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Why Do Healthcare Systems Need to Know More About Their Healthcare Suppliers’ Risk Prevention Programs?
We are living in an era where supply chain disruptions are growing because of various risk factors 1) increased natural disasters around the world 2) geopolitical conflicts in hot spots around the world 3) pandemics like COVID-19 4) cyber security breaches 5) raw material shortages 6) labor shortages in manufacturing and transportation 7) compliance violations 8) logistic congestion in ports and the list goes on and on. No longer can healthcare systems use “hope” as a strategy to receive healthcare supplies.
Featuring:
Patrick is CEO and Founder of SRS, which applies risk prevention, threat prediction & monitoring software to cut supply chain risk disruptions. Supply disruption data shows that 60% of supply disruptions are preventable by getting suppliers to take specific risk prevention actions.
Kristina Narvaez graduated with a bachelor’s degree in Environmental Risk Management at the University of Utah and received her MBA from Westminster College with advanced degrees in finance and information systems. She is a two-time Spencer Education Foundation Scholar from the Risk and Insurance Management Society. She has worked in the risk management departments of both Utah Transit Authority and Zions Bancorporation before beginning her job as Supplier Risk & Business Continuity Manager in the Supply Chain Organization at Intermountain Healthcare. She is also owner and operator of ERM Strategies, LLC which is an Enterprise Risk Management research and consulting firm and also partner of Strategic Risk Insights, LLC which is a Strategic Risk Management research and consulting firm. She has published two books on Enterprise Risk Management and a book on Strategic Risk Management https://www.amazon.com/Books-Kristina-Narvaez/s?rh=n%3A283155%2Cp_27%3AKristina+Narvaez and over 60 published articles on Enterprise Risk Management, Board Risk Governance and Strategic Risk Management.
Missy Hill, RN, CPHRM, FCN, HACP, CBRM | Patrick Brennan, MBA | Kristina Narvaez, MBA, ERM-57 designation
Currently, Missy Hill works for Vizient with healthcare facilities in all classes of trade throughout the United States as the Director, Disaster Management. In this role, she works with internal Vizient stakeholders to help members continue operations in the event they are exposed to an emergency event that would prohibit them from continuing to provide products/services to their customers. As a nurse, Hill also acts as a subject matter expert for healthcare providers, contracted suppliers and distributors in matters concerning operational health, patient safety initiatives, emergency preparedness and regulatory standards. Previously, while at Intalere, Hill worked as a Dir., Med/Surg Advisory Specialist. She assisted in developing their Accreditation Readiness Solution and Operational Continuity and Emergency Management Program. Prior to this, she worked in sales for Mercury Medical, LifeGas, Medline Industries and Progressive Medical. To round out her healthcare experience, she has served in planning/marketing of rural health initiatives and was the corporate purchasing director for The Schuster Group., a small health care company comprised of hospitals, home health/hospice, specialty clinics and an assisted living facility. As a Registered Nurse, Hill also has experience in both acute and nonacute settings. She is a Certified Healthcare Risk Manager, Faith Community Nurse, a Healthcare Accreditation Professional, and a Certified Business Resilience Manager. Hill is a member of the American Society for Healthcare Risk Management, the Institute for Healthcare Improvement/National Patient Safety Foundation, Faith Community Nurse Association of Oklahoma, and volunteers for the Oklahoma County Medical Reserve Corp. She has also served on the Educational Board for Health Connect Partners. Hill received a bachelor’s degree in Psychology from the University of Oklahoma, a nursing degree from St. Charles County Community College, St. Peter’s, Mo., and holds her multistate RN license from the Oklahoma Board of Nursing.Patrick is CEO and Founder of SRS, which applies risk prevention, threat prediction & monitoring software to cut supply chain risk disruptions. Supply disruption data shows that 60% of supply disruptions are preventable by getting suppliers to take specific risk prevention actions.
Kristina Narvaez graduated with a bachelor’s degree in Environmental Risk Management at the University of Utah and received her MBA from Westminster College with advanced degrees in finance and information systems. She is a two-time Spencer Education Foundation Scholar from the Risk and Insurance Management Society. She has worked in the risk management departments of both Utah Transit Authority and Zions Bancorporation before beginning her job as Supplier Risk & Business Continuity Manager in the Supply Chain Organization at Intermountain Healthcare. She is also owner and operator of ERM Strategies, LLC which is an Enterprise Risk Management research and consulting firm and also partner of Strategic Risk Insights, LLC which is a Strategic Risk Management research and consulting firm. She has published two books on Enterprise Risk Management and a book on Strategic Risk Management https://www.amazon.com/Books-Kristina-Narvaez/s?rh=n%3A283155%2Cp_27%3AKristina+Narvaez and over 60 published articles on Enterprise Risk Management, Board Risk Governance and Strategic Risk Management.
