Masters of Healthcare Supply Chain: A Conversation with Hall of Famer Ed Hisscock

Unlock the secrets of healthcare supply chain mastery with Ed Hisscock , Trinity Health's visionary and the newest addition to the Bellwether Supply Chain Healthcare Supply Chain Hall of Fame. Our riveting conversation peels back the layers of this complex industry, shining a spotlight on Ed's remarkable career and the pivotal role of total cost to serve as the yardstick for assessing supply chain prowess. As Trinity Health claims the title of the largest PACE provider in the United States, we explore the nuances of delivering home and community-based care to the elderly, all set against the backdrop of Ed's unique experience as a Michigan State Supply Chain School graduate in the heart of Ann Arbor's fierce sports rivalries.

Step inside the world of healthcare supply chains, a realm fraught with inefficiencies and ripe with opportunities for innovation. This episode traverses the landscape of waste within healthcare systems, drawing stark comparisons to the efficiency of industries like grocery to spotlight potential for improvement. We dissect the challenges of distributing products across an array of care settings, tackle the financial tightropes walked by not-for-profit organizations, and demystify the misconceptions surrounding healthcare profitability. In the face of a pressing need for supply chain talent, we underscore the burgeoning academic interest in this critical field. Join the discourse as we navigate the imperatives of strategic acquisitions, the art of contract negotiation, and the collaborative push towards a leaner, meaner supply chain that benefits all.

Transcript

Fred Crans: 0:02

Hi there everybody. This is Fred Crans from the St Onge Company. We are starting a series that we're going to talk about conversations with supply chain difference makers, where we'll talk to some of the influential people in the healthcare supply chain, get their input to the issues they're facing, the sweet topics they like to talk about and like to address. And we're going to start the series off with my good friend and former boss, ed Hiscock, who is from Trinity Health in Livonia, michigan. Ed was a 2022 inductee to the Bellwether Supply Chain Healthcare Supply Chain Hall of Fame and Ed, of course, is not wearing his pin, like he's supposed to be wearing it. I am the. He's got his. I see the trophy in the background. That's great, but, ed, why don't you tell us a little bit about yourself and about your role at Trinity?

Ed Hisscock: 1:00

Sure Well, thank you, fred. I really appreciate being here and being your inaugural, maybe practice session, right, but no flattered Thank you. You know I've personally I've just had a very blessed career. I just I don't say no when somebody asks, would you like to, or what about? And I found myself serving in all facets of this industry, all supply chain. But I've been on the supplier side, I've owned a consultancy, I owned a small tech company and, of course, on the provider side. That's where I started my career and where I'm ending my career is on the provider side and I wouldn't trade any of those experiences for anything. It's just really helped me understand really where the opportunities are. You know, when you talk about Difference Maker, it's really just seeing those opportunities. I think we all have opportunities to make a difference. It's just knowing where to look. Sometimes so happy to be here.

Ed Hisscock: 2:08

As I said, trinity Health we're a $21 billion organization, which is not insignificant. We've topped the 100 hospital mark. We're now 101 facilities with some recent acquisitions in the state of Iowa, facilities with some recent acquisitions in the state of Iowa and have, as you might imagine, surrounding those acute care facilities, just a plethora of other community care and mission-based work that we do in the communities that we serve. We are actually the country's largest PACE provider and that program for the elderly is growing rapidly, and I for one, at this stage of my life, I'm happy to see that, because I think it's a wonderful program to be able to give people the independence to still live in their home but then bring them to a location for social activities as well as all of their care. I think it's just a wonderful way to maintain independence as long as possible for the elderly, so very proud of that. So yeah, that's a little bit about me and a little bit about Trinity Health.

Fred Crans: 3:18

Well, before I start with my first question, I have a pre-question question. My first question I have a pre-question question. Okay, I know that you are a graduate of Michigan State Supply Chain School and I also know that you live in Ann Arbor. How hard is it to have to bear with the fact that one of your arch rivals is now the national champion? Who's that?

Ed Hisscock: 3:51

So that's how you handle it. Huh, ignore it. No, no, it's, it's all good, you know it's. We're happy to see the big 10 represented and um, um, yeah, so we're, we're towing, we're towing the uh kind of company line there, but uh, but yeah, glad the Big Ten's in it Couldn't pick a school with a bigger ego to win the national championship, but those two shall pass.

