Webinar Recap “Supply Chain Best Practices and Potential Tariff Implications for Community Hospitals and Medical Practices.”

Speaker 1: 0:32
supply chain best practices and potential tariff implications for community hospitals and medical practice. That was a mouthful, jason. How are you doing today?

Speaker 2: 0:43
Aaron, it’s great to be here. It’s great to recap an excellent webinar we had yesterday with our subject matter expert, phil Church, excited to talk through it.

Speaker 1: 0:52
Yeah, so for the podcast listeners, things are going to be a little bit different. We’re going to recap some direct quotes, some moments from the webinar, but we will have a link to the recording in our show notes. We do encourage you to go back and watch that and, yes, I say watch it. There is a PowerPoint that that goes along with it. It. There is a powerpoint that that goes along with it. But the idea here is that we’re going to recap, cover some of the the highlights for you, just to whet your appetite a little bit. So, before we get started, I think the the thing that we really uh need to focus on and maybe help explain, because we we hear it a lot in the headlines, is tariffs. Okay, we hear tariff and hopefully most of you who are listening understand what a tariff is, but I think it’d be good to lay some groundwork to understanding tariff.

Speaker 1: 1:48
Now, tariff is a import tax, so it’s a fee that’s assigned to an item being brought into the United States. So if you’re ordering something from Timu, it’s probably coming from China and there is $100 a unit and, honestly, the tariffs keep changing. So we’ll go with an easy number a 25% tariff that same hospital gown. Instead of being $100, is now $125. And I think you’ve heard it said by some politicians that the foreign country will be the one paying the tariff. No, that’s misleading. It is the importer that pays the tariff. So the supplier will be paying the $25, which makes their cost $125. And unless they are really really nice and they eat the cost of that, you’re going to be the one paying that extra money. So really that’s what we be the one paying that extra money. So really that’s what we’re talking about. In regards to tariffs, they’re a little more complicated than that. That’s just a high-level overview of how tariffs work. Typically, it’s going to raise the cost of goods in the United States. Jason, is that a good roundabout explainer?

Speaker 2: 3:12
Yeah, great setup, and so, hopefully, folks. Now we’re economists, right. We tend to do this every couple of years, don’t we? We were all physicians a few years ago, weren’t we? Now we’re all MMT-based economists here trying to figure out what tariffs are. But no good setup, Aaron.

Speaker 1: 3:31
Jason, I’ll tell you this, though On Facebook, I’m an expert on everything.

Speaker 2: 3:35
That’s right, that’s exactly right, tell you what I think. Tomorrow I’ll be an AI expert, but today, yeah, let’s pretend to be economists, shall we?

Speaker 1: 3:45
Now I will note that one of the things Phil brings up is that it’s not just tariffs, and I want to make that clear for our audience here. We’re going to harp on tariffs a little bit, particularly at the beginning, but there’s going to be COVID-like supply shortages and at the root of it is tariffs that’s causing this. But there is supply chain disruptions all over the place lack of contingency planning, et cetera. We’re going to get into that.

Speaker 2: 4:13
Yeah, just overall kind of setting this up. He did a great job, I thought, of applying how such economic policy can impact medical imports and just the not the cost side of it, but the sourcing side of it right, the challenges we’ll have to face. We of course revisited, as you mentioned, covid era, the disruptions there, the lessons learned from it. He then parlayed that into what we’ll see on the small and community hospital side of things and practices. And then, lastly, where I think Phil really brings a lot of knowledge and expertise is okay, now what? How do we assess our vendor contracts? How do we stockpile supplies? How do we talk to our vendors? A what to do now perspective.

Speaker 2: 5:00
So, just to set up Phil, that’s what our webinar entailed yesterday. So he did a really good job and I think we’ll talk through some of his primary points today, them up here to kind of start things off. As you mentioned, mike and I went back and forth on the few and I thought he did a really good job Phil did on answering the question why is this important now? And to today’s audience, in this case, hospital administrators, physician practice administrators why is this important now? So let’s take a listen.