Transcription:
Prakash Chandran: Welcome to the ASHRM podcast made possible by the American Society for Healthcare Risk Management to support efforts to advance safe and trusted healthcare through enterprise risk management. Visit ashrm.org/membership to learn more and to become an ASHRM member. My name is Prakash Chandran.
We are living in an era where supply chain disruptions are growing because of various risk factors, increased natural disasters around the world, geopolitical conflicts in hotspots around the world, pandemics like COVID-19, cybersecurity breaches, raw material shortages, labor shortages in manufacturing and transportation, compliance violations, logistic congestion in ports and the list goes on and on. No longer can the healthcare system use hope as a strategy to receive healthcare supplies.
We're going to talk about it today with three experts. Our first expert is Kristina Narvaez. She's the Supplier Risk and Business Continuity Manager in the Supply Chain Organization at Inner Mountain Healthcare. She's in charge of designing and implementing the Third-Party Supplier Risk Management program. Our second expert is Patrick Brennan. He's the CEO and Founder of Supply Risk Solutions. It's a cloud-based software for healthcare supply chain risk management. Our third and final guest is Missy Hill. She's the Director of Disaster Management for Vizient. Vizient is a group purchasing organization that provides data insights and purchasing power to half of the healthcare organizations across the US.
So Kristina, Patrick, Missy, really great to have you here today. Thank you so much for taking the time. Missy, I'd like to start with you. Why is it important for healthcare systems to have supply chain visibility of their healthcare supplies?
Missy Hill, RN: Greetings, Prakash. Thank you, and excellent question. I liken supply insecurity to food insecurity. But as you know, food insecurity, the people don't know where their next meal is going to come from. And with supply insecurity, there is an equal amount of lack of consistent access to enough supplies to maintain an active, healthy supply chain. So when providers have supply chain visibility, it helps them to know where the obstacles are so that they can mitigate against any potential losses, which could ultimately cause harm to their staff or to their clients.
So visibility into the supply chain is an understanding of risks so that they can minimize the impact of disturbance. And this helps with supply chain resilience ultimately. Having confidence in that supply chain will produce and deliver supplies necessary to meet patient care needs. And at Vizient, we like to call this supply assurance.
So to your point previously in the intro, pre-pandemic, Vizient averaged less than a hundred backorders a month or suppliers average less than a hundred backorders a month. But today, healthcare providers are experiencing 10 to 12 times that. So until recently, none of us had been prepared to address the staggering numbers. Kristina, you may have an additional insight on that from a provider standpoint.
Kristina Narvaez, MBA: Okay. Well, let's just take just-in-time inventory. Over the last 40 years, here in the United States we've depended a lot on overseas manufacturing. For example, in 2017, Hurricane Maria hit Puerto Rico and we didn't realize that BD, one of our big suppliers, had many of their manufacturing assemblies in a concentrated area. And we weren't aware of the backup plans that they have for disruption like your hurricane. So we were waiting anywhere in the neighborhood of 12 weeks backorders on IVs and IV tubings. So it's really critical for us as healthcare providers to understand and see visibility of a supply chain from raw materials to finished products, so we can see where the vulnerabilities are, where the locations are and how natural disasters and geopolitical issues and power outages can happen, but also have contacts, and Patrick will talk more about that later on, is being able to reach out to those different facilities and ask what is recovery time to receive a certain product.
Prakash Chandran: So Patrick, what types of information should healthcare suppliers be sharing with healthcare systems about their risk prevention programs and the risk prevention programs of their sub-suppliers?
Patrick Brennan, MBA: The starting point is supply chain visibility. So the health systems need to understand where the supplier's manufacturing sites are located and where their key distribution hubs are located. And as Kristina pointed out, to have someone at those sites that they can contact to see if production or distribution is affected when there's a major disaster event or a pandemic increase in that area.
So this idea of having visibility into where those manufacturing sites are located is the primary foundation for supply chain risk management. But once that's in place, then the health systems can take the next step, which is to make sure that each of those suppliers have an adequate handle of their risks. So do those suppliers and sub-tier suppliers have adequate risk management programs in place to protect their production sites against disaster events or fires, pandemic or other types of incidents? Our data shows actually that most production disruptions can be prevented if suppliers and their suppliers put adequate risk management in place before those events happen. Kristina?
Kristina Narvaez, MBA: Well, just to add to what Patrick just brought up is if we had more transparent communication with our suppliers and sub-suppliers, then on our end, we can better understand what business continuity plans we need to execute. Should we go to an alternative supplier? Does that alternative supplier share the same tier two and tier three suppliers as our current suppliers? So understanding that mapping of who of our suppliers, which manufacturing sites, assembly sites of where they're extracting raw materials is really important for us to make good timely decisions on where to go for alternative supplies.
Prakash Chandran: Yeah, so that bleeds into my next question. You know, we've talked at a high level about the importance of supply chain visibility and adequate risk management. But Missy, I'd love to also understand why is it important to understand where and how raw materials are sourced?
