provider, most of which today are office supplies. While Amazon claims to have a catalog of over 700,000 healthcare products, most are in retail packaging and those are being bought and being sent to homes.”
Carl Meyer, Bellwether Class of 2019, Vice President, The Wetrich Group

On technology
“Either Robotic Process Automation (RPA) that takes highly transactional areas like purchase order and accounts payable processing and translates these to >35% improvements to productivity and near 100% accuracy. OR Artificial Intelligence (AI) that can pull data from across organizational disparate systems to drive decision-making. Unfortunately, the existence of such information sources is often lacking – non-existent, biased, incomplete or not definitive – and I do not see the government, payers or suppliers collaborating enough to make such information more available. To that end, organizations will need to begin a journey towards self-sufficiency in this space and AI shows promise.

On supplier/service company
“Amazon or Google will serve as our Artificial Intelligence (AI) providers in the future. Their management of and access to data is unprecedented.”
Ed Hardin, Bellwether Class of 2020, Vice President and Chief Supply Chain Officer, Froedtert Health, before his passing in January 2021