BW Exclusive | 'Cut Costs' Echoing In Every Nook & Corner Of Healthcare Industry: Dr Vinoth Kumar
In an exclusive conversation with BW Healthcare World, Dr Vinoth Kumar, Group Head, Supply Chain Management, Jehangir Hospitals, Pune speaks on the evolution of supply chain management in healthcare, supply chain management challenges faced by the hospitals, circular economy in healthcare and future of supply chain management in healthcare in India
The Covid-19 pandemic shook the foundations of the healthcare industry leaving the policymakers and the health industry leaders looking for various answers in a short span of time among numerous challenges thrown by the virus. One of the prominent tussles that the health industry faced was the effective management of the healthcare supply chain.
The country at one time faced shortages of PPE kits, oxygen concentrators, and ventilators among other important medical devices and equipment leading medical experts to ponder on the resiliency of supply chain of the Indian healthcare industry to sudden shockwaves such as the pandemic. The pandemic has put supply chain management at the centre of the healthcare sector's map, implying that the healthcare systems will be unable to skip its importance in their future plans.
Dr Vinoth Kumar, Group Head, Supply Chain Management, Jehangir Hospitals, Pune, stated that the recent pandemic has exposed a structural weakness in healthcare systems especially in the supply chain most notably a lack of resilient systems resulting in an inability to obtain critical supplies on time like PPE kits, ventilators, oxygen, critical medications etc. in hospitals. Adding to that he said prior to the pandemic, healthcare organisations focused merely on cost negotiations and the supply chains were not built to be efficient and resilient.
"Covid brought to light the previously unseen vulnerabilities. The pandemic has had substantial huge negative impacts on supply chains, and it has highlighted the significance and need for greater supply chain efficiency and resiliency," Dr Vinoth said.
From SCM perspective, what are all the key challenges faced by hospitals? How do you think the sector can overcome them?
The healthcare industry is under mounting pressure to drive down costs because the revenues are declining, and materials costs and manpower costs are increasing day by day, shifting of customer needs and new competition. Moreover, recent price fixing by NPPA on products such as drugs, stents, implants etc. has reduced our profit margins. If we look at our operating margins, it confirms the problem. Unfortunately, we find it difficult to revise the tariff in this competitive world. The only solution is to cut costs and the hospitals must develop effective procurement plans and supply chain strategies to maintain profitability.
Ideally materials cost in hospitals should not be more than 25-26 per cent of the revenue earned. But if we look at the P&L statement of many hospitals, the cost is more than the ideal figure. ‘Cut Costs’ is the slogan echoing in every nook and corner of the healthcare industry and we need to develop effective supply chain strategies to reduce cost and maximize margins. In healthcare, five per cent of cost savings in supply chain might result in up to 25 percent increase in turnover.
One of the biggest factors in supply chain costs can be the physicians’ preferences on specific brands and products which might be mainly due to unawareness of the cost impact of the materials that they use or prefer. Value analysis meetings can be conducted periodically and that will be beneficial for clinicians to understand the costs associated with care.
We need to bridge the gap between the supply chain and clinical stakeholders. It's essential to bring all hospital stakeholders together to understand available options for improving supply chain processes and to quantify the tangible benefits of these options.
How do you foresee healthcare supply chain management in the days to come?
I foresee a paradigm shift in healthcare supply chain management in the days to come from a demand-supply aggregator approach to CQO (Cost-Quality-Outcome) approach, a fragmented system to an integrated system, technology-driven to patient-centricity driven, efficiency-focused to resilience-focused and profit-driven to sustainability-driven model.
A holistic, end-to-end approach not only improves efficiency and reduces costs but also results in better healthcare at lower costs to the patient. The data-driven systematic approach towards intelligent consumption planning and spend management and smart intelligent processes like digitalisation, supply chain automation and analytics, integration with new disruptive technologies like Artificial Intelligence, Internet of Things (IOT), application of lean management and six sigma concepts, Health Technology Assessment (HTA) by conducting cost-benefit analysis, clinical effectiveness and utility analysis will be the future of supply chain in healthcare.
What is the significance of the supply chain in hospitals in this competitive market?
Supply chain management in healthcare plays a pivot role for human beings as the end user itself is a human suffering from health-related issues. The supply chain also plays a major role in building a self-sufficient healthcare ecosystem and making healthcare affordable and sustainable. In healthcare, supply chain is the only area, one can think about cost reduction, and we may find only very little scope in other expenditures like manpower costs and administrative costs etc.
Hence it is clearly evident that the future competition might be between the supply chains and not among the hospitals. Unless we think outside the box and embrace best practices in supply chains, we face the possibility of being beaten by the competition or incurring huge losses.
The solution that I firmly believe to enhance operational efficiency, better patient care and sustainability is by embracing the best cost-effective practices, technologies, and coherent strategies.
What is a circular economy and how do you think the healthcare sector in India can benefit from this?
The circular economy is a model of production and consumption that strives to maintain the usability of existing materials as long as possible and at their highest value through sharing, leasing, refusing, rethinking, reducing, reusing, repairing, refurbishing, remanufacturing, repurposing, and recovery. In a circular economy, products are used to maximum extent as possible and thereby, waste is reduced to a greater extent and disposal is the last resort.
The healthcare sector can benefit tremendously because it revolves around three fundamental principles such as sustainability, resilience, and inclusiveness. The circular economy is the future of healthcare, and this approach not only reduces wastes, carbon emissions and pollution, it also makes hospitals more regenerative, resilient, and sustainable for the future.
Thus, the circular economy can help hospitals to save resources and money which will enable hospitals to invest in other patient care facilities. This also helps patients because it incentivizes hospitals to better use of medical devices and natural resources more efficiently and thereby mitigating climate crisis and making healthcare more affordable for everyone.
You are an innovator and have won the “Best Innovator in BW Healthcare Excellence Awards”. Please tell us about your innovation, its genesis and its contribution to the circular economy and how is it beneficial to achieve sustainability.
The two major challenges faced in healthcare are the high cost of treatment due to highly expensive medical devices and the impact of huge medical waste generated daily that causes greenhouse gas emissions. Healthcare services are responsible for 4.4 per cent of greenhouse gas emissions.
Most medical devices are very expensive which in turn makes complex procedures unaffordable for the majority of the population, particularly in developing countries like India. This has prompted us to innovate a solution i.e., 4D MUSIC Methodology to achieve sustainable healthcare. The approach addresses all three elements of sustainability that constitute the triple bottom line of any organization - (Social Sustainability (People), Economical Sustainability (Profit or Prosperity) and Environmental Sustainability (Planet)).
The application of the innovative, novel 4D MUSIC methodology results in huge cost savings and a significant reduction in the generation of medical waste in healthcare facilities. There is a significant reduction in material handling costs by 50 per cent while also resulting in the reduction of medical waste materials due to effective management of the reuse of medical devices.
The cost of procedures can be reduced by almost 60 per cent if this method is followed by ensuring strict control of hygiene and safety. The benefits arrived out of economic, environmental, and clinical outcomes can be shared with the community to make healthcare more affordable and accessible.