Missy Hill, RN: Yes. I think in order for us to understand why it's important to know where the raw materials are coming from, we need to maintain a really good vision as to where we've come from, right? So prior to the pandemic, sourcing managers have typically been rewarded based on cost-focused metrics, such as supply-based reduction. They could streamline the organization spend to fewer suppliers and really just drive better value from those relationships. Since orders were based on historical spends, then distributors could set allocation amounts for items. This just-in-time mindset that Kristina had alluded to earlier didn't need to factor in where each part of the product was made and what the consequences would be should that part not be available for whatever reason.
Purchasing agents knew what they needed and they knew how long it would take for them to get it to their docks. In this purchasing model, no one considered where the raw materials were sourced because it really didn't matter, right? But now, let's fast forward to a real example that we faced earlier this year, was sharps containers. Vizient had two suppliers on contract believing we actually had redundancy. When backorders started to occur, many providers didn't look for alternate suppliers. However, we learned that the issue is not necessarily the supplier, but it was with where the suppliers actually sourced the resin. We learned that there was a fire at the resins plant that both suppliers used. So we actually didn't have redundancy at all in the production pathway, which ended up at the same place.
So without understanding the source of major material components, it's really difficult to know what mitigation strategies are needed to be in place. Kristina, do you have any additional thoughts on that?
Kristina Narvaez, MBA: Well, another thing too is Intermountain Healthcare is also involved the Healthcare Anchor Network. And one of the initiatives that we're working on in the next few years is reducing chemicals of concern in our products. And one of the questions is do we have PVCs and DEHPs in our products, because those can cause harmful effects to both the patient as well as the providers. And so that's another thing we're looking at. That's why it's so important to understand what type of raw materials are put and where those raw materials are being sourced, because certain areas around the world are very vulnerable to different types of disruptions.
Prakash Chandran: Missy, another question that I wanted to ask is I think all of us have heard about all the different supply chain issues and maybe have even been affected in some way. The things that we order, for example, online might take a little bit longer. Things at the store aren't readily available anymore. But Missy, I'm curious as to what makes healthcare supply chain different from other supply chains that I've just mentioned.
Missy Hill, RN: I love this question because healthcare supply chains are vastly different than what I believe all other supply chains are. And I think this is the reason why, you have to consider the supply chain stakeholders. For example, in the automotive industry, I would think that the stakeholders would primarily be the consumers, the dealers, suppliers and logistic firms. Automobiles are optional, right? Individuals don't have to own cars. Another example might be in the semiconductor industry where electronics of course are nice. But someone could still exist with few, if any, of the nicer toys that are out on the market. But good health, Prakash, while some may treat it as an option, the expectation is that poor health is not an option. Poor outcomes are punitive to all.
And people might argue that the true stakeholder in healthcare supply chain is the patient or consumer. However, in my years of experience from bedside nursing to purchasing in both acute and non-acute care settings, that truly the stakeholders are not just the patients, but it's purchasing, it's the C-suite, the board of directors, doctors, nurses, insurance companies, attorneys, suppliers, distributors, community leaders, and even the government. Every one of these entities has their own opinion and influence on what constitutes operational, financial, clinical and even really strategic success for a healthcare provider and every one of them has tremendous influence on the quality of the care. I can't think of another industry that has so many fingers in the pie of operational health, and if not managed correctly, and this is the kicker, can cause harm. Therefore, I think this is what makes healthcare supply chains different from most supply chains and really what makes them very, very difficult to manage. Kristina?
Kristina Narvaez, MBA: Yeah. I'd like to add to that, about the supply chain and the stakeholders. If we didn't have supplies, we can't do our procedures. I mean, we're dead in the water, just like a lot of other industries do. But Missy was talking about the stakes are really high because no one wants to receive poor healthcare. I mean, there's no tolerance for that at all. And there's a lot of pressure to perform at a high level, but if you don't have the right products protecting the providers and protecting the patient, we have some real issues. And like I mentioned before about the chemicals of concern, where we're working on that and that's an initiative with a Healthcare Anchor Network with over 40 different healthcare systems, is removing any toxics in our supplies that could impact the hope of the provider and the health of the patient.
Prakash Chandran: So Patrick, you know, I wanted to take a step back from everything that we've talked about today, and I was hoping that you could educate us on how healthcare supply chains have changed over the past couple of years.
Patrick Brennan, MBA: Absolutely. Years ago, each of the health systems used to implement its own separate supply chain risk management program. Each one operated as its own silo and what that meant for the suppliers then, it was really difficult for them because they would get different requests from many, many different customers. And a lot of the time, there were just so many requests that the suppliers really wouldn't participate at all. And there was really very little that health systems could do about it. Suppliers really have a lot of negotiating power and they were not used to, you know, fielding requests from so many different customers.