Fred Crans: 4:13

So there you go A school with a bigger ego or a coach with a bigger ego, I don't know which. You know, ed, you've always been about measuring performance and I know you're a data-driven guy and I know you've got a big data-driven background. What KPI do you use and how can you tell if your supply chain is performing well?

Ed Hisscock: 4:40

You know there's probably about 642 answers to that question, right, because when you our supply chain is very complex, as you hear all the time, it's not untrue and actually in healthcare we have multiple supply chains. We got a food service supply chain, we got a hospitality or hotel supply chain because we put people up for a period of time, so we need everything. A hospital or a hotel would need um or food service, because we feed them um, and we're a healthcare supply chain and we're a laboratory supply chain and we're right, so there's just multiple supply chains. So it it creates a lot of complexity and um. So there's a lot of ways to measure and what I've been pursuing over the last several years and I think this year with the management fellow that I've been working with here, precepting this year, I think we're finally going to get to a place where we will have a control tower set up with a single KPI and that is our total cost to serve and cost to serve.

Ed Hisscock: 5:49

Cts is a thing in supply chains in other industries and in fact it's what drives the price of the product to a specific customer is how much it takes to serve that customer. How much does it cost to serve that customer? How much does it cost to serve that customer? And then that helps you decide what price to make the desired margin that you would like to make on that customer. But in healthcare it's not really a thing yet. We're starting to talk about it, I'm hearing more about it. Some of the work that Gartner's doing recently and their benchmarking kind of gets us to a cost to serve. But it really takes everything and pulls all those 642 measures into one and sums it up and says all right, what does it take us at Trinity Health from a supply chain perspective? What does it cost us to serve each patient that we serve? And then you start breaking that into its constituent pieces to try and affect change. But it's been an interesting journey to get to that metric and we're in the process.

Ed Hisscock: 6:53

Next year we'll take a lot of time and this has been work now for what will be three management fellows that I've precepted, management fellows that I've precepted. But next year we'll be spending some time bringing all of the various departmental measures, the productivity and our procure-to-pay, the inventory measures at our distribution center transportation cost as well as a price for the products and the labor that goes into those products and securing those prices and contracting and sourcing and VA. So just a lot of components there. But we'll start understanding how each one of those influences that total cost to serve to focus on making more holistic kind of end to end decisions as we go about our work.

Ed Hisscock: 7:47

As we go about our work Because you know we make mistakes every day in taking a nickel out of the price of a product but then it takes more transportation costs to get it to us or it takes more labor costs to break the box and move the product. So we really didn't move the cost to serve, we just shifted the cost elsewhere. So that's one that I put a lot of energy into of late and it's really starting to pay some dividends here at Trinity.

Fred Crans: 8:11

My question about that is that I recently looked up the number of hospitals in the country. There's 6,129. 3,600 of them are contained within 1,100 IDNs. So really there's so much variation. How can you develop that KPI, that indicator, to a point where it's relevant so that if I'm where I used to work and we're now part part of Trinity Genesis Health System in Iowa, I can see I can get my cost to serve and be able to compare it effectively or relevantly to someone else?

Ed Hisscock: 8:56

Yeah, so I mentioned Gartner and we're a member, obviously have been for years, and we chose Gartner over some other organizations we could have been a part of, because they also operate in other industries and they are helping to port kind of cost to serve discipline from other industries into health care. The work that Eric and his team are doing with the benchmarking, like I mentioned, comes very close. So there's going to be a population in Gartner that are submitting data for benchmarking that are going to be on the same path. The other thing that I've been really active in lately there's a group of us that get together informally and talk about different experiments that we're running in our supply chains, largely around demand planning, largely around demand planning. But we've asked David Dobrikowski, a professor from University of Arkansas who runs what Gartner has ranked as the number one healthcare supply chain program in the country.

