Health Care Law and Regulations
You have read about several interesting topics this week related to supply chain management. Select one of interest to you and develop a 250-word summary of the topic and how you would address it as an Administrator having oversight. Think out of the box and be creative. Global Supply Chain Management
Global Supply Chain Management
“I cannot say whether things will get better if we change; what I can say is they must change if they are to get better.”
— Georg Christoph Lichtenberg
Lecture Overview
Principles and Applications
Business Process Outsourcing
Offshoring of Health Care Outsourcing
Flattening of the U.S. Health Care System
Supplying Hospital Staff Versus Medical Expertise
Medical Products Outsourcing
Global Drug Manufacturing in China
Early-Stage Medical Products Research in India
Captives and Business Process Organizations
Hybrid Program Offices
Virtual Captives
Privacy Concerns
What Lies Ahead for Outsourcing
Source: Hammaker, D. K., & Knadig, T. M. with Tomlinson, S.J. (2017). Processes for thinking about the U.S. health care system. In Health care management and the law: Principles and applications (pp. 295-312). (2nd Ed.) Burlington, MA: Jones & Bartlett Learning.
Principles and Applications
Leveraging network connectivity (internet of things) is the next frontier for the health care industry.
Efficient supply chains can create value for health care providers by:
Cutting costs
Deploying new delivery system models
Offering new medical products and services
The Food and Drug Administration Safety and Innovation Act of 2012 strengthens the Food and Drug Administration’s (FDA) ability to safeguard and advance public health by enhancing the safety of global supply chains.
Business Process Outsourcing (1 of 2)
Business process outsourcing, the use of outside vendors for the performance of general administrative services, is a critical issue for the health care industry, in:
Accounting
Claims processing
Customer relationship management
Finance
Human resources
Procurement
Business Process Outsourcing (2 of 2)
The need for outsourcing is intensifying as the demand to create value in health care continues to multiply.
As discretionary patient spending expands due to the growth of consumer-directed health care, the demands for cost-effective care and medical products will only increase.
Outsourcing transfers responsibility for ongoing management tasks and execution of business activities, processes, or functional areas in order to improve efficiency and performance.
Offshoring of Health Care Outsourcing
The following specialized medical services are outsourced and sent offshore with growing frequency as hospitals and health plans come under heightened pressure to cut costs and enhance value:
Billing
Collation
Insurance claims processing
Technical information support
Transcription
X-ray analysis
As the cost of telecommunications time falls and cloud technologies and robotic process automation expands, the volume of medicine practiced in cyberspace is steadily increasing.
Flattening of the U.S. Health Care System (1 of 2)
It is possible to do business nearly instantaneously worldwide with:
Connectivity
Globalization
Technology
The decision to outsource the function allows health care providers to focus their resources on their core competencies, which are:
Clinical care
Medical education
Research
Strategic treatment procedures
Flattening of the U.S. Health Care System (2 of 2)
Most academic medical centers do not engage in business functions unrelated to their core functions, such as:
Food services
Insurance claim processing
Maintenance
Patient billing
Security staffing
They focus instead on clinical care, medical education, and research.
The outsourcing of American medical jobs will only surge with technological innovations in the fields of telemedicine and cybersurgery.
There are outsourcing specialists for almost every business process who are better at providing the service for many health care providers than any one provider on their own, for instance:
In health care systems integration, outside vendors can integrate data standards for use in electronic medical records, computerized provider order entry systems, and genetic databases, within technical frameworks to clean and integrate quality medical data.
Supplying Hospital Staff Versus Medical Expertise (3 of 5)
Teleradiology
Statistics show radiological outsourcing growing with a significant number of hospitals currently engaging in such a practice.
Reliable estimates as to the size of this offshore market do not exist since teleradiology is currently provided primarily by a number of private firms that are not obligated to file public reports.
Teleradiology is the largest component of international telemedicine today in terms of complexity and cost.
The hospital no longer tells the physicians and technicians how to analyze patient X-rays; now the hospital and outsourcing firm agree on the outcomes of the analysis andthe hospital pays the outsourcing firm depending on the number of X-rays analyzed.
Supplying Hospital Staff Versus Medical Expertise (4 of 5)
Telecardiology, Teledermatology, Telepharmacy, Telepathology, Telepsychiatry, Teledermatology, telecardiology, telepathology, and telepsychiatry simply involve videoconferencing
Telesurgery occurs either when a remotely located physician provides video assistance to physicians performing a surgery or when a physician uses a remote robotic arm during surgery.
Supplying Hospital Staff Versus Medical Expertise (5 of 5)
Outsourcing Centers of Excellence
With health data concentrated into centers of excellence where the best skill sets exist, the economies of scale would cause the net unit cost for radiographic interpretation to fall below the costs currently generated by radiologists interpreting films under exclusive contracts in hospitals.
Centers of excellence could be located in U.S. health care facilities where patient care is offered at an exemplary level on a wide range of measures or in emerging economies in health care facilities with exemplary patient care around the world.
Medical Products Outsourcing (1 of 2)
Nearly 80% of the active ingredients and almost 40% of the finished drugs and medical devices used by U.S. consumers are manufactured abroad.
In the majority of areas of medical products outsourcing, most of the concerns boil down to audit of standardized procedures, including:
Business data analytics, clinical trials, cost and price analyses, early-stage drug development, enterprise resource planning systems, environmental health and safety, manufacturing, production planning, and quality assurance and quality oversight.
