Strategic Insights for the Distribution Channel
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1 Healthcare Supply Chain 2015 Strategic Insights for the Distribution Channel
2 Demographic Provider Shortages Funding Cuts Quality Measures
3 Thought Leaders Project Goals Understand key market trends and likely 3 5year scenarios for U.S. healthcare provider landscape Determine impacts on the distribution needs of upstream and downstream healthcare players
4 Approach McKinsey & Company partnership In depth interviews with 40 key provider execs across markets HIDA Thought Leaders Summit
5 Approach McKinsey & Company partnership In depth interviews with 40 key provider execs across markets HIDA Thought Leaders Summit Now you re a part of the process
6 Key Themes Driving the next level of supply chain savings Moving beyond the acute care setting Managing risk; supporting outcomes Restructuring for an integrated, consolidated market
7 Startling Pressure on Margins Expected Revenue Decline 10% 70% 20% Our entire margin is Up to 10% expected to evaporate 10 20% starting in 2014 because of 21 30% lower reimbursement. VP supply chain, IDN Source: McKinsey & Company/HIDA Thought Leaders Interviews, 2012
8 Many Forces Driving Care Outside the Hospital Payment bundling Consumerism Technology We are trying to give patients care closer to home we will always have inpatient beds, but they will be more concentrated. t We are highly hl focused on moving from inpatient to retail (outpatient). VP supply chain, hospital system
9 Risk: More Payment Tied To Outcomes Before, a surgeon didn't care what implant they used, but once the payment is bundled to take care of entire episode, everyone will care about reducing costs. CEO, group purchasing organization Percent of Hospital Pay Tied to Performance (ACO amount depends on model)
10 Providers Expect More Consolidation I think consolidation it will continue or accelerate. In our case, we are interested in acute care, home health, DME, physician practices. VP supply chain, IDN "If we're not merged in the next five years, we'll be gone. CEO, home care company Successful health systems need to be in the $3.5B + range to be healthy. Need to have capital reserves to invest and only size is able to bring that. VP supply chain, IDN What choice do providers have but to consolidate? VP supply chain, academic medical center
11 Thought Leaders Developed Recommendations Around deach htheme
12 Driving the Next Level of Supply Chain Savings Implement and champion data standards Fix the contracting process Address end to end supply chain cost Expand the scope of products in distribution If doctors have to choose between cutting labor, capital, andsupplycosts costs, they will always choose supply. VP supply chain, IDN
13 Moving Beyond the Acute Care Setting Stti Support new front line care models dl Enable the home setting Leverage non acute data distributors and manufacturers should bring a whole set of systems and products to bear on improving costs and quality outside of the hospital. CEO, physician i group
14 Managing Risk; Supporting Outcomes Link products and outcomes Leverage data to create actionable insights Partner in standardization/ d streamlining efforts Prepare to shoulder some risk burden The biggest opportunity for improvement in supply chain management would be having data analytics and getting it to the user level. VP supply chain, IDN
15 Restructuring for an Integrated, Consolidated d Market Provide greater transparency to product and service costs Evolve go to market strategy Aggressively strip away supply chain costs Invest in capabilities to enhance service across care settings The sales rep model is archaic and dying. COO, children s health system The model of paying list price and then getting a rebate is broken. Distributors are stuck in a very inefficient model. VP supply chain, self distributing IDN
16 What Would Be Your Top Priority? Fix the contracting process Link products and outcomes Implement and champion data standards Partner in standardization / streamlining efforts Enable the home setting
17 Top Five Recommendations 1. Fix the contracting process 2. Link products and outcomes 3. Implement and champion data standards 4. Partner in standardization / streamlining efforts 5. Enable the home setting
18 Fix the contracting process Link products and outcomes Implement and champion data standards Partner in standardization/ streamlining Enable the home setting Address end to end supply chain cost Expand scope of products in distribution Enhance service across care settings Leverage data for actionable insights Support new front line care models Leverage non acute data Evolve the go to market strategy Aggressively strip away supply chain costs Provide greater transparency to costs Prepare to shoulder some risk burden
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