Maximizing value for patients in Healthcare together

Capability “the power to do something” and Sourcing “obtain from a particular source”. Maximizing value for patients in Healthcare Together.

Procuring in healthcare in 2017. Continuously, new technologies and innovative treatments emerge. Expanding the possibilities for improving health dramatically. Putting this in aid for patients is driving buyers in health care everyday. But what if sourcing for the best products and services is not sufficient anymore to keep healthcare affordable to people, to societies? How to successfully procure for patient value in a situation where, by nature, business models currently do not yet reward an exceptional focus on patient value? That requires new capabilities, also from suppliers. Sourcing for those capabilities, is the challenge. What can suppliers contribute to patient value and how are suppliers able to support healthcare providers to improve care?

This report presents the outcomes of research on what capability sourcing in healthcare actually implies and how an dedicated designed assessment survey serves as a tool to support the concept of capability sourcing in healthcare.

Some context Purchase costs of Dutch hospitals doubled in ten years time to 8 billion in 2015 (Gupta, 2017). This increase is driven by expensive medicines (transfer and growth), medical products and ICT. This raises the question which value patients have received in return, has patient value doubled in this period?

Today, it has been ten years ago since Michael Porter published the book: “Redefining Health Care” (Porter, 2006) which was a game changer moving towards what Porter defined as Value-based healthcare. At its core is maximizing value for patients: that is, achieving the best outcomes at the lowest cost.

Thanks to technical innovations and with the aim to deliver care more cost-effective, care will transfer from the hospital towards the patient’s home. Resulting in more outsourcing of services. This means that hospitals need to develop more long term relationships with their suppliers, mostly with technical healthcare providers. The role of an hospital therefore moves from being a one stop shop at one location to being a director of care and medical technology.

Selection of suppliers today is mostly done based on user (physician and nursing) requirements which do not always have a proven relationship improving the patient’s value. Services offered by suppliers like training, medical congresses or suppliers funding in scientific research are not always visible for a buyer, management or board of directors. Outcomes of treatments are in most cases not measured yet. Dealing with monopolist like pharmaceuticals due patented medicines is weakening a buyers position and blocking capability sourcing.

This raises the question how we can use the principles of VBHC to increase transparency but also assure that we select a supplier based on its capabilities allowing us to embrace these VBHC principles as defined by M. Porter. Avoiding the risk of not being able to lower costs and maximizing patient value in the long term.

Sourcing for capabilities should therefore become more important than sourcing for products or services alone. Hospitals are not yet prepared for this new way of sourcing and are struggling how they can implement this. Our recommendations are based on HOW hospitals should enable themselves for this VBHC way of sourcing. The main question(s) in our research therefore is:

  1. What is needed for healthcare organizations to apply VBHC (enablers, prerequisites);
  2. What implications will capability sourcing, used to improve the patient value, have for buyers;
  3. Which capabilities are required from suppliers to support healthcare organizations applying VBHC and contribute to improving patient value.

Introducing capability sourcing based on VBHC is challenging, but exciting!

Introducing capability sourcing enabling VBHC in hospitals is challenging. There are several reasons which complicates the process of introducing capability sourcing. The first one is the lack of transparency as described above. Another reason is that buyers are relatively few (compared to sales forces of suppliers or the total workforce in an hospital). Resulting in pressure on available resources, stakeholder management and having latest knowledge about technical developments in the industry. However contributing to patients value while lowering costs is an exciting opportunity for procurement and requires leadership.

Three main recommendations to enable capability sourcing based on VBHC In this report we will describe three main recommendations which would enable capability sourcing. Most important to understand is that change can be achieved in small steps.

  1. Make capability sourcing based on VBHC principles a priority on board level. Create a VBHC core team and define the desired outcomes, identify metrics used to create transparency;
  2. Structure the procurement organization in such a way that buyers being empowered to closely work together with users (physician and nursing) and suppliers. This means improving conditions and enablers to develop the people, systems and processes;
  3. Use the capabilities identified in this study to select suppliers and measure impact & performance using metrics which drive VBHC maximizing value to the patient and lower costs.

VBHC capability sourcing improves a hospital’s competitive position by ensuring that processes and functions are obtained from the right source at the right cost. As sourcing matures, hospitals can leverage outsourcing and offshoring for more processes and categories, to achieve a broader set of objectives, meaning improve on capabilities, quality, service levels and costs.