Published: 13 November 2019
Analyst(s): Eric O'Daffer , Stephen Meyer , Andrew Knight
In its 11th year, the Healthcare Supply Chain Top 25 highlights supply chains that successfully advance healthcare by improving patient outcomes and controlling costs. Supply chain leaders in the healthcare industry can use lessons from these leading organizations to improve their own operations.
Healthcare is changing at an unprecedented pace, due to the impacts of technology, cost pressures and the growing influence of the patient. Leading supply chains realize that there is a need to adapt the current ways of working, and are devising and implementing new capabilities, such as digital technology and agility, that will prepare them for the future.
J&J is our new No. 1, returning to the top spot for the first time since our inaugural ranking in 2009. The rest of the top 5 are Cleveland Clinic, Mercy, CVS Health and Duke University Health System. Six supply chains that weren’t on the list last year made it on our Top 25 list this year.
In our second year of recognizing sustained supply chain leadership via a Masters category, three supply chains met the qualifications of this difficult-to-achieve award: Mayo Clinic, Intermountain Health and Cardinal Health.
Chief supply chain officers (CSCOs) and supply chains leaders should learn from the strategy and leadership of the top global supply chains, and:
Make your supply chain capabilities more agile by segmenting your customers, implementing faster responses via shorter lead times, and improving your sensing acumen to improve service and lower total cost.
Focus the majority of your supply chain strategy efforts on its deployment, not its development, by staffing your strategy team with people who excel in governance, education, change management and communications.
Harness the power the digital supply chain by taking an “R&D” approach — make directed investments in digital technology to discover the intersection between capability and need, and don’t constrain the initiative with fixed return on investment expectations.
The Gartner healthcare supply chain research team is pleased to present the 11th annual Healthcare Supply Chain Top 25. This ranking, a separate program from , recognizes supply chain leadership across the spectrum of organizations that deliver healthcare.
We believe that comparing the supply chains of the different participants in healthcare — integrated delivery networks (IDNs), distributors, manufacturers and retailers — has immense value. While each organization may emphasize different aspects of their supply chain, every participant in the healthcare ecosystem has an impact on cost, delivery, clinical outcome and patient experience. To compare the supply chains of the different industry segments, we use our Healthcare Value Chain Capabilities Model (discussed in The Healthcare Supply Chain Top 25 Methodology section below).
For the second year, we are recognizing sustained supply chain leadership in healthcare via the Masters category. This prestigious recognition is difficult to achieve — it is awarded only to supply chains that have earned a top 5 composite score in any seven of the past 10 years. Further details can be found in The Healthcare Supply Chain Top 25 Methodology section below.
As with previous years, we begin our discussion of the leading supply chains in healthcare by highlighting some characteristics that these organizations share.
The healthcare industry is in a state of flux as it transforms toward a future environment that is significantly different than the way it was just five years ago, as follows:
Mergers and acquisitions (M&As) in all healthcare segments constantly reinvent the competitive landscape and redefine who are customers, suppliers and partners.
Product technology is evolving, leading to better, more connected and more accessible care.
Pressure to control costs is omnipresent, leading to new payment models and a drive toward greater process efficiency.
Health needs of the world are changing, as a result of climate change, a globally mobile population and some self-inflicted wounds, such as the U.S. opioid crisis.
With so many aspects of the industry changing simultaneously, it’s impossible to predict which trends will win out and which will fall to the side. This makes planning for the future a very difficult task, especially when change is slowed by diligence and regulation — supply chains must begin the change process now for the benefits to be realized in three to five years. Leaders in healthcare supply chains understand this and are taking action. They are making informed choices as to the capabilities that will help them prepare for whatever the future may hold and implementing them now.
This year, we discuss three areas where leaders are making changes — agility, strategy and digital.
“Agility” has become a much-coveted capability, even as the debate of how to define the term persists. Gartner analysts Thomas O’Connor and Pierfrancesco Manenti define agile supply chains as those that are “able to quickly respond to changes in both customer demand and supply sources, without incurring extra costs or penalties.” (See ) This is an attractive trait, as it allows supply chains to insulate customers from supply disruptions and take advantage of demand spikes.
Historically, healthcare supply chains have been anything but agile. Change is slow and deliberate, and inventory is the primary tool for buffering demand from supply. But leading supply chain realize that this model is predicated on stability, and the future of healthcare promises less stability, not more.
More and more products, both on the device and pharmaceuticals segment, are customized — tailored to an individual patient. Agile supply chains are a must for these products, as the manufacturing must occur during the order-to-ship cycle. Historically, most healthcare products were made-to-stock, and manufacturing and order fulfillment were not directly linked, thanks to the presence of substantial reserves of finished goods inventory. This tactic will not work for personalized products, and leading supply chains are pursuing tactics like manufacturing postponement and disintermediated supply to become more agile. Efforts are underway to reduce manufacturing lead times, and new capabilities such as chain of identity are being implemented to improve information flow.
Another reason supply chains are interested in pursuing agility is the current geopolitical situation. Global trade agreements are in a state of flux, with Brexit, the tariff uncertainty between the U.S. and China and the proposed change to the North American Free Trade Agreement (NAFTA) being key examples. As the past few years have shown us, these changes are unpredictable and, therefore, difficult to plan for. To prepare for the disruption of the U.K.’s exit from the European Union leading supply chains like Novo Nordisk are using tried-and-true strategies such as inventory stockpiling. Additionally, Novo Nordisk is also making its logistics response more agile by securing more air freight capacity — shortening the response time, in response to possible border delays.
Disruptive weather events, such as hurricanes and typhoons, also highlight the need for supply chain agility. For example, in the aftermath of Hurricane Maria in 2017, the supply chains of many life sciences companies were devastated by the storm, as Puerto Rico has become an important location for manufacturing sites. Along with the humanitarian crisis caused by the hurricane, damage to infrastructure prevented manufacturers from resuming normal operations for weeks and/or months after the storm hit. A solution that allows supply chains to quickly respond to a capability disruption is AbbVie’s “plant in a box,” which enables manufacturing to continue even if communication links are damaged.This solution allows sites to continue to operate their quality, manufacturing and logistics systems by maintaining servers locally.
IDNs, such as Mayo Clinic, Spectrum Health and Centura Health, are using agile approaches as they build out their risk management capabilities. This is further discussed in recent research which highlights the work of a Gartner’s Special Interest Group on the topic and Healthcare Best Practice Series, Instead of solely relying on reactive responses when a disruption hits, risk mitigation actions are complemented with better visibility to` external events, enabling faster recovery.
Agility is defined by how quickly your supply chain can sense and respond. Use continuous improvement tools to remove delays in key business cycles such as procure-to-pay, order-to-cash and manufacturing lead times.
Improve visibility by leveraging external services that can monitor key risk areas (e.g., weather, acts of god and geopolitical) and establishing internal control towers.
Effective strategy development is not a rare capability. Most supply chains, in all segments, are able to craft strategies that evaluate current abilities, establish a future vision and construct a framework for a roadmap that links the two. Nearly all supply chains can design compelling presentations that show the links between their proposed actions, corporate goals, and the needs of their customers and patients. When discussing strategy, Gartner analysts are asked to review these documents, and give advice on how to make them better aligned and more effective.
In most cases, this strategy development process tends to be the primary focus. Each year, months are spent developing and/or revising the strategy, ensuring it balances high-level vision with tactical activity. The strategy is presented to business leaders, key partners, and the supply chain team to ensure it is aligned and understood.
