Achieving the status of high reliability for healthcare supply chains is a multi-step endeavor, of which one of the most important is standardizing item formularies and purchasing processes to orchestrate demand decisions from the front end of the procurement process.
This is particularly important in a current climate that is marked by supply shortages, shrinking health system revenues, and increasing costs due to inflation.
Two methods in the process of achieving high reliability while responding to supply chain challenges include broadening the supply chain’s span of control and shaping demand across thousands of purchasing decisions being made every day by a health system.
Both of these methods are complemented by the standardization that results from rigid formulary control at the point of service.
What Is Formulary Control?
Formulary control ensures that supply chains can control purchasing compliance from the front end of the procurement lifecycle. It includes the ability to operationalize contracts, and then direct purchasing decisions to approved items from contracted suppliers at the correct contract price. This requires the active involvement of value analysis to assess the efficacy of products, sourcing professionals to manage supply channel risks, and contracting teams to align contract coverage across the demand footprint.
Once item formularies are approved for use by the various functional arenas of the hospital – clinical, operational, and financial – then driving purchasing activity to contractually compliant and cost optimized product options requires that requesters have access to a single procurement workflow to order the approved and preferred items they need.
Formulary control is critical for orchestrating demand in real-time to enforce compliance from the front end of the procurement process on thousands of purchasing decisions made every day in healthcare. It is especially critical for rapid response to such challenges as product shortages or supply disruptions as well as to provide a simplified, managed workflow for contract conversions.
Health systems must strike a balance for their end-users between control and giving them adequate preference options where applicable. During Prodigo Solutions’ 2022 User Conference, supply chain leaders indicated that it was more important to give requesters flexibility when selecting preferred, contracted items than a more restrictive “less-is-best” strategy that can result in special request increases.
How Does Formulary Control Work?
Formulary control prescribes the items that are available for purchase by a requester based on their role, location, and service needs. It presents requesters with purchase options that are aligned with procurement policies, accurate, and compliant with clinical outcomes and patient care objectives.
Through the process, supply chains are able to orchestrate a directed buying journey for requesters that drives purchasing behaviors toward cost-savings objectives. Additionally, formulary control enables the flexibility to respond to specific clinical preferences and ordering thresholds without eroding contracted commitments.
Similar to the other five high-reliability priorities, there are challenges when putting this into practice.
First is the evolving condition of healthcare supply chains. Product shortages and inflation continue to have detrimental impacts on patient care and the rising cost of healthcare. Supply chains must provide rapid response to market data and product availability information to mitigate disruptions and manage costs.
Second is a lack of supply chain visibility, which creates blind spots for requesters at the point of service. Supply chain consumers want to do the right thing and adhere with the organization’s preferred buying practices but are often left unaware of what their preferred options are.
To combat such challenges, supply chains must standardize procedural formularies, and then direct purchasing decisions to eliminate variance and ensure that all items are approved for use and purchased from the right source at the contracted price.
Prodigo directs end users to the best option without them needing to know the item, vendor, or contract relationship and, in the process, helps them to reach their organization’s compliancy, equity, and sustainability goals. This also enables them to achieve the third tenet of the high-reliability healthcare organization.
A healthcare organization’s cost, quality, and outcome priorities define which contract sources, items, and prices are available for purchase. Prodigo’s filtering logic and smart search dynamically determines which items and prices are available to the requester based on their business unit, requesting or inventory locations, role, distribution channel, or contract commitments.
This high-reliability priority restricts discretionary purchasing options to eliminate rogue or noncompliant supplies from entering the supply chain. This eliminates costly manual sourcing workflows and reduces risks of unvetted or counterfeit items being introduced in patient care events as well as maximizes the negotiated savings anticipated through the contract lifecycle. Every dollar of clinically aligned and compliant spend that flows through the supply chain is an opportunity to simplify healthcare, impact patients and families, and control costs.
Prodigo Gives the Supply Chain More Control
Prodigo’s Solutions Suite consolidates an organization’s spend – for supplies, purchased services, and capital – into a single, compliant procurement workflow.
Prodigo helps healthcare organizations build a virtual item master that acts as a single source of truth to contracted and approved items. Its directed buying platform gives the supply chain more control over what is purchased and where it’s purchased by directing users to preferred sources of supply, matching demand with approved item formularies that support an organization’s clinical, diversity, and ESG (environmental, social, and governance) initiatives.