So, there has been a response to that. In the last couple of years, an industry-wide collaboration has been formed by several of the leading healthcare systems like Intermountain, Mayo Clinic and Spectrum Health and Stanford, and many dozens of others got together to collaborate on supply chain risk management. This is a really exciting innovation. They've been able to get many dozens of health systems to manage supply chain risk together and to work with hundreds of their most critical suppliers that are participating. They formed a nonprofit organization called the Healthcare Industry Resilience Collaborative. It's a healthcare system-led organization, expressly aiming to improve patient care by making healthcare supplies more resilient.
So to answer your question, you know, where in the old days, people used to operate their own separate silos, these days, health systems have come together with their suppliers and are working on supply chain transparency and proactive risk management to cut down on disruptions before those threats hit. Missy, do you have some thoughts on that?
Missy Hill, RN: I do, Patrick. Thank you. I think that while most of America may look at the pandemic and respond to it with groanings and gnashing of teeth, I do believe maybe as an eternal optimist, that there have been some very, very good things that have come out of the pandemic. And one of which is that it has forced an enterprise risk management mindset onto supply chain executives. Sourcing is learning to balance costs and resiliency, which is very, very significant. What this means is that providers are needing to identify the risk that can affect their supply chain department. They need to know how these risks can impact their ability to provide supplies. It causes them to have to prioritize the risk based on likelihood and frequency. They need to know what the maximum downtime would be upon the unavailability of a critical item before there is a loss or harm. But also, it causes them to consider what the consequences would be for non-action. All of this requires this collaborative mindset that Patrick just spoke about.
Supply chain doesn't need to completely abandon the lean mentality though. That's still very important and it has its place, but now they know that some of their critical items do require some shelf depth. This requires a lot of breaking down of silos with clinicians and distributors and GPOs and even other providers in the community. And this requires a well thought out and practiced resiliency plan.
Patrick Brennan, MBA: I'd like to add to that. We will just talk about collaboration and some of the health systems that are listening to the podcast may be interested in getting involved in the collaboration. So the nonprofit organization I mentioned earlier is called the Healthcare Industry Resilience Collaborative or HIRC, and you can reach them at their website, hircstrong.com. That's H-I-R-C-S-T-R-O-N-G dot com. So this is a highly recommended and free resource to all health systems that will help each of the health systems to get a handle on transparency and proactive risk management in supply chain.
Prakash Chandran: So you know, once there is that visibility and transparency, and you're kind of looking at risk mitigation measures, talk tactically about what hospital systems and even suppliers have done to resolve this. Like, is it better redundancy of supplies? Is it better sourcing? Can you talk tactically, Kristina, about some of the implementations to alleviate this stress?
Kristina Narvaez, MBA: One of the things that we're doing at Intermountain Healthcare, and I'm working on with the supply chain organization is coming up with a Tableau supplier risk metrics dashboard. We're looking at nine different risk categories. And these are things that could cause a disruption in our supply chain, location risk and sourcing risks. We're looking at labor risks. We're looking at financial stability risks, compliance risks. We're looking at logistics risk, quality assurance risk. We're looking at sustainability risk and technology risk. And so where you're using a grading system, one to ten, one to three being low, four to six being medium risk and seven to ten being high risk, we're gathering different data sources, bringing them in to this Tableau supplier risk metrics dashboard, and coming up with a risk score card or risk profile of our suppliers. And this is not all our suppliers, it's our strategic suppliers, so probably the top 200 suppliers. And then we use that risk profile, risk score card in sourcing methodology. We use it in negotiating contracts. We use it in business reviews and also in our decision-making process for alternative suppliers.
Patrick Brennan, MBA: So in addition to what the provider can do as Kristina has laid out, suppliers are really critical to reducing the number of disruptions in the healthcare supply chain. Our data shows that 60% of disruptions can be prevented when suppliers have adequate risk management protections in place. So these are basic risk management practices, like having a recovery plan for your production site, having a designated crisis management team, working on crisis exercises at the production site, having sprinklers, these sorts of things. So there's actually a lot that suppliers can do in advance of events to make sure that they're not affected by disruptions. I really believe that suppliers are the key. They are able to put in place protections that prevent the majority of disruptions.
Missy Hill, RN: And from a GPO standpoint, Prakash, some of the most helpful collaboration occurs across our membership. So in times of need, sharing conservation strategies and best practices can be very helpful. We are collaborating with many stakeholders to develop critical supply profiles inclusive of conservation strategies, cross-references, common uses, best practices and other insights that are pertinent to this topic.
Prakash Chandran: So Kristina, the Healthcare Industry Resilience Collaborative or HIRC was mentioned previously by Patrick. Can you talk a little bit about how you personally have benefited from this?
