How a Supply Chain Management Framework Can Get You to the ... Tommy Boy... · Benfield-Gallagher [email protected] Consulting and insurance brokerage services to be provided

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™

Ideas, Execution and the “Tommy Boy” Effect:

How a Supply Chain Management Framework

Can Get You to the Next Level JANUARY 25, 2017


Supply Chain Management Is…

© 2015 Benfield, a division of Gallagher Benefit Services, Inc. Employer & Coalition Market Overview and Trends. All rights reserved. 2

The Global Supply

Chain Forum

Supply Chain Management is the management of relationships in the

network of organizations, from end customers through original

suppliers, using key cross-functional business processes to create

value for customers and other stakeholders.

Focused on Value

Multi-Stakeholder

Collaborative


Supply Chain Management is an

Established Management Science



Brief History – Health Benefits

Supply Chain Management


2005 2009 2015 2016 2017

SCM

happening,

but not yet

labeled as

such.

SCM

framework

developed

as part of

an exec ed

program

sponsored

by J&J.

Interest in SCM

concept leads to

writing of a book

Framed by

the language

or not, SCM-

like strategies

and initiatives

grow.

Health

Transformation

Alliance forms

and announces

itself in early

2016.

“…the companies

seek to make the

current multilayered

supply chain more

efficient.”

SCM language

being used more

Bounce in

requests for

book

Benfield

engaged to help

NC Chamber

transform

healthcare in

state via SCM

framework


Time is Right for Health Benefits

Supply Chain Management

• Affordable Care Act

– Electronic data infrastructure

– Cost and quality transparency

– Government movement toward value-based payment models

• Provider-side transformation and desire to capitalize on investments

in differentiated quality

• Employers more willing to look beyond traditional partners for

solutions

– Hitting limits of cost-shifting as a solution

– Anti-establishment sentiments/trust factor

– Success models growing

• Traditional partners more willing/able to innovate their models



Simplified Health Benefits

Supply Chain

6

Employers

Tier 3

Manufacturers/

Suppliers

• Prescription

Drugs

• Consumer

Products

• Devices

• Diagnostics

• Info Technology

Tier 2

Providers

• Primary Care

• Specialists

• Systems of Care

• Retail

Pharmacies

• Etc.

Tier 1

Intermediaries

• Health Plans

• PBMs

• Specialty

Drug Managers

Benefits &

Programs Demand Demand

Employees,

Dependents &

Retirees

Provide


Attributes, Effects and Implications


Unique Attributes

• Multiple stakeholders

at every stage of the

supply chain engage

directly with each

other and with the

end user

• Multiple stakeholders

are involved in the

healthcare purchasing

decisions

• No stakeholder sees

the full value equation

• All stakeholders face a

“many-to-many”

problem, and no

stakeholder is in

control

• Incentives and

strategies are

misaligned, and

negotiations are often

“zero sum”

• Most stakeholders are

frustrated and many

tend to see

themselves as victims

Effects

• The opportunity to

create better value is

substantial

• Changing how the

market operates

requires extensive

collaboration, both

within and across

stakeholder groups

• Employers are critical

to success/need to

drive alignment

• Principles of strategic

supply chain

management are

directly relevant

Implications


Strategic Management of the Health

Benefits Supply Chain – Principles

8

Leverage

success to

expand and

extend

collaboration

to other priority

opportunities

Manage

priority

customer and

supplier

relationships

to drive value

creation

Identify and

engage key

supply chain

stakeholders

that are

essential for

creating

value

Focus on high

priority

opportunities

to improve

value

Achieve

consensus on

what “value” is

1 2 3 4 5

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 Benfield, a division of Gallagher Benefit Services, Inc. Employer & Coalition Market Overview and Trends. All rights reserved. 9


1. Define Value – Employer Perspective


Question: What is your company trying to purchase

with money spent on health-related benefits &

programs?