However, leaders view strategy development as being only the beginning. Just like the commonly used visual of an iceberg with only 10% of the total size visible above the waterline, so is the challenge of designing and implementing an effective supply chain strategy. Leaders in healthcare supply chains realize that just like the visible portion of the iceberg is the smallest part, so is strategy development. The real effort is required in deploying the strategy across a complex organization, ensuring that every individual in the organization is aware of their expected contribution to the initiative.
As a result, leading healthcare supply chains invest heavily in communication, education and governance — putting tools in place that propagate the components of the strategy, address questions and concerns, and monitor progress toward goals.
A leading life sciences supply chain realized that it had been approaching strategy backward. Each cycle, most time and effort was spent on crafting strategy and vetting it throughout the business to make sure it was acceptable and aligned to corporate strategy. But they struggled to execute — frequently different business units and geographies were completely unaware of the centrally developed strategies and had developed their own ones. In response, this supply chain brought a new leader in, that had a proven track record of change management, to head the strategy group. This leader refocused the strategy group on deployment and execution, and now every individual, among the tens of thousands of team members, know the supply chain strategy and their part in it.
Remember the iceberg — spend the majority of your time and/or resources on deploying and executing your supply chain strategy, and far less time on creating it.
Staff your supply chain strategy group with experts in communications, education and governance. These skills make the difference in effective strategy implementation.
The impact of technology continues to be felt across healthcare, especially in products and the supply chains that support them. Every day, innovations that leverage digital technology are announced. For example, connected devices that improve patient monitoring and generate useful data, and communication technology that increases access to care.
The potential of digital has been top of mind for supply chain leaders for the past few years. However, the path to leveraging the benefits of digital technology hasn’t been clear. In fact, Gartner survey data shows that the sheer number of options can be overwhelming and there are significant obstacles to overcome (see ).
As healthcare is a care-driven industry, naturally digital applications are centered on ways to improve this care, usually patient experience, and connected or “smart” devices. The descriptions of this year’s leading supply chains found later in this report provide good examples on the breadth of digital projects being implemented by organizations.
Supply chain leaders such as Novo Nordisk and Thermo Fisher Scientific are good examples of the embracing of the current reality of digital supply chains (see ). While there are more intriguing (and yet mostly unproven) technologies, both of these supply chains have leveraged digital technology to improve supply chain visibility. Decidedly, unprovocative supply chain areas such as demand management, supply risk and inventory levels have benefited from digital tools that allow near-real-time sensing of operational performance. This immediate availability of data allows for timely and better decisions, and more time to prevent situations that would adversely impact customers.
Align supply chain digital initiatives with existing company needs and efforts to improve customer/patient experience.
Collaborate with product development and commercial organizations to define future business models and deploy digital strategies to support them.
Digital supply chain requires experimentation to be successful — provide resources without the expectation that every project will generate ROI like traditional investments.
As part of the Gartner analyst peer opinion process this year, there was much discussion on the role of the supply chain in the current opioid abuse epidemic in the U.S. While the argument can be made that the blame lies with doctors who write prescriptions, one of the key attributes in our Healthcare Value Chain Capabilities Model, which serves as the standard that supply chains are evaluated by in this ranking, is visibility. When you contemplate the scale of the problem — over 10 billion oxycodone and hydrocodone tablets distributed each year between 2006 and 2012 — it’s evident that there was clearly a supply chain visibility problem.With approximately 313 million U.S. residents in 2012, this means that at least 243 tablets were produced and distributed over that period for every child and adult in the U.S. This is a staggering and deeply troubling number. From a supply chain perspective, we believe that this indicates that the organizations involved had an extreme lack of visibility, from manufacturing through wholesaling, prescribing and dispensing.
As a result, some Gartner analysts have taken this lack of visibility under consideration in their votes this year. As each participating analyst is allowed to draw their own conclusion from a shared fact base, it’s impossible to determine to what degree a supply chain’s analyst opinion component was influenced by this.
Similarly, we expect that certain peer voters considered the epidemic in their ballots too. But we cannot confirm to what extent, as we don’t require peer voters to share the reasons behind the way that they assemble their ballot.
We encourage you to draw your own conclusions and to take the necessary steps to ensure that the products that flow through your supply chain arrive at their intended customer, and are used for their intended purpose. We believe that this is a standard that supply chains should be held to.
Congratulations to those companies for being examples of supply chain excellence and making it on the 2019 Gartner Healthcare Supply Chain Top 25. Our industry needs leaders and we applaud your ongoing progress. For those of you looking for Cardinal Health, Mayo Clinic and Intermountain Health, they are this year’s Masters and we don’t share their scoring details. Their write-ups can be found following Table 1.
To introduce the organizations that make up our Top 25 ranking and our Masters category, we have used a similar format to previous years. We discuss each supply chain, describing its scoring highlights as well as insight into how it demonstrates supply chain leadership.
We will review the supply chains in this order:
Healthcare Supply Chain Masters
The Top 5
Distributors and Wholesalers
As always, we hope you find this information inspiring and helpful in the effort to improve your own supply chain leadership.
Now in its second year, the Healthcare Supply Chain Top 25 Masters recognizes sustained supply chain leadership in healthcare. The criteria are the same as in Gartner’s Global Supply Chain Top 25 — a top 5 composite score in any seven of the last 10 years.
Mayo Clinic made our Masters Group for the second year in a row. This $12 billion health system, comprising 22 hospitals across the U.S., has been in the top 5 in our ranking for nine consecutive years.
Mayo Clinic is a combination of methodical and innovative in its approach to supply chain excellence. Pushing boundaries and investing in areas before other healthcare organizations see the problem is what makes Mayo a Master. Mayo’s supply chain team’s mission is clear and drives its strategic planning: “To provide information, services and solutions that result in high-value healthcare and improved performance.”
There are three overarching goals associated with supply chain management at Mayo Clinic, including:
Executing to achieve superior performance.
Sustaining improvements through people, process and technology solutions.
Contributing to the transformation of healthcare.
One of our pillars for evaluation for peer and analyst voters is collaboration, and within that bucket is the concept of industry leadership. Mayo is good at this. It shares openly and for the good of providers across the country, building actionable programs collaboratively with partners. Mayo is a founding member of Civica Rx with seven other IDNs that launched its first generic pharmaceutical product this year. It is also a founding member of Healthcare Industry Resource Collaborative (HIRC) with Spectrum Health and Centura Health focused on business continuity planning in supply chain. Over the years, Mayo has commercialized some of its most successful programs such as Captis and its freight management program with FedEx. Captis now has more than 80 health systems participating in its committed group purchasing program totaling $10 billion of contracted purchases in 2019.
Mayo Clinic is not standing still in developing new patient care technologies with collaborative suppliers:
Mayo Clinic and the $10 billion technology company, Leidos, announced a strategic collaboration in February of 2019.This collaboration will build on the combined strengths of both organizations to accelerate the research, development and market adoption of tools, technologies, products, and therapeutics. This will enable patients and their families to be more active participants in their care, with the goal for them to live happier, healthier lives. This collaboration will take place in a life sciences incubator in Florida.
Mayo Clinic and Boston Scientific formed Motion Medical in July of 2019. This new venture is designed to accelerate the development of medical technology and new minimally invasive treatments for many health conditions that impede quality and longevity of life. Both parties have committed millions of dollars over three years to develop and bring new solutions to the market to address unmet medical needs, combining Mayo Clinic’s clinical experience and patient care with Boston Scientific’s engineering, innovation and business expertise.