Speaker 3: 5:34
Because everything we’re buying at this point could in some way be subject to these new tariffs. Even items, products, equipment that are quote made in the USA may have raw materials coming from other countries, and then they’ll be tariffed as well, coming in. So the pricing impacts that we’re looking at can vary widely, but it’s helpful to know what countries your products that you’re using are coming from, how they’re put together, where they’re put together, how they’re getting from point A to point B, and that’s part of what we’re looking at here today.

Speaker 2: 6:24
All right. So, as you heard there, you know again some input from Phil on why and who this is going to impact. Today, again, he hit on some key points, like you mentioned, aaron, on supply chain disruption, cost disruption You’re going to see that now again to the practices and hospital settings. So some good points there to Phil, points there to fill and to further again kind of dovetails into more specifics.

Speaker 2: 6:51
We asked him OK, this is changing every day right and like, you wake up and there’s a change to a certain policy or you know a certain rate to a certain country, you know who knows right it just you got to have your head on a stick here to keep it moving. So we asked him that question how best to keep up with these fast and fluid changes. And then, more importantly, and you’ll hear Mike ask this, how do I sync that up with the potential price impact for me? And so if I’ve got my own GPO arrangement of contracts and it’s got my terms in there, taking those terms and applying the rates that you mentioned at the beginning, aaron, how do those reconcile? Let’s, let’s take a listen here.

Speaker 1: 7:40
How do I keep up with it and how quickly is it going to change actual pricing of my supplies, actual pricing of my supplies.

Speaker 3: 7:47
Yeah, and that’s the key. I’ve talked to GPOs and most of their pricing, they say, is locked in through whatever the term of the contract is. And this is where your materials folks slash finance are going to need to be involved in working with your GPOs looking at your contracts, whether they’re GPO or local contract, looking at the price protection clauses, seeing when those terms come due. Most vendors increase their pricing or their contracts run out a lot of times at the beginning of each year, even though you’ve got multiple year contracts, a lot of times at the beginning of each year, even though you’ve got multiple-year contracts a lot of them. If it’s a five-year contract, that’s due at the end of this year, it might be term due this coming January and if that’s the case, that’s probably what we’re hearing from vendors that they’ll be passing along these price increases. To what degree we don’t know.

Speaker 2: 8:53
All right. So, as you heard there, again some good input from Phil. You know, aaron, we do this a lot. You’re on the data side of things and so hearing a way to kind of put perspective of I know I’ve got X cost to these supplies right and I’m anticipating, if most of these are coming from China, and the potential tariff impact. Who knows what could be X percent? Can I do the math today?

Speaker 1: 9:21
Yeah.

Speaker 2: 9:21
Yeah, I thought that was an interesting perspective.

Speaker 1: 9:24
Well, and it’s kind of a perfect opportunity. I think most organizations are probably either in the middle of budget season or about to kick off budget season and 3% and 5% cost increase over the next calendar year. You’re going to need a budget for 25 to 50, or, in some cases, 100% cost increase for some of your goods that are coming in from overseas. And Phil talks about this, about understanding your sources. Where are your vendors getting their things from? That’s going to help you better understand. Is it coming from China? Okay, what’s the tariff flavor of the day on China? Oh, it’s coming from Germany. What is the German tariff? And yes, it’s going to be a lot of extra legwork, but it’s going to pay off in terms of being able to accurately budget for these sort of things.

Speaker 2: 10:33
Yeah, good point, good point and you know he further went into we won’t necessarily go into it here but other ways, as Aaron mentioned. As you mentioned in the beginning, it’s not just tariffs we’re concerned about today, right, but the cost increases and Phil did go into a little bit detail as to other ways that vendors are going to pass along cost they incur to your point, aaron at the beginning to the provider. So if you’re a physician administrator listening or hospital CFO, there are other ways that the vendors are going to pass along those costs to you. To Aaron’s point at the beginning that Phil hits on, so you may want to take a listen to that as well. That point you know.

