Preface

1 Addressing the Needs of an Evolving Healthcare Industry

This edition of the book was substantially revised in consideration of the evolution of health sector supply chain research and practice over the past decade and a half. This includes the critical learnings that arose out of the COVID-19 pandemic, especially as it relates to a heightened appreciation of the need for preparedness and resiliency. Most importantly, the book incorporates the substantive changes in the supply chain necessitated by the fundamental shift to a value-based healthcare system. Foremost, as hospitals, healthcare systems, and clinicians are increasingly compensated based on their ability to create value in relation to money spent and resources consumed, healthcare institutions have greater dependencies on the ability of the supply chain to source, secure and deliver products and services that support the delivery of high-quality care at an affordable cost. The centrality of the physician as the predominant decision-maker as to what is needed and what is prescribed remains intact, but changing value-based payment methodologies and incentives are increasing interest in the cost of care and fostering more collaboration with supply chain leaders.

Supply chain management teams are also important contributors to broader initiatives that seek to integrate the delivery of both clinical and social resources. For example, food, transportation, and housing are products and services necessary to optimize the health and well-being of entire communities and populations of patients. An expanding role for supply chain is to manage the sourcing, procurement and delivery of products and services associated with the so-called social determinants of health (SDOH).1 This is driven in large part by the increasing number of value-based reimbursement programs that are tied to improving the health of entire populations, especially among the poor and communities of color that have historically lacked access to these resources, which have been proven to enhance health status and longevity.

Governments, commercial payors, and health systems are also using reimbursement policies to shift some of the care that has traditionally or frequently been delivered in the acute care hospital setting to community locations, such as ambulatory surgery centers and the home, where the same quality of care can be delivered at a lower cost.2,3 The U.S. Centers for Medicare and Medicaid Services (CMS) have also expanded the list of procedures that can be performed in the non-acute setting, while commercial insurers have begun to deny coverage for certain services, for example, imaging, unless handled outside the hospital.4

The first edition of this book had been based on research conducted from 2001 to 2004 by its authors, Eugene Schneller and Larry Smeltzer.5 At that time, there was relatively little written about supply chain management in the health sector from a strategic perspective. Gene and Larry each brought a unique perspective to the evolving field - one through a lens grounded in health management, policy research, and education, and the other substantiated by a practitioner's knowledge of the fundamentals of supply chain management and how the field had developed in other industries. Gene's teaching had been principally to students, including physicians, in health management programs, where supply chain was infrequently mentioned. Larry, on the other hand, spent his career teaching supply chain management students and consulting with multinational companies, such as Motorola and John Deere. Thus, he brought to the project an in-depth understanding of how the non-health sector had utilized the supply chain for competitive advantage. Larry, who passed away in 2004, was also a pioneer in the area of supply chain management research and education at Arizona State University and served as a chair of the Department of Supply Chain Management. From his perspective from multiple roles in supply chain, Larry observed that hospitals and healthcare systems failed to recognize both supplies and the supply chain itself as strategic assets. In the first edition, the authors challenged supply chain researchers and practitioners to foster a vision for the field that would drive benefits similar to what other industries had achieved, noting at the time that a few progressive organizations had begun to do so.

For the second edition, Gene is joined by three new authors to support this broader and more impactful role for supply chain. Yousef Abdulsalam brings an additional academic perspective steeped in healthcare supply chain research, while both Karen Conway and Jim Eckler offer decades of practical experience in the practice of healthcare delivery, technology, and supply chain. All four authors also have substantial knowledge of healthcare supply chain operations and performance across global markets.

This breadth of experience and perspectives also supports the revised volume's approach to the supply chain as a system of systems, operating in the larger context of the overarching healthcare ecosystem. A systems-based approach takes into consideration how overall performance of the supply chain is closely linked to the interdependencies among myriad stakeholders, including manufacturers, distributors, healthcare delivery organizations, clinicians, group purchasing organizations, technology partners, and regulators, among others. Together with a foundational understanding of the shifts in both the market and regulatory environment, applying systems thinking uniquely positions the revised edition to support the needs of a broad array of learners.

2 A New Framework: The Fully Integrated Supply Chain Organization (FISCO)

This volume incorporates a new framework, elaborated upon within the text and Appendix 1, for a Fully Integrated Supply Chain Organization (FISCO) as the desired destination for those seeking to develop a mature supply chain. The FISCO concept, developed at Arizona State University, takes emphasis off any one supply chain function, allowing for a more holistic assessment of current status and realization of a vision that supports improved clinical, financial, and operational performance.

3 The Audience: Who Will Benefit from the Revised Edition

While supply chain management has occupied a pivotal position for change in other industry sectors, leading to a proliferation of interest in this topic in both undergraduate and graduate-level business management education in the United States, supply chain management strategy remains almost non-existent in comparable graduate-level programs in healthcare. For this reason, a primary audience for the revised edition are graduate students in health sector and/or supply chain management programs. Those exploring and advancing their careers as practitioners in the healthcare field will benefit from a better understanding of supply chain's potential to not only manage the spiraling increases in the costs of the supply chain and healthcare delivery, but also to improve the ability to meet the evolving demands of value-based healthcare. Those in supply chain programs, in turn, will appreciate the unique and broad-reaching opportunities in healthcare that can have significant implications for individuals, organizations and society as a whole. Identifying progressive practices will assist managers to meet the challenges posed in designing, managing, and monitoring an effective supply strategy, understanding the roles and inter-relationships between multiple business, clinical and technical partners, hiring competent supply managers, and assuring accountability, all which are critical competencies for the modern healthcare supply chain professional.

Similarly, the book will serve programs in executive education for clinicians, with much of the research and framing "tested" across cohorts of students at Arizona State University and the University of Colorado's executive program in health sector management, as well as in physician-specific MBA and business in medicine programs. Both clinicians and practicing supply chain leaders will learn the importance of collaborating in the redesign of care for specific patient cohorts based on evidence as to the impact of products and services on the quality and cost of care. In this regard, supply chain leaders can support the clinician's need for evidence on product performance, while clinicians can gain a new understanding of the factors that drive costs, affordability and value for health systems and most importantly patients.

The book can also assist senior hospital and health system executives, given heightened recognition of the critical importance of supply chain made evident during the global pandemic and their need to adapt systems and processes in the move to value-based healthcare. It supports the transition of managerial understanding of the supply function beyond what many have seen as an organizationally bound and narrow "purchasing" or "procurement" function to what is quickly evolving into a mission-critical, multi-enterprise business network operation.

Chief supply chain officers, along with their vice presidents, directors, and managers, will value the lessons to be learned from progressive supply chain organizations both in healthcare and other industries. By focusing on the fundamentals, but with thoughtful consideration of critical issues in healthcare, the revised edition provides guidance to those seeking to transform the supply chain function to support both a wider and higher-level range of strategic organizational goals....