Even as they expand their footprint aggressively in Florida and Arizona, increasing overall supply chain complexity, Mayo Clinic’s supply chain is breaking new ground in many other areas as well.Watch this space as Mayo becomes more public in what it is doing in the digital supply chain for healthcare, healthcare retail, and home care management and logistics rationalization in regional markets. With a deep supply chain talent pool and a restless mandate to break new ground, we look for more interesting things to happen at Mayo.
Intermountain Healthcare is another supply chain repeating as a Master in 2019. Intermountain Healthcare is a Utah-based, not-for-profit system that is vertically integrated with an in-house health plan division called SelectHealth. For each of the past 10 years, Intermountain has ranked in the top 10 or better on Gartner Healthcare Supply Chain Top 25 list.
As indicated by its consistent ranking, Intermountain does a lot right when it comes to its supply chain. Long a leader in the use of analytics to improve its supply chain, Intermountain has also embraced the power of population health management and is a willing collaborative partner.
One example of collaboration is with J&J’s Medical Devices business.Brought together by a desire to improve product availability at Intermountain’s facility, the supply chains worked together to improve forecasting and performance reporting, and streamlined logistics processes. The net result was a 40% decrease in stock-outs.
By focusing on improved affordability for patients, Intermountain’s supply chain continues to successfully partner with surgeons to improve product standardization. An example of this is a partnership between the supply chain and surgeons in the Musculoskeletal Clinical Program. By engaging surgeons in the product purchasing process, the supply chain was able to save $3.6 million.This was accomplished by consolidating volumes by standardizing on a smaller number of purchased items, and in some cases, using surgeons to help negotiate pricing.
Intermountain also leverages a formulary approach — a concise list of approved medical supplies and implants — to reduce healthcare costs while maintaining high-quality standards. Additionally, Intermountain’s hyperfocus on data accuracy and integrity continues as it utilizes GS1 standards, United Nations Standard Products and Services Code (UNSPSC) categorization, and over 60 product attributes to improve data transactions, alignment and efficiency.
Intermountain continues to strengthen its supply chain influence by including the responsibility for operating room inventory management as part of the supply chain’s span of control.
Aiming to help people live the healthiest lives possible, Intermountain is widely recognized as a leader in clinical quality improvement and efficient healthcare delivery, including the recent acquisition of HealthCare Partners Nevada. Already known for its innovative collaborations such as Intalere, Civica RX and most recently, Castell, Intermountain continues to advance healthcare by striving to address social determinants of health such as the lack of stable housing, food, transportation and employment.
Our third and final Master in 2019 is Cardinal Health. Another repeat Master from last year, Cardinal has the added distinction of a top 5 score in all of the eleven years of the Healthcare Supply Chain Top 25.
While we include Cardinal Health in our “Distributor or Wholesaler” category, this is an oversimplification. Cardinal Health is both a distributor and manufacturer. While pharmaceutical distribution is over eight times as large as its medical products business, Cardinal continues to evolve its role in healthcare toward manufacturing, and customer and patient experience. Specifically, Cardinal is growing its home health business thanks to its acquisition of some of Medtronic’s businesses two years ago. This is helping Cardinal effectively change the landscape by transforming from logistics, distribution and global sourcing partnerships.
Cardinal’s relationship with naviHealth is a good example of how Cardinal is repositioning itself as healthcare changes. As payment shifts from fee-for-service to outcome-based, companies like naviHealth provide an important resource for post-acute care. It does this by ensuring that appropriate care continues after the initial treatment, advising hospitals and payers on the most effective treatment regimens. Along with responding to how healthcare is attempting to improve its cost and patient outcome balance, it also embodies the patient-focus aspect of our capabilities model.
Patient focus is also behind Cardinal’s acquisition of mscripts.With this acquisition, Cardinal gains ownership of web and mobile applications that can help with patient experience of prescribed medicines. The applications receive information directly from the pharmacy dispensing system and use reminders to help improve prescription adherence.
Based on annual surveys it undertakes, Cardinal believes that supply chain tasks are still too often the responsibility of clinical staff at IDNs. A specific area of focus for Cardinal is the hospital pharmacy, and leverages automation, analytical tools and process guidance to improve the efficiency of pharmacies, and free up clinical staff to focus on more patient-centric activities.
As a response to the rise of gene therapy as a new product technology, Cardinal has partnered with PANTHERx Specialty Pharmacy. This partnership brings capabilities designed expressly to support the specialized supply chain needs of gene therapy products, specifically distribution and third-party logistics (3PL) services.
The 2019 top 5 features four organizations from last year’s top 5, plus one newcomer.
In 2019, Johnson & Johnson (J&J) has accomplished something it hasn’t done since Gartner’s first Healthcare Supply Chain Top 25 in 2009 — earn the No. 1 spot in the ranking. J&J is up two spots from 2018, with the top analyst opinion of any supply chain in 2019, the top peer opinion of any supply chain in 2019, and the second highest improvement in inventory turns among manufacturers, distributors and retailers in the Top 25.
While J&J has never been ranked lower than the ninth position in the history of the Gartner Healthcare Supply Chain Top 25, its ranking journey over this time frame parallels its supply chain journey. It’s fair to say that customer and patient expectations have increased significantly during the journey, making the capabilities that earned J&J the top spot in 2009 still important foundationally, but these wouldn’t be enough for the top spot in 2019. Gartner’s research in 2009 highlighted J&J as having “a series of targeted, enterprisewide initiatives that focus both on the customer and operational efficiencies” and “engaging key hospital customers in supply chain pilots aimed at identifying and unlocking joint value.” (See )
Since 2009, J&J’s supply chain has made impressive strides in strategy deployment, improving patient and customer experience, collaborative efforts, and embracing digital supply chain.
J&J’s supply chain leadership has been a source of stability during its climb to reclaim the top spot. This year, J&J’s CSCO was recognized by the Council of Supply Chain Management Professionals (CSCMP) for its contributions to advancing supply chain.What J&J’s supply chain leadership has been able to achieve is all the more impressive when you consider the size of the J&J supply chain — over 50,000 team members worldwide, across three very different business units — pharmaceuticals, medical devices and consumer products.
J&J is committed to improving the access to care globally, as evidenced by its Health for Humanity 2020 initiative. J&J is launching individual projects aligned to five of the UN Sustainable Development goals — global disease challenges, maternal and child health, global surgery, environmental impacts, and gender equality.This, in part, has resulted in J&J earning the third-highest rank among pharmaceutical companies in the Access to Medicines Index.
Another distinguishing characteristic of J&J’s supply chain is its embrace of digital. Gartner has highlighted the 3D printing center of excellence, but that is just one of many innovation areas J&J is pursuing. In the recent past, J&J has made strides in analytics, intelligent platforms, Internet of Things (IoT) and automation, to name just a few other areas. While J&J has been a presence in the news concerning the opioid epidemic, it didn’t receive the same impact in the opinion scoring that other supply chains did. While we can’t speak to how each individual voter made their decision, the outcome seems in line with reporting on the major manufacturers involved.Needless to say, the full story hasn’t been told and we expect future rankings to reflect new information as it’s discovered.
2019 is Cleveland Clinic’s fourth consecutive year in the top 10, and its ranking this year is especially impressive considering a dip from the first to the third quintile ranking on the IBM Watson Health 15 Top Health Systems Study. Helping to bolster its ranking were strong opinion scores, both from the peer and Gartner analyst groups. Despite the integration challenges caused by its recent M&A activity in Florida, Cleveland Clinic continues to move toward achieving its vision to be the global leader in healthcare supply chain.
