Shaping Demand to Drive Government Contract Compliance & Utilization
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Ted Dagnal, Strategic Account Director
Directing spend toward preferred sources plays a pivotal role in enabling healthcare supply chains to respond swiftly to shifts in demand, shortages and disruptions. This article discusses how shaping demand at the point of requisition can help increase government healthcare contract compliance and utilization.
Table of Contents
1. The need for better data quality
Directed buying refers to directing spend to preferred sources that provide health systems with the ability to respond to demand shifts, shortages and disruptions with prescriptive actions. An analysis of hospital purchase activity would almost certainly reveal that they procure both clinical and nonclinical goods and services in many different spend categories.
The diversity in spend and the complexity in healthcare procurement makes it difficult – and, at times, frustrating – for supply chain professionals to make informed and accurate decisions about when the next shortage will occur and how it will affect their ability to support patient care.
At GHX, we emphasize the need for better data quality and firmly believe that it can help government agencies track all aspects of the supply chain, gain better control of purchasing, reduce P-Card spend, and ultimately improve contract compliance and utilization. Improving and maintaining data is an ongoing process and one that requires diligence and discipline, but the results can truly change how effectively supply chain can manage shortages and demand shifts.
2. The right technology and processes
In today’s market, many technology platforms claim to have the “secret sauce” to control and predict spending patterns, including the ability to shape demand and interpret demand signals. However, truly shaping demand on thousands of daily purchasing decisions and understanding the results requires having the right technology and processes in place to avoid missing opportunities that present themselves.
For example, there are a lot of disruptions in clinical goods that can cause increased wait times, supply shortages and long lead times. The ability to pivot when events like these occur is not only critical to life-saving patient care, but also to preserving the ability of the hospital to maintain revenue streams from elective surgery and other procedures that keep the health system viable for the community.
3. Proactive and predictive
So, how does directed buying help avoid – or at least minimize – these situations and allow supply chain teams to be more proactive and predictive of the changing environment? It all starts at the front end – the point of requisition.
Supply chain teams have to look at what is happening at the tactical level to effect change at the strategic one. Looking at what buyers request will provide the ability to predict trends to determine in advance where shortages will occur. This can be done by analyzing purchase orders and invoices, but going a bit deeper will provide a new level of detail because not all requisitions become a purchase order.
In most health systems, a requester identifies an item that is needed for a surgical procedure or other clinical care process that could come from inventory or be purchased from a vendor partner. Once the decision is made, the acquisition process starts with the creation of a material stock request to pull the item from inventory, the creation of a purchase order to a vendor, or in rare cases by kicking off a sourcing event.
There are many factors to consider with each of these outcomes, but it’s the decision of the requester that is important here. Analyzing these decisions provides insight into the clinical environment and what is happening at that level.
For example, if there is an increase in a specific set of items or category of items being requested, supply chains can make better decisions on how to deploy their teams to make sure the supplies are available to meet the needs of clinical staff providing patient care. They can also pivot more quickly when they get signals from a vendor or the materials management teams that an item might go on a back order or become an out-of-stock issue.
Even if the requisition does not become a purchase order, supply chain will see where the demand is going and be able to make decisions to keep supplies flowing to clinical staff. It seems simple, but without the right system and data collection processes in place to provide the information, the predictability becomes difficult.
Details matter in these scenarios, so look for trends in use activity that will help predict clinical activity – for example, what buyers are requesting, which vendors are being targeted, and whether they are buying from the right contract.
With this data, supply chain teams can make better assumptions and implement strategies to avoid situations that slow down or inhibit a hospital from providing care. And if the purchasing system in place complements these efforts by giving supply chains the tools they need to adjust what buyers have access to at the point of requisition, the risk is drastically reduced.
4. Empowered to make the right decision
One example of this is the ability to show a substitute or replacement for a back-ordered item to the buyer before the purchasing decision is made. It’s too late if the item is sent to a vendor on a purchase order and rejected due to it being on back order.
And it goes beyond substitutes and replacement items – shifting spend from one contract to another to get the items needed quicker or gain traction on a rebate or tiered-pricing adjustment is just as important if it is done seamlessly for the buyer or clinician requesting the items.
In this case, supply chain is using demand signals to increase utilization on a preferred or secondary supply source contract without disrupting the impact to the clinical environment. Again, the right tools and technology are critical as well as the right messaging to the buyer community.
Push the items from the preferred contracts to the top of search results and do not make it harder for buyers to do the right thing. Adding friction will not produce the results expected. Communicate early and often, so buyers are empowered to make the right decision.
5. Sound processes reduce risk
Directed buying provides supply chains with the power to avoid negative situations and gives them the ability to work towards their strategic goals and objectives in a proactive way. Technology can enable the process, but understanding how and when to deploy it is truly an art.
There will always be volatility in the healthcare supply chain, but having resilience built in through sound and tested processes, streamlined procedures, and a robust plan to analyze and shape demand at the point of requisition can reduce risk and ensure that clinical teams can deliver patient care when it is needed – or, in the case of elective procedures, when it is scheduled.
Visit ghx.com/government-solutions to learn how GHX offers federal agencies the power of the leading healthcare supply chain solutions to deliver better care at a lower cost.