Kristina Narvaez, MBA: Yeah. I have been affiliated with Healthcare Industry Resiliency Collaborative since last December, so December 2020. And I've been able to collaborate with Mayo Clinic and Spectrum and Stanford and Northwestern and University of Vermont and a number of other healthcare systems, sharing information back and forth. For example every Tuesday morning, a few members of HIRC, the providers that is, because there's providers and suppliers that are part of Healthcare Industry, Resiliency Collaboration, and on Tuesday morning about four or five of us healthcare providers come together and we look at the risk landscape across supply chain, our supply chains. And we ask ourselves what are some emerging risks that we see coming down the pipeline, for example, port issues in Los Angeles and Long Beach and how is that going to impact backorders and stuff. But also we're talking about raw material shortages. One of the discussions we had on Tuesday, December 14th was resin. And resin is a main component of producing plastics. And as you can imagine, plastics is used all over as for healthcare supplies. So, Mayo Clinic had a more detailed report on why we're having the resin shortage and where we're at and give feedback online on quarter two. And that's all based on the resin disruption in Texas where a lot of the resin plants, where 85% of the resins is produced in Texas. And so they gave me a report that I was able to give to my solutions director over commodity. And that solutions director was able to explain to the physicians and nurses why we're having back orders on certain products that include resin and part of it in plastics.
So I feel that that collaboration, that fraternity of sorts, is super useful to me because it's information that I am hearing from other healthcare systems. We also have a critical items list and we compare where are you at with these critical items? Are they backorders? And so as we come together as a group and we collaborate more with our healthcare suppliers, it will create better transparency and assurance in the healthcare supply chain.
Prakash Chandran: Well, Missy, Patrick and Kristina, this has been a truly informative and educational conversation today. I really appreciate your time.
Missy Hill, RN: Thank you.
Patrick Brennan, MBA: Thank you.
Kristina Narvaez, MBA: Thank you.
Prakash Chandran: That was Kristina Narvaez, Supplier Risk and Business Continuity Manager in the Supply Chain Organization at Intermountain Healthcare; Patrick Brennan, CEO and founder of Supply Risk Solutions and, finally, Missy Hill, Director of Disaster Management for Vizient. Thank you so much for joining us today.
The ASHRM podcast was made possible by the American Society for Healthcare Risk Management, to support efforts to advance safe and trusted healthcare through enterprise risk management. You can visit ashrm.org/membership to learn more and to become an ASHRM member.
My name is Prakash Chandran. Thank you again for listening and we'll talk next time.
Prakash Chandran: Welcome to the ASHRM podcast made possible by the American Society for Healthcare Risk Management to support efforts to advance safe and trusted healthcare through enterprise risk management. Visit ashrm.org/membership to learn more and to become an ASHRM member. My name is Prakash Chandran.
We are living in an era where supply chain disruptions are growing because of various risk factors, increased natural disasters around the world, geopolitical conflicts in hotspots around the world, pandemics like COVID-19, cybersecurity breaches, raw material shortages, labor shortages in manufacturing and transportation, compliance violations, logistic congestion in ports and the list goes on and on. No longer can the healthcare system use hope as a strategy to receive healthcare supplies.
We're going to talk about it today with three experts. Our first expert is Kristina Narvaez. She's the Supplier Risk and Business Continuity Manager in the Supply Chain Organization at Inner Mountain Healthcare. She's in charge of designing and implementing the Third-Party Supplier Risk Management program. Our second expert is Patrick Brennan. He's the CEO and Founder of Supply Risk Solutions. It's a cloud-based software for healthcare supply chain risk management. Our third and final guest is Missy Hill. She's the Director of Disaster Management for Vizient. Vizient is a group purchasing organization that provides data insights and purchasing power to half of the healthcare organizations across the US.
So Kristina, Patrick, Missy, really great to have you here today. Thank you so much for taking the time. Missy, I'd like to start with you. Why is it important for healthcare systems to have supply chain visibility of their healthcare supplies?
Missy Hill, RN: Greetings, Prakash. Thank you, and excellent question. I liken supply insecurity to food insecurity. But as you know, food insecurity, the people don't know where their next meal is going to come from. And with supply insecurity, there is an equal amount of lack of consistent access to enough supplies to maintain an active, healthy supply chain. So when providers have supply chain visibility, it helps them to know where the obstacles are so that they can mitigate against any potential losses, which could ultimately cause harm to their staff or to their clients.
So visibility into the supply chain is an understanding of risks so that they can minimize the impact of disturbance. And this helps with supply chain resilience ultimately. Having confidence in that supply chain will produce and deliver supplies necessary to meet patient care needs. And at Vizient, we like to call this supply assurance.
So to your point previously in the intro, pre-pandemic, Vizient averaged less than a hundred backorders a month or suppliers average less than a hundred backorders a month. But today, healthcare providers are experiencing 10 to 12 times that. So until recently, none of us had been prepared to address the staggering numbers. Kristina, you may have an additional insight on that from a provider standpoint.
