Sponsor:

National Science Foundation

Research Team:

Manuel D. Rossetti, Amit Bhonsle

Universities Involved:

University of Arkansas

Start Date:

08/15/04

End Date:

07/31/08

Summary:

The objective of this project is to evaluate ways that hospital organizations manage their vertical chain of production, culminating in decisions regarding “make versus buy” and inventory stocking policies, and to provide health care managers with information that will allow them to make better strategic decisions about inventory and distribution to
improve the performance of their organizations.
This project is a collaborative research effort between CELDi and CHMR. Co-PI’s include Eugene S. Schneller, Lawton R. Burns.
The purpose of this proposal is to provide research in the area of health care logistics modeling and analysis through a NSF TIE Project between two highly successful NSF industry/university cooperative research center I/UCRCs. The Center for Engineering Logistics and Distribution (CELDi) at the University of Arkansas is a multi-campus NSF I/UCRC sponsored in part by the National Science Foundation specializing in logistics research. The Center for Health Management Research is also a multi-campus NSF I/UCRC with a lead institution at the University of Washington specializing in health care research. The research foci of these centers present a unique opportunity to examine issues related to the health care supply (value) chain. The health care value chain consists of the producers of medical products such as pharmaceuticals and medical devices, the purchasers of these products such as wholesalers and group purchasing organizations, the providers including hospitals, physicians, and pharmacies, the fiscal intermediaries (insurers, HMOs, etc.), and finally the payers (patients, employers, government, etc.). Each health care value chain may have a different structure, and therefore, different strategic management issues, costs, and performance abilities.
The aims of the proposed research are two-fold: (1) to evaluate the ways that hospital organizations manage their vertical chain of production, culminating in decisions regarding “make versus buy” and stocking policies; and (2) to provide health care managers with information that will allow them to make better strategic decisions about inventory and distribution to improve the performance of their organizations. The work is unique in (1) its multi-disciplinary approach, (2) the extent to which it is designed to assess inventory and distribution from the perspectives of managers themselves (3) in its focus on documenting and modeling observed progressive practices and processes to better understand strategic options, and, finally, (4) in its structured dissemination phase to assure that managerial practice is positively impacted. It is intended that this collaboration between management scholars, engineers, and system analysts will become a model for advancing the fledgling field of evidenced based management for health sector managerial decision making. The researchers will analyze the operations of several integrated delivery networks (IDNs) that represent three strategic approaches: make, ally, and buy. Case studies of representative firms will be performed to develop qualitative and quantitative data on the behavior and performance of the IDNs. In addition, a national survey of hospital material managers is planned. Part of the data gathered will be utilized to develop simulation models of various IDN configurations. The simulation models will enable the researchers to examine the quantitative performance of the IDNs across many exogenous variables. The purpose of the simulation study will be to analyze whether or not the configurations conform to the intended strategic requirements for the entities within the health care value chain. The intellectual merit of this project includes the high probability that the methods applied will result in generic findings for health care value chains. Among many outcomes, the project will 1) identify strategies leading IDNs take in managing their inventory, 2) examine how the changes that are affecting wholesalers/distributors are affecting the end-user clients, 3) detail the risks and strategies associated with inventory failure within the value chain, and 4) quantify the strategic importance of various IDN configurations. The research has strong industrial interest through the CELDi and CHMR, and their member organizations. The broader impact of this research will be magnified through tech
Large scale simulation models developed to simulate hospital systems. Methods to analyze stock keeping unit proliferation were developed.
Methods to analyze the cost of inventory decisions in health care were developed
The results will assist health care managers in better analyzing supply chains within the health care value chain. The inventory models both simulation and analytical can be used in other industries besides health care.
Contributions Beyond Science and Engineering:
The research to analyze health care costs can have a benefit within the health care industry.