OC Reilly Blog: CQO Boosts ROI In Health Care Supply Chain

By Bill O’Connor, President and CEO, OC Reilly Inc.


(Nov. 9, 2015)–Competing on price alone may not always be the wisest route, neither for the provider of products and services, nor for the purchaser. Being the cheapest does not always equate with being the best, in other words.

Health care supply chain administrators realize this, of course, which has led to an increase in use of the cost-quality-outcomes or CQO approach. Under CQO, supply-chain professionals shift from a focus on the lowest-cost product to products that deliver the best quality for the best price. It’s a purely value-driven model that, over time, provides the best patient care at the most reasonable cost.

In the article, “Driving Supply Chain Value: Collaborating with Suppliers Under the Cost-Quality-Outcomes (CQO) Approach,” found in the September/October 2015 edition of Supply Chain Strategies & Solutions magazine, it reads:

“Hospital and health-system executives are focusing on the cost of inputs – supplies and services used to deliver care – and costs avoided by preventing hospital-acquired conditions and readmissions. Health care supply-chain stakeholders – both hospital and supply-chain leaders and suppliers – have a critical, strategic role in supporting cost containment while improving these outcomes.

“The key is for the health care supply chain to support value-based care by finding the intersection of the cost of a product or input with quality of care provided, and reimbursement,” the article continues. :This is CQO – the strategic evaluation of inputs against outcomes…But the health-system supply chain can’t implement CQO without help from what may seem like an unlikely partner: suppliers…CQO demands a sea change in how hospitals interact with suppliers, creating a process that is more collaborative and objective than ever before.”

The hallmark of effective supply chain management always adheres to the business maxim that the best deals are the ones where everyone comes out a winner. In the case of CQO, that principle becomes absolutely central to success.

Having a knowledgeable, independent, third-party advisor working as a partner with health care administrators can help identify suppliers willing to enter into this type of arrangement. As the CQO approach takes root and grows, health systems can move more confidently toward a steady return on investment and a sustainable record of high-quality patient care.