Kristina Narvaez, MBA: Okay. Well, let's just take just-in-time inventory. Over the last 40 years, here in the United States we've depended a lot on overseas manufacturing. For example, in 2017, Hurricane Maria hit Puerto Rico and we didn't realize that BD, one of our big suppliers, had many of their manufacturing assemblies in a concentrated area. And we weren't aware of the backup plans that they have for disruption like your hurricane. So we were waiting anywhere in the neighborhood of 12 weeks backorders on IVs and IV tubings. So it's really critical for us as healthcare providers to understand and see visibility of a supply chain from raw materials to finished products, so we can see where the vulnerabilities are, where the locations are and how natural disasters and geopolitical issues and power outages can happen, but also have contacts, and Patrick will talk more about that later on, is being able to reach out to those different facilities and ask what is recovery time to receive a certain product.
Prakash Chandran: So Patrick, what types of information should healthcare suppliers be sharing with healthcare systems about their risk prevention programs and the risk prevention programs of their sub-suppliers?
Patrick Brennan, MBA: The starting point is supply chain visibility. So the health systems need to understand where the supplier's manufacturing sites are located and where their key distribution hubs are located. And as Kristina pointed out, to have someone at those sites that they can contact to see if production or distribution is affected when there's a major disaster event or a pandemic increase in that area.
So this idea of having visibility into where those manufacturing sites are located is the primary foundation for supply chain risk management. But once that's in place, then the health systems can take the next step, which is to make sure that each of those suppliers have an adequate handle of their risks. So do those suppliers and sub-tier suppliers have adequate risk management programs in place to protect their production sites against disaster events or fires, pandemic or other types of incidents? Our data shows actually that most production disruptions can be prevented if suppliers and their suppliers put adequate risk management in place before those events happen. Kristina?
Kristina Narvaez, MBA: Well, just to add to what Patrick just brought up is if we had more transparent communication with our suppliers and sub-suppliers, then on our end, we can better understand what business continuity plans we need to execute. Should we go to an alternative supplier? Does that alternative supplier share the same tier two and tier three suppliers as our current suppliers? So understanding that mapping of who of our suppliers, which manufacturing sites, assembly sites of where they're extracting raw materials is really important for us to make good timely decisions on where to go for alternative supplies.
Prakash Chandran: Yeah, so that bleeds into my next question. You know, we've talked at a high level about the importance of supply chain visibility and adequate risk management. But Missy, I'd love to also understand why is it important to understand where and how raw materials are sourced?
Missy Hill, RN: Yes. I think in order for us to understand why it's important to know where the raw materials are coming from, we need to maintain a really good vision as to where we've come from, right? So prior to the pandemic, sourcing managers have typically been rewarded based on cost-focused metrics, such as supply-based reduction. They could streamline the organization spend to fewer suppliers and really just drive better value from those relationships. Since orders were based on historical spends, then distributors could set allocation amounts for items. This just-in-time mindset that Kristina had alluded to earlier didn't need to factor in where each part of the product was made and what the consequences would be should that part not be available for whatever reason.
Purchasing agents knew what they needed and they knew how long it would take for them to get it to their docks. In this purchasing model, no one considered where the raw materials were sourced because it really didn't matter, right? But now, let's fast forward to a real example that we faced earlier this year, was sharps containers. Vizient had two suppliers on contract believing we actually had redundancy. When backorders started to occur, many providers didn't look for alternate suppliers. However, we learned that the issue is not necessarily the supplier, but it was with where the suppliers actually sourced the resin. We learned that there was a fire at the resins plant that both suppliers used. So we actually didn't have redundancy at all in the production pathway, which ended up at the same place.
So without understanding the source of major material components, it's really difficult to know what mitigation strategies are needed to be in place. Kristina, do you have any additional thoughts on that?
Kristina Narvaez, MBA: Well, another thing too is Intermountain Healthcare is also involved the Healthcare Anchor Network. And one of the initiatives that we're working on in the next few years is reducing chemicals of concern in our products. And one of the questions is do we have PVCs and DEHPs in our products, because those can cause harmful effects to both the patient as well as the providers. And so that's another thing we're looking at. That's why it's so important to understand what type of raw materials are put and where those raw materials are being sourced, because certain areas around the world are very vulnerable to different types of disruptions.
Prakash Chandran: Missy, another question that I wanted to ask is I think all of us have heard about all the different supply chain issues and maybe have even been affected in some way. The things that we order, for example, online might take a little bit longer. Things at the store aren't readily available anymore. But Missy, I'm curious as to what makes healthcare supply chain different from other supply chains that I've just mentioned.