Ed Hisscock: 9:56

We've asked David to sit as our convener because the idea there is that have a university, bring some discipline to documenting those experiments that each of us is running and then, when a university documents, that becomes public knowledge right, so it's searchable. You can go out to PubMed and download it. Right, and it's out there and available to all. So our thinking is let's just make sure that this gets professionally published and sees the light of day so everybody can consume those kinds of benefits and start running at similar measures, benchmarking and different, you know programs that we might run with suppliers and the like. So just a couple of thoughts on kind of how we're trying to keep this bigger than just a Trinity Health Initiative, you know, yeah.

Fred Crans: 10:51

I think it's exciting because we've been struggling for ever since I've been in the industry to come up with commonalities of measurement that we could use for, you know, positive reasons other than just to defend ourselves. The other thing is we talked about a month or so ago and you said something that I had actually written down. I had actually asked this question for an article I was going to write, and that is is the healthcare supply chain a real supply chain or is it something different? And you make some comments about that. Could you give us your input on that again, please?

Ed Hisscock: 11:31

Sure, yeah. So I mean it is a supply chain right. It moves products from wherever they're made to the patient. And you know, one of the kind of tenets in the Michigan State supply chain program is that supply chains really are three things. They have to be three things they have to be efficient, they have to be effective and they have to be relevant. And the relevance one is the one that always gets me. And we are definitely relevant. We are there for the patients when and where they need us. We're somewhat effective at doing that right. We tend to, better than 90% of the time, get the product to where it's needed.

Ed Hisscock: 12:13

Efficiency is, I think, where we are the weakest as a supply chain in healthcare. As a supply chain in healthcare there's just tremendous waste and I know I'm a bit of a broken record. I've been saying this for years. But if you look at SG&A for the suppliers in our industry sales, general and administrative expense what it takes for a supplier to get product from where it's made to us to get it to the patient that SG&A is about 35, 36 on average in our industry for our suppliers Other industries like grocery that have very similar SKU characteristics. You know the characteristics of the items with expiry and cold chains and the like. That industry can get product from where it's made to the consumer on about 16, 18 cents, 16, 18% SG&A. So that right there suggests we've got 15, maybe 20 points of waste in our supply channel, and that's at the highest level.

Ed Hisscock: 13:14

What does that look like? It takes a lot of forms, but you know, I mean, how did it ever make sense that the way to get some of the most invasive, most costly products, implants to a patient, is out of a sales rep's trunk? I mean it just that's nutty, that is. That's not a supply chain you would design in any other industry and and we've got to change that We've got to look at better, more efficient ways to do that, because most of us are not-for-profit organizations. So every nickel we can take out of our cost to serve goes right back into better care for the next patient that shows up. It affords us the capital we need to keep our plants up and running. It affords us the latest technology and to keep our plants up and running, it affords us the latest technology and access to the brightest caregivers. So it's just it's that waste and that inefficiency is, I think, where we suffer as a supply chain in healthcare the most.

Fred Crans: 14:18

My thoughts on that were that, with what I call, and I call the horizontalization of healthcare, now where we used to be acuity hospital-based system, you know, everything went to one spot and all you had to do was be smart enough to take it off the truck at the dock and get it to where it was going. I mean, I oversimplify, but you look, here in Cleveland, I think. Cleveland Clinic Foundation in Northeast Ohio has over a hundred care sites, a hundred points of care, and many of those have different requirements. They can't be served with just one overarching way of doing business. That's what I was thinking about. A CareWeb, too, is having to develop different strategies for different places within your IDN.

Ed Hisscock: 15:13

Yeah, yeah. In fact we have over 100 sites just in Michigan with our medical groups. Just one of the practices alone is over 90 sites in Michigan with our medical groups. Just one of the practices alone is over 90 sites in Michigan and they've grown up kind of as a cottage industry, right. So it's a clerk at the front desk that visits with you know, joey Bag of Donuts, that comes in every Thursday, counts what's on the shelf and you shelf and tells them they need to order two cases of whatever, right. So it's just what they buy.

Ed Hisscock: 15:50

How they buy it is very, very loosely controlled and in turn they're paying a pretty penny for that stuff, because Joey Bag of Donuts is going to sell what makes the greatest margin. That's his role in his organization, and baby needs a new pair of shoes this month. He's going to sell them two cases when they maybe only needed one, right? So it's a lot of work to be done in that space. But that goes back to the comment I made earlier about the complexity in our industry, and that is a growing segment of the business. We're seeing more and more patients outside of that acute care setting and that'll continue. So that's a layer of complexity that most of us haven't spent a lot of time on, but we're going to need to to meet the patients when they start showing up there.