Cleveland Clinic is using technology in ways that help the patient — both directly and indirectly. An example of the direct way Cleveland Clinic is leveraging technology to improve patient care is its partnership with Google to provide health and wellness information on Google digital devices.It is also leveraging telemedicine to improve the monitoring of patients with epilepsy or who have suffered a stroke. Using constant, real-time monitoring and video feeds, patients can be monitored by doctors remotely.
An indirect application of technology to help patients is how Cleveland Clinic is using technology to improve supply chain processes. As part of the Inventory Management Transformation (IMT) initiative, RFID tags are being used to help better track inventory of high-value items.Not only does this improve inventory accuracy, but it also allows clinical staff to spend less time on supply chain activities and more time with patients — estimated at 22,000 hours as of June 2019.
Cleveland Clinic also expanded its supply chain scope to include patient support services, enabling it to better align with the IDN’s population health strategy and to achieve improved end-to-end visibility with both caregivers and patients. Patient Support Services includes patient transportation at Cleveland Clinic, bringing new meaning to right product, right place, right time matched to where the patient is.
Cleveland Clinic also established its own laundry facility in 2019, which not only establishes higher reliability, quality and continuity for its linen program, it also provides jobs to Cleveland’s surrounding lower-income communities. Through a focus on informed decision making, collaboration, innovation and smarter work, Cleveland Clinic’s supply chain continues to be a thought leader and force of influence and change in healthcare.
Attaining its best result in the last 8 years, Mercy has improved by one to move into the No. 3 spot this year. Mercy, one of the nation’s largest Catholic health systems, was named on IBM Watson Health 15 Top Health Systems Study for the fourth year in a row. This year, its peer opinion score showed a significant improvement over 2018, which is notable because its peer opinion has historically held them back from higher rankings on our list. As with past years, Mercy’s ranking was supported by strengths in its bond rating, IBM Watson Health score and Gartner analyst opinion ratings.
The big story for Mercy in 2019 was HealthTrust’s acquisition of ROi, the healthcare supply chain business, which just officially completed on October 1, 2019. Mercy was ahead of its time when it founded ROi in 2002. Its growth over the next 17 years is a testament to the forward-leaning, effective leadership and personnel that run ROi, and the fact that it became an attractive acquisition target is a testament to the value it created. This divestiture also serves as proof to its claims that the supply chain is a strategic asset that can be transformed from a cost center to a revenue center. Going forward, making the transition from builder and/or provider of supply chain services to an orchestrator will test Mercy. Its capabilities in clinical supply chain alignment and data analytics should be a good foundation.
Mercy’s supply chain vision is to transform the clinical, operational and financial performance of those they serve through an integrated supply chain and placing control in the hands of providers. It continues to focus on eliminating waste and unnecessary steps within the traditional supply chain by reducing the number of middlemen, touchpoints and complexities — all in an effort to deliver significant clinical, operational and financial value. Over the past year, it has also focused on bringing better visibility to its logistics processes as well as maturing its contact compliance, utilization, tier optimization and standardization work.
Once again, Mercy was recognized by College of Healthcare Information Management Executives (CHiME) as one of its Most Wired organizations.In earning this recognition for the fourteenth consecutive year, Mercy demonstrates that it leverages technology that is effective for patient care — such as using natural language processing to pull data from doctors’ notes onto electronic health records. Mercy also leverages technology to improve operational efficiency, with estimates of the benefits of data analytics on reducing costs on purchased items being upward of $20 million in the past year.
CVS Health makes the top 5 of our ranking for the second year in a row coming in at No. 4. CVS saw slight declines in return on assets (ROA) and inventory turns compared to 2018, while peer and analyst recognition held pretty steady even in light of the opioid issues felt by some other companies. It may demonstrate CVS’s transition in 2019 from a pharmaceutical retailer to more of hybrid healthcare provider.
You don’t have to look further than CVS Health’s investor day presentation to see the transformation it is embarking on. The title slide reads “Creating Value by Transforming the Consumer Health Experience” and the following pages lay out the plan that the $74 billion acquisition of Aetna has catalyzed.Focus on becoming the most consumer-centric healthcare company is its goal, its retail locations are within three miles of 70% of the U.S. population. Plans are in place to utilize existing real estate space to install 1,500 HealthHUBs, expanded Minute Clinic formats, by 2021. CVS already makes 700,000 home visits and has 72 million Americans connected via text. With the ability to supply pharmaceuticals, medical products and home care services, CVS is a potential threat to either be the new front door of healthcare or at least the bridge from inpatient care to the home for many patients.
CVS has clear supply chain performance standards for all suppliers published directly on its website for all vendors to comply to.CVS Health also earned a spot on DiversityInc’s Top 50 Companies for Diversity list for the third consecutive year achieving the 27 rank overall for diversity across the enterprise.As part of that recognition, CVS Health was also named No. 1 in Top Companies for Supplier Diversity, following increased investments in its diverse supply chain.
Duke Health continued its rise up the healthcare supply chain ranking moving up five spots to join the top 5 group at No. 5. Duke’s IBM Watson Health score moved into the top quintile for 2019. This move, along with improved peer and analyst recognition, and continued solid bond rating, led Duke upward.
Duke Health continues to advance its supply chain across its $6 billion, three hospitals and 300 points of care network. More evolution on a theme than revolution in 2019, Duke has progressed steadily under the 20-year guidance of its supply chain leader. Our patient-driven value network (PDVN) research shows the value of sustained leadership and Duke has built a differentiating capability through diligence and relationships that get things done. (See ) Differentiating is exemplified in how clinically integrated supply chain is into the fabric of patient care. Duke employs a supply chain chief medical officer responsible for helping guide that true north for the organization. At the foundation, a sourcing group, independent of group purchasing organizations (GPOs), garners national interest from other health systems contemplating on ending their reliance on GPOs. Duke’s recent implementation of point-of-use technology across the organization will leverage the data standards work that the supply chain team has accomplished, and provide better visibility to service levels and demand management for clinical products.
New for 2019 is a robotic process automation (RPA) initiative in procurement that is a first for Duke overall.Duke’s procurement team is using RPA to manage supplier emails for confirmation, order acknowledgment, backorders and pricing discrepancies. Duke also plans to lead in connecting physician leaders in supply chain nationally to expand the discussion of what is possible in clinical connectivity beyond just a good operational function.
With two Masters and three top 5 placements, the 2019 ranking had a record 13 healthcare providers in the Top 25, up from 11 last year. Two IDNs are new to our Top 25 ranking, and two other IDNs are back after a year or two off the list. Leading healthcare providers continue to demonstrate the ability to break new ground on top of strong foundational capabilities. Sustained delivery on aligned supply chain strategies to patient care and sustained profitability, an eye to business continuity planning, and adoption of early digital capabilities win the day.
Banner Health moved up two spots to No. 7 in this year’s Top 25, marking its second consecutive year in the top 10. Banner’s rise over the past 10 years is impressive, as it has improved significantly more than any other IDN. This rise reflects improvements in its IBM Watson Health score, moving from second quintile to the top quintile, as well as a slight improvement in the Gartner analyst opinion score.