Missy Hill, RN: I love this question because healthcare supply chains are vastly different than what I believe all other supply chains are. And I think this is the reason why, you have to consider the supply chain stakeholders. For example, in the automotive industry, I would think that the stakeholders would primarily be the consumers, the dealers, suppliers and logistic firms. Automobiles are optional, right? Individuals don't have to own cars. Another example might be in the semiconductor industry where electronics of course are nice. But someone could still exist with few, if any, of the nicer toys that are out on the market. But good health, Prakash, while some may treat it as an option, the expectation is that poor health is not an option. Poor outcomes are punitive to all.
And people might argue that the true stakeholder in healthcare supply chain is the patient or consumer. However, in my years of experience from bedside nursing to purchasing in both acute and non-acute care settings, that truly the stakeholders are not just the patients, but it's purchasing, it's the C-suite, the board of directors, doctors, nurses, insurance companies, attorneys, suppliers, distributors, community leaders, and even the government. Every one of these entities has their own opinion and influence on what constitutes operational, financial, clinical and even really strategic success for a healthcare provider and every one of them has tremendous influence on the quality of the care. I can't think of another industry that has so many fingers in the pie of operational health, and if not managed correctly, and this is the kicker, can cause harm. Therefore, I think this is what makes healthcare supply chains different from most supply chains and really what makes them very, very difficult to manage. Kristina?
Kristina Narvaez, MBA: Yeah. I'd like to add to that, about the supply chain and the stakeholders. If we didn't have supplies, we can't do our procedures. I mean, we're dead in the water, just like a lot of other industries do. But Missy was talking about the stakes are really high because no one wants to receive poor healthcare. I mean, there's no tolerance for that at all. And there's a lot of pressure to perform at a high level, but if you don't have the right products protecting the providers and protecting the patient, we have some real issues. And like I mentioned before about the chemicals of concern, where we're working on that and that's an initiative with a Healthcare Anchor Network with over 40 different healthcare systems, is removing any toxics in our supplies that could impact the hope of the provider and the health of the patient.
Prakash Chandran: So Patrick, you know, I wanted to take a step back from everything that we've talked about today, and I was hoping that you could educate us on how healthcare supply chains have changed over the past couple of years.
Patrick Brennan, MBA: Absolutely. Years ago, each of the health systems used to implement its own separate supply chain risk management program. Each one operated as its own silo and what that meant for the suppliers then, it was really difficult for them because they would get different requests from many, many different customers. And a lot of the time, there were just so many requests that the suppliers really wouldn't participate at all. And there was really very little that health systems could do about it. Suppliers really have a lot of negotiating power and they were not used to, you know, fielding requests from so many different customers.
So, there has been a response to that. In the last couple of years, an industry-wide collaboration has been formed by several of the leading healthcare systems like Intermountain, Mayo Clinic and Spectrum Health and Stanford, and many dozens of others got together to collaborate on supply chain risk management. This is a really exciting innovation. They've been able to get many dozens of health systems to manage supply chain risk together and to work with hundreds of their most critical suppliers that are participating. They formed a nonprofit organization called the Healthcare Industry Resilience Collaborative. It's a healthcare system-led organization, expressly aiming to improve patient care by making healthcare supplies more resilient.
So to answer your question, you know, where in the old days, people used to operate their own separate silos, these days, health systems have come together with their suppliers and are working on supply chain transparency and proactive risk management to cut down on disruptions before those threats hit. Missy, do you have some thoughts on that?
Missy Hill, RN: I do, Patrick. Thank you. I think that while most of America may look at the pandemic and respond to it with groanings and gnashing of teeth, I do believe maybe as an eternal optimist, that there have been some very, very good things that have come out of the pandemic. And one of which is that it has forced an enterprise risk management mindset onto supply chain executives. Sourcing is learning to balance costs and resiliency, which is very, very significant. What this means is that providers are needing to identify the risk that can affect their supply chain department. They need to know how these risks can impact their ability to provide supplies. It causes them to have to prioritize the risk based on likelihood and frequency. They need to know what the maximum downtime would be upon the unavailability of a critical item before there is a loss or harm. But also, it causes them to consider what the consequences would be for non-action. All of this requires this collaborative mindset that Patrick just spoke about.
Supply chain doesn't need to completely abandon the lean mentality though. That's still very important and it has its place, but now they know that some of their critical items do require some shelf depth. This requires a lot of breaking down of silos with clinicians and distributors and GPOs and even other providers in the community. And this requires a well thought out and practiced resiliency plan.
Patrick Brennan, MBA: I'd like to add to that. We will just talk about collaboration and some of the health systems that are listening to the podcast may be interested in getting involved in the collaboration. So the nonprofit organization I mentioned earlier is called the Healthcare Industry Resilience Collaborative or HIRC, and you can reach them at their website, hircstrong.com. That's H-I-R-C-S-T-R-O-N-G dot com. So this is a highly recommended and free resource to all health systems that will help each of the health systems to get a handle on transparency and proactive risk management in supply chain.