Value of Investments in Health

11

Value of

Investments

in Health

Potential Benefits from Money Spent: Health

outcomes, lower absence, lower disability, higher

work output, improved safety, improved resiliency,

improved quality or service, increased employee

satisfaction, cost offsets,…

Total Costs

Value should reflect connection between business strategy,

human capital performance, health and health benefits.

• What do we do?

• How do people contribute to business success?

• How does health improve or impair performance?

• How do health-related benefits and programs help us

compete for talent?


2. Focus on High-Priority Opportunities

to Improve Value

12

Question: What are your company’s top three

opportunities to get better value by generating more

beneficial outcomes for money spent, and/or

reducing total costs?


To Increase Value – Increase Beneficial

Outcomes and/or Reduce Cost


More

Less

Less More

Ch

an

ge

in

be

ne

ficia

l

ou

tco

me

s

Change in Total Cost

Same

Same


Identifying Priorities - Considerations

• Conclusions should be data-driven

• Benefits and Costs may be broadly defined

• Priorities should align to business/human capital strategy

• Ways to think about priorities

– High risk/high cost people (5/50 rule)

– High cost conditions

– Key risks/drivers of future high cost conditions

– Employee satisfaction/employer of choice requirements

• Start with a winnable collaboration opportunity

14


3: Identify and Engage Key Stakeholders

Who Are Essential for Creating Value

15

Question: Who are the stakeholders that can most

directly and profoundly help create more value?


Identify and Engage Key Stakeholders -

Considerations

• “Key” stakeholders:

– Will vary based on the value opportunity being pursued

– Where the rubber meets the road in value creation

– Employees/patients almost always key stakeholders

• Focus on fewer stakeholders first, then expand – after key

stakeholder value creation opportunity is well-defined,

and key contributor relationships are well-understood

16


4: Manage Key Stakeholder and Customer

Relationships to Engage Them in Value

Creation

17

Question: How will we manage key stakeholders to

drive value creation?


Manage Key Stakeholders -

Considerations

• “Management” framed by metrics, data, responsibilities, accountabilities and incentives…aligned to value creation

• Includes consumers/patients

• May require:

– New investments

– Program, policy and procedure changes

– Different/shared risk and reward arrangements to align incentives toward success

• Often, will need intermediary support to help refine and implement arrangements…expect friction; negotiate to an effective solution

18


5: Leverage Success to Expand and Extend

Collaboration to Other Priority Opportunities

19

Question: How do we drive deeper? Can we move

to the next priority?


5: Leverage Success - Considerations

• Start small/think big

• Leverage ROI from initial

success to:

– Do more of the same with same

partner

– Do something different with the

same partner

– Do same with different partners

20

“We’re thinking about this like building a highway. We’re only paving

one lane, but we’re grading eight.” Craig Osterhues – GE Aviation


Reasons to Believe

Logic Evidence Experience

• Buyers talking directly

to sellers

• Ability to align

incentives to focus on

value creation

• Reduce/eliminate

zero-sum behaviors

that drive up costs

• Weed out non-

collaborative mindset

• Maine

• Cincinnati

Collaborative

• Washington Health

Alliance/Health

Authority

• Intel

o Healthcare

Marketplace

Collaborative,

Portland

o Connected Care in

New Mexico

• IQ Health Care

experience to date


Resources

• Tommy Boy article here.

• Chapter 1 of Bridging the Value Gap available here.

• Update on Cincinnati Collaborative is available here.

• White paper on Intel’s Connected Care initiative here.

• Global Supply Chain Forum here.


http://us1.campaign-archive2.com/?u=7d45a65472ae73848845a8257&id=ec1def26ba&e=708e54ec68

http://www.bridgingthevaluegap.com/takeapeek.html

http://www.healthtransformation.ohio.gov/LinkClick.aspx?fileticket=6o9aXFsRnjg%3D&tabid=114

https://fisher.osu.edu/centers-partnerships/gscf


Chuck Reynolds | Area President

Benfield-Gallagher

[email protected]

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How a Supply Chain Management Framework Can Get You to the ... Tommy Boy... · Benfield-Gallagher [email protected] Consulting and insurance brokerage services to be provided