With 28 hospitals across six states, Banner operates a vertical supply chain strategy that includes a centralized service center model with self-contracting, self-distributing, self-manufacturing, and sourcing some components and raw materials in full container loads.Banner Health’s supply chain mission is to use its clinically integrated supply chain to support a patient-driven value network and to create an industry-leading supply chain focused on cost, quality and outcomes through standardization of product, information and financial transactions.
Banner continues to develop patient-focused capabilities and consumer-facing technologies such as mobile access to patient records and personalized messages. Banner also employs technologies that provide real-time visibility of and analytics for calculating total cost to serve, supply expense, and cost per procedure, per physician, per patient encounter and per member per month (PM/PM), and quality outcomes.
Banner is using technology and analytics to improve its purchasing process.From consolidating purchases, to streamlining requests for proposals, to contract usage optimization, Banner is benefiting from the automation and insights that technology enables.
Ochsner comes in at No. 14 this year, it its fourth consecutive year on the Top 25 ranking. While Ochsner dropped three spots from 2018, it still has relative strength in peer and Gartner analyst opinion. This year, Ochsner saw an improvement in its bond rating, but it is still well below the level of most other health systems in Gartner’s Top 25. Ochsner’s IBM Watson Health score was consistent year over year, remaining in the second quintile.
2019 was a transition year for Ochsner in supply chain due to a transition in senior leadership. Kudos to Ochsner for effective leadership succession planning and a solid transition path that allowed it to maintain its momentum in supply chain transformation.
Another area where Ochsner has been successful from a leadership perspective is in its hiring of physicians for key roles in the supply chain.As healthcare transforms from a fee-for-service payment model to an outcome-based payment model, having strong clinical expertise is a real advantage at finding the right balance between cost and outcomes.
Ochsner’s ongoing leadership in support of the industry’s cost, quality and outcomes (CQO) movement has been widely recognized. This year brought new leadership as well as an award as a finalist on Gartner’s Chainnovator for its work with the Center for Molecular Imaging (see ). Ochsner was also recently highlighted in RevCycleIntelligence for its physician engagement improvements made by tapping physicians for leadership positions in the supply chain, effectively changing the dynamic in influencing physician behavior and decision making.
Advocate Aurora Health debuts as a merged organization on our ranking at No. 16 this year. Advocate Health had been on our ranking in the mid-teens, mostly since 2012. However, the combined entity has almost doubled in size and scope, and now comprises of 27 hospitals and 1,200 points of care in Illinois and Wisconsin with over $12 billion in net patient revenue.
Mergers of this size take time and both organizations came to the merger with complementary patient care and supply chain capabilities. Advocate Aurora Health seems to have moved decisively on the major decisions of distribution, ERP and GPO partners working quickly to gain the synergies of being a larger organization, while reducing redundancy. Early reports look promising for Advocate Aurora Health as it tries to take significant real supplies and service cost per adjusted patient discharge out of the cost of care, independent of new technology adoption or inflation.
The health system is targeting corporate social responsibility as well. Advocate Aurora Health is a member of the Health Care Climate Council. Advocate Aurora Health intends to power all of its healthcare operations with renewable electricity by 2030.The decision was both a social responsibility and cost-saving one, according to Mary Larsen, director of environmental affairs and sustainability.
Spectrum Health rose seven spots this year to garner the No. 17 spot in our ranking on improvements in peer and, especially, in analyst recognition to offset a drop of its IBM Watson Health score into the second quintile.
Spectrum continues to demonstrate industry leadership as it transforms the supply chain of this $6.5-billion-and-growing system. One of the few health systems we meet with a manager assigned specifically to change management, Spectrum is investing in supply chain aggressively, in people and technology, to meet its goals. With alignment to its own payer, Priority Health, Spectrum is working on collaboration with suppliers and other service providers to better serve its patients. The health system has a vision for a centralized Center for Transformation and Innovation to open in 2022 focused on its “vision to provide personalized health that is simple, affordable and exceptional” according to CEO Tina Freese Decker.
Supply chain leadership at Spectrum has a lot of range. From logistics to digital supply chain to collaboration and advanced sourcing, Spectrum is shaking things up. The finished product is not complete at Spectrum, but the senior management buy in, investment and energy level is high and it is demonstrating leadership in some key areas such as business continuity. As a founding member of Civica RX and Health Industries Research Companies (HIRC) with Mayo Clinic and Centura Health, Spectrum is driving early thinking in supply chain alignment to population health and collaborative supplier agreements in high-impact categories.
After falling shy of Gartner’s list by just one spot last year, Trinity Health makes the Top 25 list in 2019 for the very first time, coming in at No. 18. Trinity Health is a Michigan-based Catholic health system with 92 hospitals located in 22 states, and was one of the original governing members of Civica RX.
In addition to its solid bond rating, Trinity Health’s scores from both peer and Gartner analyst opinion improved year over year. The biggest change came from an improvement in its IBM Watson Health score this year, moving them from the second quintile to the top quintile.
Trinity has partnered with XPO Logistics to provide supply chain services through its self-distribution network.This agreement features XPO operating Trinity-owned facilities and transportation network. The warehouse network leverages a single entry point for incoming shipments and handles medical devices through a consolidated service center.
Trinity’s cost savings efforts leverage classical tools, like physician participation and formularies, in some non-traditional areas.An example of this is “slipper socks” — a consumable that every hospital needs but is often overlooked due to its low cost. Working with clinical staff, the specific requirements for the socks were determined and then suppliers were evaluated to see who could provide the items for the best cost.
BJC HealthCare is back on the ranking for the first time since 2016, but for the sixth time in the 11 years that we have done the ranking. The $5 billion, 15 hospital system out of St. Louis comes in at No. 23 this year with a jump into the second quintile of the IBM Watson Health study, strong bond rating and steady strength in peer opinion.
BJC invested in new supply chain leadership from another health system in early 2018, after having two outside healthcare leaders at the helm in the middle of the decade. BJC has a long history of collaboration with supply and service partners and that legacy continues into 2019. BJC received its fourth year in a row Millennium award from GHX for achieving the highest levels of supply chain automation with trading partners.In addition, BJC automated its procurement process over the past few years utilizing Prodigo’s Marketplace solution to bring order to its 276,000 product item master, reducing non-PO spend by 46%, while increasing contract spend by 22%.
Northwestern Medicine debuts in our ranking at No. 24. This downtown Chicago-based healthcare provider is a poster child for capitalizing on the disruptive merger and acquisition activity in the industry. Northwestern has grown from a single-site Academic Medical Center (AMC) to a $5 billion, 10 hospital health system in the past decade. Northwestern moved up five spots in the ranking from No. 29 last year, with steady improvement in peer and analyst recognition in addition to top quintile IBM Watson Health scores and the best bond rating in our Top 25 group this year.
Northwestern’s supply chain leaders have sustained its efforts over a long time horizon, adapting to a changing environment that brings the AMC and suburban community hospitals together. It has a unique program for evaluating new technology and standardizing large product categories “designed for the physicians by the physicians” to make investment and financing decisions for the system across specialties. Northwestern is also embarking on a five-year medical equipment management program in collaboration with its CFO to better manage its 60,000 assets and clinical engineering process to keep them running efficiently.
Scripps Health returns to the ranking after a brief absence, closing out the Top 25 with the final spot on the list. Scripps Health reclaimed its place on the list by improving the two spots that it dropped last year, reflecting improvements in its IBM Watson Health score as well as the Gartner analyst opinion score in 2019. Although its peer opinion score dropped a bit from 2018 to 2019, its bond rating strength and other improvements brought them back into this year’s Top 25.