Prakash Chandran: So you know, once there is that visibility and transparency, and you're kind of looking at risk mitigation measures, talk tactically about what hospital systems and even suppliers have done to resolve this. Like, is it better redundancy of supplies? Is it better sourcing? Can you talk tactically, Kristina, about some of the implementations to alleviate this stress?
Kristina Narvaez, MBA: One of the things that we're doing at Intermountain Healthcare, and I'm working on with the supply chain organization is coming up with a Tableau supplier risk metrics dashboard. We're looking at nine different risk categories. And these are things that could cause a disruption in our supply chain, location risk and sourcing risks. We're looking at labor risks. We're looking at financial stability risks, compliance risks. We're looking at logistics risk, quality assurance risk. We're looking at sustainability risk and technology risk. And so where you're using a grading system, one to ten, one to three being low, four to six being medium risk and seven to ten being high risk, we're gathering different data sources, bringing them in to this Tableau supplier risk metrics dashboard, and coming up with a risk score card or risk profile of our suppliers. And this is not all our suppliers, it's our strategic suppliers, so probably the top 200 suppliers. And then we use that risk profile, risk score card in sourcing methodology. We use it in negotiating contracts. We use it in business reviews and also in our decision-making process for alternative suppliers.
Patrick Brennan, MBA: So in addition to what the provider can do as Kristina has laid out, suppliers are really critical to reducing the number of disruptions in the healthcare supply chain. Our data shows that 60% of disruptions can be prevented when suppliers have adequate risk management protections in place. So these are basic risk management practices, like having a recovery plan for your production site, having a designated crisis management team, working on crisis exercises at the production site, having sprinklers, these sorts of things. So there's actually a lot that suppliers can do in advance of events to make sure that they're not affected by disruptions. I really believe that suppliers are the key. They are able to put in place protections that prevent the majority of disruptions.
Missy Hill, RN: And from a GPO standpoint, Prakash, some of the most helpful collaboration occurs across our membership. So in times of need, sharing conservation strategies and best practices can be very helpful. We are collaborating with many stakeholders to develop critical supply profiles inclusive of conservation strategies, cross-references, common uses, best practices and other insights that are pertinent to this topic.
Prakash Chandran: So Kristina, the Healthcare Industry Resilience Collaborative or HIRC was mentioned previously by Patrick. Can you talk a little bit about how you personally have benefited from this?
Kristina Narvaez, MBA: Yeah. I have been affiliated with Healthcare Industry Resiliency Collaborative since last December, so December 2020. And I've been able to collaborate with Mayo Clinic and Spectrum and Stanford and Northwestern and University of Vermont and a number of other healthcare systems, sharing information back and forth. For example every Tuesday morning, a few members of HIRC, the providers that is, because there's providers and suppliers that are part of Healthcare Industry, Resiliency Collaboration, and on Tuesday morning about four or five of us healthcare providers come together and we look at the risk landscape across supply chain, our supply chains. And we ask ourselves what are some emerging risks that we see coming down the pipeline, for example, port issues in Los Angeles and Long Beach and how is that going to impact backorders and stuff. But also we're talking about raw material shortages. One of the discussions we had on Tuesday, December 14th was resin. And resin is a main component of producing plastics. And as you can imagine, plastics is used all over as for healthcare supplies. So, Mayo Clinic had a more detailed report on why we're having the resin shortage and where we're at and give feedback online on quarter two. And that's all based on the resin disruption in Texas where a lot of the resin plants, where 85% of the resins is produced in Texas. And so they gave me a report that I was able to give to my solutions director over commodity. And that solutions director was able to explain to the physicians and nurses why we're having back orders on certain products that include resin and part of it in plastics.
So I feel that that collaboration, that fraternity of sorts, is super useful to me because it's information that I am hearing from other healthcare systems. We also have a critical items list and we compare where are you at with these critical items? Are they backorders? And so as we come together as a group and we collaborate more with our healthcare suppliers, it will create better transparency and assurance in the healthcare supply chain.
Prakash Chandran: Well, Missy, Patrick and Kristina, this has been a truly informative and educational conversation today. I really appreciate your time.
Missy Hill, RN: Thank you.
Patrick Brennan, MBA: Thank you.
Kristina Narvaez, MBA: Thank you.
Prakash Chandran: That was Kristina Narvaez, Supplier Risk and Business Continuity Manager in the Supply Chain Organization at Intermountain Healthcare; Patrick Brennan, CEO and founder of Supply Risk Solutions and, finally, Missy Hill, Director of Disaster Management for Vizient. Thank you so much for joining us today.
The ASHRM podcast was made possible by the American Society for Healthcare Risk Management, to support efforts to advance safe and trusted healthcare through enterprise risk management. You can visit ashrm.org/membership to learn more and to become an ASHRM member.
My name is Prakash Chandran. Thank you again for listening and we'll talk next time.