Gartner IDN Supply Chain Benchmarking: A New Hope

By Eric O'Daffer | October 19, 2021 | 0 Comments

Supply ChainPower of the Profession

If integrated delivery network (IDN) Supply Chain Benchmarking was a movie in the Star Wars franchise, our episode would be “A New Hope.”

In publishing this blog, I feel like Princess Leia sending R2-D2 into space with an important message. The good news: healthcare benchmarking is a much simpler task than blowing up the Death Star. The challenge: we need a collective group of data Jedis to do it. This blog shares some learnings and an invitation to join our benchmarking community.

All of this is a bit dramatic, but I’ve been working on IDN supply chain metrics for a dozen years and benchmarks for three years. A few learnings from those efforts:

Fundamentally, we are looking for macro benchmarks that illuminate the value of the healthcare supply chain — the value of inventory, service and the scope of the operating expenses. We benchmark all third-party spend with suppliers across medical surgical, medical device, lab, pharmaceuticals, capital equipment and all purchased services plus all the people, facilities and technology it takes to operate that supply chain that delivers products and services to the point of care. Our initial benchmark data shows that a fully loaded supply chain represents 37+% of the cost of patient care, for example. Most organizations think of supply costs as a percent of operations in the mid to high teens and in many cases way lower.

Gartner has learned a lot in our benchmarking journey that started in its first iteration in 2019 — namely that as a group healthcare needs to get WAY better at measuring supply chain performance. After reviewing our benchmarks and how IDNs calculate them, my confidence in service-level performance, inventory loss and expiration rates are low. But, as noted, I am confident in the big numbers and that supply chain represents way more of a percentage of the budget at an IDN for delivery patient care than most recognize and that there are trade-offs with cost to run supply chain, inventory and patient outcomes.

Our learnings led us to the group of eight benchmarks below that most IDNs can collect with accuracy.     Our goal is to create a community of IDN benchmarkers and build out additional metrics that the group agrees we can collect and expand the program. The initial benchmarks we seek are:

  • Patient Outcomes: IBM Watson Health 15 Top Health Systems Quintile Performance
  • Total Cost of Patient Care: Total Patient Care Cost in $ per CMI Adjusted Discharge
  • Total Cost of Supply Chain: Fully Loaded Supply Chain Cost in $ per CMI Adjusted Discharge
  • Total Supply Chain Operations Expense: Supply Chain Operating Expense as % of Fully Loaded Supply Chain Cost
  • Inventory Total: Days of Supply On Hand for Medical Surgical, Pharmaceuticals and Medical Devices
  • Span of Control: Percent of All Third-party Expense Under Supply Chain Management
  • Contracting Costs: Ratio of Direct Spend Under Contract to Sourcing/Contracting Personnel
  • Documented Savings: Percent of Document Annual Savings Compared to Total Supply Chain Cost

Our benchmarking program is looking for annualized data through the most recent time period that you can collect. Data input into the pool is open from now until Dec. 31. I can make myself available to help you understand the details of the calculations we use and again to do a quality check with you on your submission. Once we collect all the data, each participant will get a report on their performance and an analysis call on how to interpret the data.

Here’s the Process

So, we are looking for some benchmarking Jedis and we can help you in the process. But the time is now. There is no cost to join our benchmarking program and Gartner is not exposing your individual data in any way. Give data and get a report back on your performance to the benchmarks — that’s the deal. Hope you will join us.

Eric O’Daffer
VP Analyst
Gartner Supply Chain
eric.odaffer@gartner.com

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