FDA guidelines provide a system of business processes to assure that the medical products produced by manufacturers have what they are represented to possess in terms of:
Composition, identity, purity, quality, and strength
Medical Products Outsourcing (2 of 2)
Good manufacturing practice guidelines address operating procedures and documentation requirements for:
Distribution, in-house testing, production and process controls, qualifications of manufacturing personnel, raw materials quality assurance, record-keeping of substances throughout the manufacturing process, standards for cleanliness and safety, and warehousing.
It is advantageous for producers of medical products to use outside vendors for outsourced work.
Medical Products Outsourcing: Risk Management of Outsourcing Relationships (1 of 2)
Firms incorporate detailed clauses into their outsourcing contracts such as:
Clear deadlines
Database locks that prevent reopening the data after it is finalized
Standards for accuracy.
Information transferred offshore is only protected insofar as the terms of the outsourcing contract provide and as the destination country permits.
Medical Products Outsourcing: Risk Management of Outsourcing Relationships (2 of 2)
In coming up with outsourcing contracts, firms take into account:
Operational risks
Performance risks
All risks involved in U.S. provider outsourcing can be managed through the right:
Acceptable service-level agreements
Outsourcing delivery model
Clear-cut price negotiation
Proper contractor selection
Medical Products Outsourcing: Protection of Tacit Knowledge
Concerns about the misuse of residual knowledge can be mitigated by requiring outside vendors to be quarantined after sensitive projects, meaning they cannot work with competitors for a limited period of time.
Corporate epistemology (the branch of philosophy that explains how a person gains and verifies knowledge) must be documented before outsourcing can be successful.
The less tangible the work the more closely strategic activities should be held and not outsourced.
Global Drug Manufacturing in China
The Chinese State Food and Drug Administration (Chinese State FDA) works with its foreign regulatory counterparts to monitor drug-ingredient production to ensure that raw materials are:
Clean
Consistent
Traceable
Safeguarding the legality, quality, and safety of active pharmaceutical ingredients is the ultimate responsibility of the global pharmaceutical and generic manufacturers and the importing countries.
Early-Stage Medical Products Research in India: Patent Protection & Ready Access to Clinical Trial Participants
Patent Protection
Earlier concerns about protection of intellectual property in India diminished significantly after the Indian government introduced patent legislation.
Ready Access to Clinical Trial Participants
Research indicates that conducting clinical trials in India can lower early-stage drug discovery costs by $35 to $50 million per new drug due to:
Rapid enrollment of participants in trials
Shortened enrollment timelines for clinical trials
Producer’s avoidance of fiduciary status with participants in trials
Shifting of liability claims to the clinical research organizations in India that are conducting the clinical trials
Early-Stage Medical Products Research in India: Avoidance of Fiduciary Status & Wage Arbitrage of Educated Workforce
Avoidance Fiduciary Status
Producers of medical products can avoid fiduciary status and some liability claims by designing protocols to comply with FDA regulations and outsourcing their clinical research.
Wage Arbitrage of Educated Workforce
India has some 22 million university graduates, including 6 million science graduates, 1.2 million with engineering degrees, and 600,000 physicians.
Captives and Business Process Organizations
Domestic captive centers are starting to move their information extraction and reporting tasks offshore, which is made possible by:
The convergence in health care computing platforms
The rapid advances in communications technology
Providers in the U.S. health care industry, as a result of the increase in costs for providing accurate and timely personal health information, will need to:
Hire more staff
Increase the expertise levels of existing staff
Hybrid Program Offices
Outside vendors have developed businesses for the delivery of higher end health care services that are a hybrid between captive organizations doing business in house and traditional work outsourced by contractors.
Program offices are centralized centers that monitor, influence, and control projects to make them more efficient.
With the development of health information technology, program offices can work very closely with U.S. health care providers to the point where the outsourcing firm’s employees become almost like the U.S. provider’s employees.
Virtual Captives
Virtual captives are the latest outsourcing model to evolve in the U.S. health care industry, and are like health care providers having their own captive.
The captive obtains the following resources to do the work:
Human resources, management, and administration.
Virtual captives satisfy:
Cost benefits, obtaining the right skill sets, and protecting intellectual property.
Virtual Captives: In-House Outsourcing and Reshoring Versus Offshoring
A significant number of outsourced functions are actually coming back to the United States.
Many health care providers are talking about in-house outsourcing and reshoring as opposed to offshoring.
Health providers also want to participate in outsourcing decisions as opposed to turning over their employees and asking the outside vendors to do specific functions for them.
Virtual Captives: Management of Multiple Supply Chains
Health providers will go to multiple outside vendors to get their non-core job functions done. Outside vendors must show good:
Business processes, which they already have
Domain expertise in the business functions in which they participate
The U.S. health care industry is looking for ways outsourcing can increase:
Their revenue or their patient base
The satisfaction of their customers, the patients
Privacy Concerns
Isolated data security and privacy violations have become high-visibility issues disproportionate to the ground realities of outside vendors.
The FDIC recommends that three general areas be considered when outsourcing offshore:
Privacy risks in the offshore outsourcing firm’s country
Ongoing oversight of all third party contractors
Contract provisions that protect the privacy of patients and their medical data
What Lies Ahead for Outsourcing?
Given the huge risks of failure for medical services and products, health care providers must think about not only the benefit of outsourcing for tomorrow but also about whether they can sustain it.
Independent of the potential for system-wide efficiencies, increased use of outside vendors could:
Create economies of scale
Improve access to care
Improve competition among providers
Reduce medical errors