Scripps Health’s leadership at the highest levels have made significant commitments to investing in the necessary technologies to build the foundation for tomorrow’s digital future. This translates to a supply chain that is able to leverage technology as a competitive advantage and differentiator in the future.
Scripps is another IDN supply chain with notable clinical engagement. In late 2017, one of its physicians was recognized with a Physicians Understanding, Respecting and Engaging supply chain (PURE) award from Healthcare Purchasing News.This recognition was specifically for Scripps’s value analysis capability that builds a solid link between the clinical and supply chain staffs, resulting in physician-requested products procured at lower costs.
Retailers were once again represented in the Top 25 by the two leading global pharmacies — CVS Health and Walgreens. Occupying a unique place in the healthcare spectrum, retail pharmacies interact with patients at times other than when treatment is necessary. Because of this, retailers have more opportunities to influence population health as well as shift the place of delivery of more traditional care.
Walgreens saw improvements in both three-year weighted ROA and inventory turns, but it couldn’t offset a decline in peer opinion from 2018. Another key company in the opioid epidemic, its opinion scoring likely reflected its role as the second largest distributor between 2006 and 2012.
Recognizing the importance of strong leaders in the supply chain organization, Walgreens hired its first CSCO in early 2019.This new leader has the responsibility of guiding Walgreen’s supply chain into a future where retail pharmacies expand their role in healthcare delivery while, simultaneously, competing with retail heavyweights such as Amazon, Walmart and Target.
In a direct response to Amazon’s acquisition of PillPack and the resulting pharmaceutical delivery capability, Walgreens has partnered with FedEx to provide expedited prescription delivery.For a nominal fee, customers can elect to have their shipment delivered the next day or leverage “click-and-collect” for in-store pick up via express check out.
Walgreens is exploring new delivery methods, specifically via drone. Wing, a subsidiary of Alphabet and the first drone company to be certified as an air carrier by the Federal Aviation Administration (FAA), will pilot (no pun intended) a program with Walgreens to deliver orders directly to consumers. The pilot program will focus on over-the-counter medications and other non-prescription items.
This segment continues to play a pivotal role, especially in pharmaceuticals, providing a supply chain partner that links manufacturers to pharmacies. While this segment has been forecast to become redundant as its customers become more sophisticated from a supply chain perspective, distributors and wholesalers remain a key link between manufacturers and providers. They are also broadening their service offerings into practice consulting, IT solutions and improving patient experience.
McKesson moves into No. 6 in The Healthcare Supply Chain Top 25 for 2019. McKesson marks its seventh consecutive year in this exclusive group and its eleventh consecutive year in Gartner’s Top 25. McKesson continues to maintain one of the industry’s best statistics on inventory turns performance, supporting its well-earned place in Gartner’s top 10 this year.
McKesson notably lost ground in both opinion scoring components this year, and its prominence in the opioid epidemic likely plays a part in this, but cannot be confirmed.
A noteworthy accomplishments for McKesson this year includes a new collaboration with technology provider, Navigating Cancer, to offer an enhanced Patient Relationship Management (PRM) platform for community-based oncologists. Additionally, toward the end of 2018, McKesson announced that it has relaunched its biopharmaceutical services business under its U.S. Pharmaceutical and Specialty Health business unit as McKesson Life Sciences.
Also in the oncology space, McKesson is helping practices with strategic planning.It teaches these individual practices how to leverage operating data in the creation of a vision for operation and for a three-year strategic plan to support that vision.
AmerisourceBergen (ABC) makes its sixth-consecutive appearance in the top 10, this year at the No. 9 spot. Highlights were the best inventory turns in the ranking at 13.7, which is also the best performance at ABC since 2012, along with ROA of 3.3%, which is its highest since 2014. However, while its quantitative performance spiked, the qualitative ratings of peers and analysts both declined over 2018.
ABC and the other pharmaceutical wholesalers had a role in the opioid epidemic over the past two decades. ABC is working hard on this complex issue through its foundation. Education has been the primary focus, directly by helping physicians learn to prescribe opioids safely, and indirectly by donating to over 30 outreach organizations.
ABC continues to demonstrate the ability to collaborate across the supply chain. ABC is now in year six of its dedicated supply chain agreement with Walgreens that extends through 2026, including a 26% stake in the company. There appears to be headwinds to further merger discussions, according to a May 2019 Forbes article, but this relationship has shown supply chain partnership and collaboration over a number of years now at scale.
ABC’s World Courier division has also partnered globally with GE Healthcare to bring solutions to the complicated and fragmented commercial supply chains for cell and gene therapy.With almost 1,000 companies providing these kinds of complex supply chains, it appears to be a compelling partnership. As GE Healthcare states, “By leveraging the manufacturing efficiencies of GE Healthcare Life Sciences’s FlexFactory, a semi-automated, modular end-to-end manufacturing platform, and World Courier’s robust global logistics platform, drug manufacturers will be able to deliver life-altering therapies that have time- and temperature-critical conditions globally.” This is an interesting development to watch unfold.
Henry Schein, in its fifth year in a row in our ranking, arrives at No. 15 this year. Even though the distributor saw a slight reduction in ROA year-over-year, it shows improvements in inventory turns. Most notably, Henry Schein’s biggest improvement from last year’s results was a substantial double-digit percentage increase in its peer opinion scores this year.
Recently, Henry Schein demonstrated its innovative leadership and adaptability to changing market conditions by forming a partnership with Uber Health to enable physicians to order portable medical microcarts to be driven to patients’ homes for remote examinations. Additionally, it recently announced the expansion of its SolutionsHub into the behavioral health space with GreenLight Behavioral Assessments, a cloud-based digital platform featuring patient administered behavioral assessments designed to enhance efficiency, improve clinical outcomes and expand mental health offerings in medical practices.
Henry Schein is also reorganizing to refine its business focus. Earlier this year, it completed a spinoff of its animal health business.This divestiture allows Schein to focus on its core medical and dental businesses.
Schein is also improving its procurement function by increasing the business awareness of its team.Too often, purchasing can become a transaction-focused activity. Henry Schein has combated this by teaching its procurement team to understand their impact on the company’s overall financials, especially profitability. The point is “driven home” when they evaluate the financial performance of Schein’s suppliers, which is often better than its own.
Owens & Minor (O&M) ranks at No. 22 on our list for 2019, making it on the list for 11 years in a row. A Masters category winner in 2018 (making the top 5 in seven out of 10 years), O&M dropped out of the top 10 for the first time, facing some headwinds in the quantitative (negative ROA and a drop in inventory turns to 6.5) and qualitative categories of our ranking. Still, O&M does a lot of things right and it is working hard in a changing world that sees logistics services colliding with global sourcing.
O&M has $9 billion in revenue across 90 countries and 4,000 healthcare provider locations. Its recent acquisitions of Halyard Health and Medical Action along with its private label offering, now make up $1.1 billion of revenue and rising. O&M continues to have a loyal following for distribution services in a tightening market with its top 10 relationships having more than 15 years of tenure. O&M’s historic and sustained focus on distribution services all the way to the patient, with an eye toward improving the end-to-end supply chain, has value, but its new direction shows an emphasis on diversification to more profitable product and service areas.
O&M’s new direction is taking the company into areas that many health systems don’t realize that they will need as of yet. It is positioned to compete in the direct to patient and/or home care market with its acquisition of Byram. O&M has also invested directly in Fusion5, an analytics company focused on partnering with healthcare providers to improve patient health and reduce costs in a bundled payment environment.