Fred Crans: 16:38

Yep, start showing up there. Yep, well, getting into that whole complexity, it also sort of gets into profitability too. And a few weeks ago I was talking to someone and I was telling that person that it's very hard for departments and divisions within an IDN to compete for scarce resources because the margins are so slim and the resources have to be parceled out with great forethought. And the person I was talking to said oh that's, you're wrong, that's you're crazy. No one's losing money. All those places that say they have terrible margins, that's just fake accounting and they're really doing quite well.

Ed Hisscock: 17:32

Could you address that about Trinity Health and tell me what are some of the challenges that your organization is facing? Well, it's interesting, yeah, I mean we've been underwater, like most of our peers in faith-based not-for-profit organizations. We've had a really rough year, year and a half, here, and most of us have lost a good bit of money and really eaten into our day's cash. And I suppose I don't think there's any fake accounting going on, because even when you're a not-for-profit, you're still accountable for your bond rating and accountable to Wall Street, right, so we still have to maintain the same accounting practices. So that was a misplaced comment by whomever made that, a misplaced comment by whomever made that. But uh, but the the fact of the matter is, like I mentioned earlier, our organization lost money for several months. We're now turning a corner and there's a lot of reasons for that. Right, there's, um, there's work that's gone on with our revenue team. Um, you know, striking better contracts. The way to strike better contracts with some of the payers is to make sure you got a greater presence in a particular market. So we've acquired some facilities and divested some others. So we continue to work on our portfolio as a company and you just have really seen the discipline ramp up and I think to the point you made.

Ed Hisscock: 19:04

It is more difficult, it's more competitive to get resources and to get dollars to expend on a program or project. But kind of the silver lining to this crisis that we're going through right now is it's forcing organizations to become much more disciplined with building out good business cases and sticking to those business cases. And typically supply chain is in the catbird seat as it relates to writing business cases. Right, because we influence a large percentage of the cost of goods for the organization. The expense of the organization is in our purview, so typically we can write a business case with a pretty significant ROI and, to the extent that we have the right political capital to get that in front of the right audiences in our organization, we've got a means by which we should be able to get those critical resources that are going to help our organizations financially.

Ed Hisscock: 20:06

It's just we need to amp up our discipline as supply chain professionals to rise to that occasion, write good business cases and live to them, and then we'll build that trust and credibility with the senior leadership team to say you know what, when my supply chain leader shows up with a business case. Believe it, because the last one he overshot it. The last six, he overshot it. The last six he made right on the money, right so? Um, so we can be very measured, we control a lot of the expenses and, to the extent that we can ramp up our business case authoring capability, we should be able to get access to the resources we need. But it's incumbent on us to rise to that occasion.

Fred Crans: 20:51

Just to clarify, the person who made that comment was one of my neighbors that stops in every day with his dogs to visit, and it's interesting because this is a non-healthcare person and it's sort of the perspective that folks that aren't in the industry have. They think that just hospitals are hospitals and idns are just, you know, uh phenomenally, uh profitable when, uh, really everyone, everyone, does struggle. So, yeah, um, you know, I guess the last thing I would say, ed, is you know, this is your opportunity to get on a soapbox and give us about five minutes of what you'd like to tell the public out there, about supply chain issues, or about where you think we ought to go, or whatever is on the top of your head.

Ed Hisscock: 21:44

Well, I guess maybe two things, fred. I mean, we've talked a lot about waste and the inefficiency in health care and there's a lot of enablers to that. But I would say that that is a message, and I know for many that may listen to this it's oh, there goes that again. You know the sgna for the suppliers in our industry and all the waste and and uh, how in the heck did it ever make sense to pull implants right out of the trunk of the sales reps car or vehicle, and uh, and then we'll sterilize it for them at no charge in our facilities. And uh, and then, um, you know, and they sit there with a really nice 20, 30 percent margin and we aren't making anything. So pretty lopsided, but I don't want it to be negative. I think the opportunity is to find those suppliers that are willing to be collaborative and really roll up your sleeves. And really roll up your sleeves. And I start those conversations by saying all right, we both acknowledge there's waste in the way that we transact in our trade relationship. So how about we go attack that waste and we'll split the value of whatever we find. So your margin gets better selling to Trinity because we reduced waste in our transactional supply chain and then you'll give me a credit, or you'llional supply chain and then you'll give me a credit or you'll give me a rebate or you'll give me some kind of recognition for half of the waste that we take out. And some of the waste is on our side. Most of the waste is on the supplier side and realized by them. So it's how we fund our distribution center is through supplier efficiency fees.