Speaker 2: 11:13
Another interesting area that Phil hit on, aaron is highlighting the importance of collaboration between teams, and obviously Phil comes from the materials world I want to say 35 years or so of materials. How then should materials work with the clinical folks? Right, we had a lessons learned just five years ago of disruption and how the two can communicate. So basically, a good lesson in transparency and better communication from materials all the way to the end user, which is the clinician communication from materials all the way to the end user, which is the clinician right.

Speaker 1: 11:51
If if kova taught us anything, it’s, it’s about how materials management isn’t just a logistics, it is a strategic resource and I think hospitals, if they haven’t shifted their thinking because of covid towards that, that was a good as time as any second best time.

Speaker 1: 12:13
You should have learned five years ago, but certainly you need to start treating your, your procurement process all of that as a strategic purchasing arm of the organization to help you plan for the future. For those rainy days and I see some clouds on the horizon but something else, phil hit on too. Around this time, particularly when it million dollars from that same supplier, they’re going to get priority treatment. Entering into joint purchasing agreements with other facilities that are like you, that aren’t necessarily your competitor, who are in the same world as you, you might be able to leverage some better pricing as well as getting some priority service. So I think that’s a strategic thing that our clients need to be thinking about.

Speaker 2: 13:32
Yeah, and let’s take a listen to Phil here on his elaboration to that point and internal team collaboration among folks.

Speaker 3: 13:40
I think we learn to communicate better with our clinical teams, the end users of these products, which ones are undergoing back orders or shortages or limited supplies allocations, whatever that they should be aware of that. There should be open communication about that to try to preserve as best they can and I think by and large most facilities, once they got that out there and pushed that and got administration involved that they push that communication out continually to let them know where you stand on products and which ones to try to be you know conserve as best as best possible, not to say that anybody’s wasting anything. But we did find certain practices in most places where you know they grabbed three or four or something when one or two could do right. Try to be conscious of that that we’re having, we’re undergoing problems and it’s costing more.

Speaker 2: 14:51
And there’s Phil there again hitting on some important points around communication. Right, we’ve been harping on cost and disruption. Let’s not forget there’s multi-team collaboration that must occur to keep things running smoothly. So good points there made by Phil, and further elaboration on those that weren’t around to your point, aaron, maybe you weren’t around during COVID. Okay, so Phil gives some good advice there, as well as to the newbies, if you will, on what you can learn from an event that you maybe didn’t participate through right. So, and lastly, you know we hit a lot on what I think Phil did a tremendous job on is sort of recommendations. What do you do today? Like, literally, it is, you know, tuesday, it’s Wednesday. What can I do today, even though this is a fluid thing? What can I do to best prepare myself, not only because of terrorists, but just what I should do as general best practices? Anyhow, let’s take a listen here at Phil and some key items he suggests. Give me something that I can take away and do something soon.

Speaker 3: 15:57
Yeah, again, look at your contracts and understand them. If you don’t understand what it’s saying, get in touch with whoever wrote that contract on the vendor side. Talk to them about it, make sure you understand what your options are, how you’re protected or not. Order what you can, what you can afford and what you can store and what’s allowed for you by the vendor to order. And then I think real key point is assessing this Where’s the source of your supplies or equipment, parts, whatever we’re talking about?

Speaker 3: 16:38
Where are they coming from? Need to know a little bit more about that, or a lot more about that if we’ve never done it right. Understand where they’re manufactured at. Just because you buy Cardinal surgical packs doesn’t mean they’re not, and they’re coming out of a distribution center in Jacksonville or wherever does not mean that they’re being manufactured here in the US. You know there’s a big plant in Mexico. It’s going to take people started building plants now to bring manufacturing back into the US. It’s going to take years for that to get implemented. In the meantime, we’re expecting what we’re talking about today increases in costs. So you really need to understand where your stuff’s coming from and what’s apt to be hit by this and to what degree.