Including J&J in the top 5, the 2019 ranking had eight manufacturers in the Top 25, down from 11 last year. While most manufacturers continue to prioritize cost and inventory reduction, leaders are focused on building new capabilities such as implementing the benefits of digital supply chain, agility and customer collaboration.
Novo Nordisk was tied for the highest ranking jump in the Top 25 this year, ascending 10 spots to No. 8. The climb was thanks to the highest improvements in peer opinion and overall score among all supply chains, and the highest improvement in Gartner analyst opinion among all manufacturers, distributors and retailers. For its financial metrics, Novo Nordisk once again had the highest three-year weighted ROA of any company in the ranking at 36.4%.
One of the areas where Novo Nordisk has made significant progress is visibility. Novo Nordisk invested in an analytics capability to improve visibility of its supply chain, as well as the speed and accuracy of decision making. Despite the allure of big data and new technology such as cognitive computing, Novo Nordisk has kept it simple — focusing on improving data availability and accuracy, and solving critical business problems. The initial areas Novo Nordisk has targeted with this capability are fundamental business problems such as inventory placement, improving demand forecasting and supply chain’s support of commercial goals.
Novo Nordisk also continues to move toward connected devices, partnering with companies such as Abbott and Health2Sync to integrate usage information from its insulin delivery devices to diabetes management and glucose monitoring tools.These partnerships promise to not only help diabetes patients better manage their condition, but also to provide the supply chain with data insights on product usage that can then be utilized to improve service.
Medtronic landed at the No. 10 spot this year, thanks, in part, to the third-highest peer opinion score in the Top 25 (trailing only J&J and Cleveland Clinic). This is noteworthy in light of the efforts Medtronic has made to improve customer collaboration over the last three years. The Medtronic supply chain has prioritized operations-to-operations relationships with its customers, a dramatic shift away from the sales representative dominated relationships that, for years, have defined the IDN and medical device interaction.
Despite a year-over-year slowing of inventory turns that belies its efforts, Medtronic continues its focus on improving both supply and demand planning. Medtronic knows better than most, that one of the few effective tools to offset limited downstream visibility is inventory and, especially, inventory positioned close to the point of use. It has deployed field inventory solutions that allow same-day delivery to groups of IDN customers in concentrated metropolitan areas.
Medtronic has also invested in digital technology, especially connected products. It recently made public a four-year relationship with the imaging company KARL STORZ that leverages 3D vision systems in a soon-to-be-released robotic surgery platform.
For the second year in a row, Becton Dickinson (BD) secures the No. 12 position in the ranking. Of the scoring elements, BD’s peer opinion score is most notable, up 18% from 2018.
In 2019, BD was finally able to refocus its efforts on supply chain transformation, after four disruptive years. The acquisitions of CareFusion (2014) and C.R. Bard (2017), along with changes in supply chain leadership are now in the past, and the organization is now able to take stock of its considerable assets and decide where to focus improvement efforts.
A recent partnership with Microsoft illustrates how BD is simultaneously leveraging digital technology and improving its customer’s supply chains.Using machine learning and data analytics, the Azure tool is enhancing BD’s medication management solutions for customers, enabling better product usage and inventory levels.
Stryker saw improvement in both three-year weighted ROA and Gartner analyst opinion, pushing it up two spots to No. 13 in this year’s ranking. Its improvement in ROA was the second-highest among manufacturers in the Top 25.
In Ireland, Stryker has partnered with the Royal College of Surgeons in Ireland (RCSI) to co-develop digital care tools, improving the customer experience for both surgeons who use Stryker products as well as patients.Stryker is accomplishing this by establishing a center of excellence for Digital Platform Services, and expects the partnership to generate new digital tools to aid in patient treatment, especially in emergency and specialty situations.
Stryker supplier management is also using MedAccred to streamline the certification of its suppliers.By using a standardized accrediting process, it can help to ensure compliant products and ultimately, safe and effective products for patients. Stryker has identified eight critical process areas where it has initially used the accreditation, including sterilization and welding.
Arriving at No. 19 in this year’s ranking, Pfizer saw uplift from its inventory turns (improving to 1.5) and the second-highest increase in Gartner opinion.
Pfizer continues to run a leading supply chain, investing heavily in technology to improve visibility of its operations. Using IoT technology as part of Intel’s Connected Logistics Platform, it is bringing near real-time tracking and condition monitoring to it shipments.
Recognizing fundamental differences in supply chain needs between new products and more established products, this year Pfizer announced an agreement to spin off the Upjohn portfolio of products into a new combined entity with Mylan. This allows mature, post-patent protection products like Lipitor, Zoloft and Viagra to benefit from the generics supply chain expertise of Mylan.
Pfizer is also collaborating with Ochsner on improving clinical trial execution.While the primary goals are to improve the efficiency and patient experience, an important supply chain aspect is the data connection between the data generated at the site and patient electronic health records.
The second supply chain in the Top 25 that saw a 10 position increase in ranking year-over-year is Roche, at No. 20. This rise is, in part, due to the second-highest ROA score of companies in the Top 25 and the highest improvement in inventory turns (up 16% to 2.5). Additionally, Roche was the only manufacturer, distributor or retailer in the Top 25 to see a year-over-year increase in all four scoring categories.
Galvanizing its efforts under its leadership team, Roche’s supply chain has grand aspirations to transform its supply chain, providing better operational alignment to commercial segments across its various businesses, including specialty medicines, diagnostics and Genentech.
Similar to our Chainnovator winner from 2016, AstraZeneca’s Healthy Heart Africa, Roche has found an opportunity to leverage its supply chain expertise to improve both access to and cost of medicine in Africa.(See )Roche’s efforts span education, infrastructure and direct sales to customers in countries such as Nigeria. Importantly, Roche is using the capabilities it developed in the region to supply products from other manufacturers as well.
Boston Scientific is the third supply chain in the Top 25 that shared the largest rank increase, up 10 spots to No. 21. Not seen in our ranking since 2013, Boston Scientific saw improvement in both opinion scores, along with the largest improvement in ROA of any manufacturer, from 0.6% to 4.5%.
Boston Scientific is taking strides to improve patient experience. Years of experience working with cardiologists and cardiac care patients highlighted that there was an opportunity to help with post-visit care. Partnering with Wellframe, Boston Scientific implemented an on-demand patient program that leverages digital technology to provide education, reminders and answer questions.
In late 2018, Boston Scientific announced a $200-million initiative to restructure its business, including realignment of manufacturing and logistics networks to better position the company to support customer needs and anticipated business growth.
Consistent with our Global Supply Chain Top 25 research methodologies, the Healthcare Supply Chain Top 25 ranking is derived from two main analyses: quantitative measures and opinion. Quantitative measures provide a view into how companies have performed in the past, and establish proxy connections between financial health, performance and supply chain excellence. The opinion component offers a qualitative assessment of value chain leadership and demonstrated supply chain performance — crucial characteristics of our Top 25. These two components are combined into a total composite score.
The centerpiece of our Healthcare Supply Chain Top 25 methodology is the Healthcare Value Chain Capabilities Model. It is used to guide both peer and analyst voters as they consider companies to select for the Healthcare Supply Chain Top 25. The model highlights activities in the healthcare value chain that help improve human life, driven by the core set of capabilities depicted in Figure 1.