Ed Hisscock: 23:32

After we've had one of those conversations and take half of the benefit and those suppliers that are participating. Their margin with Trinity Health is better and it's staggering to me. You know we talked about cost to serve but I've asked several audiences of suppliers and said serve. But I've asked several audiences of suppliers and said, hey, what does it cost you to serve Trinity versus pick another health system? And of course they look at each other and they have no idea. They don't know if their margin is better or worse. With me it's all about volume. It's about selling more to me and the market share. But actually we could just get smarter about the same market share and they'd make a lot more money, right, because we'd take that waste out and their margin would be better and everybody'd be happier. We'd probably be more efficient, we'd be more effective at getting the products into our facilities as well. So we're making investments in that vein.

Ed Hisscock: 24:28

The other thing I want to mention too, is talent. Our industry needs supply chain talent. I've been evangelizing at every university I can find that's got a supply chain program, and most do today. Most universities have a supply chain program today and since there's that plethora of facilities out there with supply chain programs, they're competing to differentiate and the differentiation oftentimes is well, let's get into an industry that has a big need and very few are in, and healthcare is rising to the top. University of Arkansas has got a great program, arizona does.

Ed Hisscock: 25:06

Wayne State University here in my backyard is building a great program and supply chain Western Michigan is, and actually our supply chain here at Trinity has formal relationships now with 11 different universities and that can be everything from judging case competitions to guest lectures to running projects and, like I said, david's helping us as a convener for that collaborative that we put together. So I think accessing technically trained supply chain professionals and bringing them into our industry is something we've got to be about, and then we can sit down supply chain to supply chain, supply chain in the provider, the buyer side of the equation supply chain in the provider, the supplier, the seller and really talk demand signals. Talk about those efficiencies in a very technical supply chain-y way that I think will help us move the needle in the future. So those are the two soapbox things I would get on. Thank you, fred.

Fred Crans: 26:13

Yeah well, you brought up a couple of things that in your statement that I sort of have to pursue a little bit. Number one is we in the supply chain in healthcare never talking to the supply chain of our suppliers. We're talking to their sales force and everyone's got a different agenda, different initiatives and all that stuff. So that's one thing a mission-driven industry where you ain't going to get rich in supply chain compared to what you might be doing at some of the really large non-mission-driven industries.

Ed Hisscock: 26:57

Yeah, well, it's kind of fortunate that one of the greatest motivators is purpose. If something is purposeful, you're motivated to keep doing it right. If you find your purpose in your work, you're going to be better at it, you're going to be more dedicated, you're going to put more energy units into it if it's purposeful. And it's pretty easy to tell a very purposeful story to a student in a university when what we do every day affects human health, compared to somebody else that's stamping out cars or stamping out you know, whatever, whatever product they're making and helping stockholders get more affluent right. There's much more purpose in what we do for a living.

Ed Hisscock: 27:44

And you're right, we can't compete oftentimes from a salary perspective, but when you find somebody that is inspired, that person is going to give you more energy than you're going to find in somebody that's just there to make a better dollar, right? So I think there's I'm not articulating it very well, but I think there's again another silver lining around that cloud that we can't afford to pay as much. But the silver lining is the people we attract and stay here. Stay here because it's purposeful work and I think you get more energy units out of those people than you would. Somebody that's chasing a better salary.

Fred Crans: 28:27

I agree and, ed, you're one of those people that is inspired and is also inspiring. It's great to have known you for 20 plus years, who have worked with you, and I really appreciate you being the first guest on this series. So thank you so much and we'll talk to you soon.

Ed Hisscock: 28:48

All right, thanks, fred. I really appreciate it. It was fun.

Fred Crans: 28:50

Take care.