Speaker 2: 17:38
So, Aaron, some good points.

Speaker 3: 17:40
Phil made there.

Speaker 2: 17:41
My takeaway. I’ll say if there was one thing I took away from Phil in what to do it’s contracts, contracts, contracts right, like pull your we talk about with managed care pull your GPO contracts. Talk to your vendors he mentioned even bring them in the office, have a conversation with them and talk through the terms and what they’re doing with them. And talk through the terms and what they’re doing. I found that pretty insightful. I don’t know about you, but in my eyes I kept thinking let me look at the contracts. Well, Phil went a little bit further and said you know what? Ask the vendor on that contract. What are they doing? What are they seeing? Some good points he made there.

Speaker 1: 18:23
Yeah, yeah. Even being able to get some additional insights into the supply chain process is, I think, going to be very valuable. But I think Phil emphasized well about those relationships. That is more than just contracts having a relationship with your vendor or vendors, and they can better understand and anticipate your needs too. So I think it’s more than just contracts, it’s more than just procurement, it is about relationships. At the end of the day and I want to say this Jason, tariffs could go away tomorrow.

Speaker 1: 18:50
You know it wouldn’t surprise me if we woke up and, oh, tariffs are off, but there could be another pandemic, there could be another major natural disaster that disrupts those supply chain. It doesn’t matter what it is. It is more important than ever before for organizations, particularly those in healthcare, to plan for these sort of contingencies.

Speaker 2: 19:16
Yeah, good point, good point. You don’t need an event with a name on it, like tariffs, to get you best prepared for any event regardless of what that may be.

Speaker 2: 19:24
Yeah, that’s a good point and you know, again, we won’t necessarily replay all the webinar here. There’s a good 40-minute discussion or so by Phil, but he also hits on you know what ordering to do’s now and some terminology you should be aware of, like allocations. If you’re not in the materials world but you need to review contracts, he gives out some things to look at in the contract. So take a listen. It’s worth the 40 minutes. It was a really good conversation by Phil.

Speaker 2: 19:51
As he mentioned too, we’re going to try and do this again, as there are updates, who knows when? 30 days, 90 days, something like that but we may do another one and if so, you’ll be lucky enough to hear Aaron and I once again, as we try to do a different format this season of recapping events. So again, aaron, it was a great webinar yesterday. I want to say if you have any questions on this it’s a big topic, it’s an important topic Reach out to us. We’ll get you in touch with someone that can help answer some questions. We’ll get you in touch with someone that can help answer some questions, but in the meantime, our next recording for our next event be on the lookout for it. I think it’s a little bit more on the analytics side with a conference presentation that some of our folks are doing, so we’ll recap that excellent work as well.

Speaker 1: 20:39
That should be fun. I’m looking forward to it. Well, jason, appreciate the time today and for the listeners. We will see you all next time. And that’s it for this episode of Beyond the Stethoscope Vital Conversations with SHP. I’m Aaron Henry.

Speaker 2: 21:00
I’m Jason Crosby, still talking to the mic as if it was my full-time job.

Speaker 1: 21:04
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Speaker 2: 21:12
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Speaker 1: 21:18
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Speaker 2: 21:29
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Speaker 1: 21:39
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Speaker 2: 21:50
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Speaker 1: 22:03
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Speaker 2: 22:15
Thanks for hanging with us everybody. We’ll be back soon in your feeds, assuming no one pulls the plug, or trips over, for that matter.

Speaker 1: 22:23
But until then, stay curious, stay healthy and keep asking the vital questions. Maybe stay hydrated.

Speaker 2: 22:31
Just a thought Bye y’all. You know I’m pretty frustrated. I’ve been looking for my Gone in 60 Seconds DVD. It was here just a minute ago.