Organizations receiving the most recognition have combined strong foundational capabilities with targeted progress in all the areas we outlined above. Although success in execution requires more than developing supply chain capabilities contained in our model, the industry recognizes that the path to improving human lives can benefit from the principles captured in our model. Wherever a company sits in the value chain, this model can be used to frame and set parameters for supply chain strategic goals.
For the second year, we use a separate category to highlight the accomplishments and capabilities of long-term supply chain leaders. We refer to these companies as supply chain Masters and define them as having attained top 5 composite scores in any seven of the last 10 years. This category is separate from the overall Healthcare Supply Chain Top 25 list, but it is not a retirement from being evaluated as part of our annual research. If a former Masters company fails to meet the criteria in the current year, it would lose its designation. However, this company would be considered as part of the Supply Chain Top 25 ranking in the same way as any other company in our study.
The first step in our Top 25 methodology is to identify a population of companies to include in the analysis. Consistent with prior years, we derived our 2019 full list of 95 manufacturers, distributors and/or wholesalers, and retail pharmacies from a combination of external sources. This includes companies from prior years’ rankings and Standard Industrial Classification (SIC) codes aligned to the healthcare industry.
Compared to the methodology of our global cross-industry Global Supply Chain Top 25, the revenue threshold required for inclusion in the Healthcare Top 25 is lower, at $1.75 billion annually. The intention of the lower revenue requirement is to ensure that we cast as wide a net as possible and have a robust population of companies to evaluate. However, one factor remained constant between the two rankings: companies must publish audited financial results and, in the case of the Healthcare Top 25, results that are specific to a healthcare business. Notably, this excludes some conglomerates with divisions in non-healthcare industries from this ranking.
Additionally, companies must generate at least 50% of their revenue from healthcare-related activities, and, because of the focus on U.S. health systems, their North American business must be at least 25% of total revenue.
The second step in our methodology is to determine the quantitative measures to utilize in our analysis. Consistent with prior years, we utilized ROA and inventory turns for operating and supply chain effectiveness, respectively. Publicly available, audited financial data was collected for each company for the years 2016 through 2018. This data is used to calculate a three-year weighted average for ROA and a 2018 end-of-year measure of inventory turns.
The primary source for all publicly available financial data is S&P’s Capital IQ (CapIQ) database. In some instances, CapIQ financial reports may include standardizations to ensure a consistent reporting methodology across companies.
The third step in our methodology is to determine the weighting applied to the quantitative measures versus the opinion score. We strongly believe that the collective wisdom of the healthcare crowd points the way to supply chain excellence and successful trading partner collaboration. We also believe that repeated, bidirectional and genuine collaboration between trading partners is a crucial ingredient to achieving value in healthcare. Consistent with previous years’ methodology, we applied a 40% weighting to the quantitative measures and a 60% weighting to the opinion score.
The methodology used to select and rank the 76 health systems this year has remained the same.
As in previous years, we partnered with IBM Watson Health (formerly Truven Health Analytics) for key components of our methodology. IBM Watson Health has collected quantifiable public data in nine key areas of patient care for the last 25 years.The results are published in its annual 15 Top Health Systems Study on patient care, which is part of its 100 Top Hospitals program. A health system’s patient care is calculated as a percentile score based on publicly available data across nine measurements of patient care performance. These include mortality, complications, 30-day patient readmits, 30-day mortality, average length of stay (ALOS), expense, operating profit margin and Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS).
We use IBM Watson Health’s data for the following two components of the process:
Selecting a meaningful group of health systems to include in our ranking.
Determining a quantifiable proxy for health systems’ quality of care.
We value our partnership with IBM Watson Health, our ranking wouldn’t be as meaningful without its willingness to share its data.
In selecting the health systems to include, our goal was to align the size of the health systems with that of the manufacturers, distributors and retailers (which must have $1.75 billion in annual revenue or greater). We include only those companies in the top 60% of IBM Watson Health’s 15 Top Health Systems Study. We openly discussed this methodology with key executives from health systems, and the majority of these executives supported the link between supply chain leadership and the quality of patient care reported in the 15 Top Health Systems Study.
As mentioned above, we used the percentile score from the 15 Top Health Systems Study to develop a force-ranked score for the quality of patient care for each health system to be used in our quantitative analysis.
While we use the actual 15 Top Health Systems Study’s quantitative assessment for our ranking purposes, we only show the tier of performance for each health system in our final report.
The four tiers are:
15 Top Award Winners
Top Quintile (top 20% excluding 15 Top award winners)
Second Quintile (61% to 80% performance)
Third Quintile (41% to 60% performance)
We continue to focus on the more complex health systems while setting a minimum level of quality of care (as signified by performance in the 15 Top Health Systems Study) that must be met to be included in our ranking.
The second quantifiable metric used to assess health systems is bond rating. As we did in previous rankings, we use bond rating as a proxy for operational efficiency of health systems. Although bond rating is not the ideal gauge of operational efficiency, it does reflect the financial discipline and management effectiveness of a health system. We used ratings from Standard & Poor’s (S&P), Moody’s and Fitch to develop an aggregate bond-rating composite score. For consistency, we mapped bond ratings from all services to the S&P scale, which is reflected in Table 1.
The last step in our health system ranking methodology is to balance the quantitative measures and opinion scores. To maintain consistency with the methodology used in past years, we applied a 30% weighting to the quantitative measures (15% for IBM Watson Health score and 15% for bond rating). We applied a 70% weighting (35% for peers and 35% for Gartner analysts) to the opinion score. The choice of this methodology demonstrates our belief that the wisdom of the collective healthcare crowd gives the best overall assessment.
Opinions are gathered from two groups: Gartner analysts who have significant interaction with the healthcare industry and professionals who have direct experience with the organizations being ranked. Any supply chain leader from a manufacturer, distributor, retail pharmacy or health system is eligible to vote. However, only one vote is accepted per company.
This year, we received peer votes from 72 supply chain leaders. Voters came from the most senior levels of supply chain at organizations across the healthcare value chain, including academia, GPOs, associations, as well as a handful of consultants (see Figures 2 and 3). To ensure voter demographics consistent with prior years, we applied weighting factors based on the voter’s industry segment.
Twenty Gartner analysts representing various industry and functional specialties cast analyst opinion votes as well. These analysts drew on their primary research field and work with healthcare value chain companies when casting their vote.
Peer panel polling was conducted during September 2019, via a web-based, structured voting process. Voters were taken through a four-page system to identify their final selection of leaders.
The breakdown of the four-page system is as follows:
The second page solicited demographic information from voters.
The third page provided panelists with a complete list of the organizations to be considered. We asked them to choose 25 to 50 that, in their opinion, most closely achieved the ideal of value in healthcare.
After the subset of leaders was chosen, the panelists were then asked to force-rank the companies from No. 1 to No. 25.
Individual votes were tallied across the entire panel, with 25 points earned for a No. 1 ranking, 24 points for a No. 2 ranking and so on. The analyst panel and the peer panel used the exact same polling procedure.
By definition, each person’s expertise is deep in some areas and limited in others. Despite that, voters weren’t expected to conduct external research to place their votes. The polling system is designed to accommodate differences in knowledge. It relies on what author James Surowiecki calls “The Wisdom of Crowds” to provide the mechanism that taps into each person’s core kernel of knowledge and aggregates it into a larger whole.
All of the information — the quantitative measures and opinion votes — is normalized to a 10-point scale and then aggregated into a total composite score. The composite scores are then sorted in descending order and the organizations with the 25 highest scores make our final ranking.
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