Needed: A National Governance Framework for Healthcare Supply Chains

The Tragedy of the Commons – A situation in which a shared resource system, where individual users, acting independently according to their own self-interest, behave contrary to the common good of all users by depleting or spoiling the shared resource through their collective actions.

• A description by the British economist William Forster Lloyd observing the effects of unregulated grazing on common land in Great Britain and Ireland

The concept of the tragedy of the commons is a suitable metaphor for what we have experienced and are continuing to suffer in the healthcare sector in the United States.  What we all have observed, despite the efforts by some media to deny the fact, is that during this national emergency, demand has been manipulated in the face of high levels of asymmetric scarcity information.  This has resulted in massive shortages in multiple sectors, including hospital supplies, medicine, testing kits, protein, sanitizers, and other critical requirements.

Over the last week, I’ve been on calls with my colleagues Gene Schneller at ASU, Dan Finkenstadt with the US Air Force, and Blan Godfrey of the Wilson College of Textiles at NC State.  We have been tossing around ideas….. all of us have been on the front lines dealing with the COVID crisis in healthcare supply chains:   PPE, masks, testing kits, disinfectants, testing kits, and of course, healthcare providers who are burning out quickly.  We have all been observing the chaos going on in this country, and the “free for all” mosh pit market that has pitted country against country, state against state, county against county, and even healthcare care providers in the same city fighting against one another for limited supplies.  No doubt, there has to be a better way, we told ourselves.  But what would that look like?

We have started to put together ideas on what a national governance framework would look like, which would begin by establishing a standing governance model for national disasters.  Here are my musings… (unvetted by the others…)

I started out with an important assumption:  A disaster such as COVID19 impacted multiple industries all at once, and created immediate disruptions in all sectors.  Delays often occurred in waves, because of varying inventory levels across all units – which impacted multiple countries in waves as shelter at home government edicts shifted.  While we may not experience another disaster as severe as this pandemic, we need to assume the worst case in planning a governance model.  Which means, what if it happens again – what would we want to have in place.  Dan put together a framework that helped to guide my thinking:

1.  Basics

Non-negotiables, “must haves”

• Clear roles and responsibilities
• Decision-making and delegation of issues, with established RACI charts establishing who does what, and when
• Criteria for setting the governance process in motion – what triggers it?  Number of cases?  First case?
• Buy-in from state agencies and all federal agencies that the framework will be set in motion given the presence of clear dangers and risks (no easy task)
• Established contracts and set-asides established through federal agencies (DoD, GSA, or others as needed).

Tolerable things we would rather not be the case, but that come with the territory

• May require an Act of Congress to set in motion
• Funding guaranteed and irrevocable across election years and changes in leadership
• Contracting to third parties that have strong private sector supply chain intelligence capabilities, etc. may involve large outlays, and will likely result in lawsuits over awards (e.g. Microsoft and Amazon battling it out over the CIA cloud business)
• May require local sources in North America, with higher costs than global sources.   And likely would require increased taxes to cover this – on insurance, healthcare providers, pharma companies, etc.
• Stockpiling will need to be renewed at a higher cost and borne by the government

2) Discriminators

Differentiators that make it novel

• Strong coordination among federal agencies
• Contracting instruments established ahead of time with key private sector manufacturers
• Tier 1 and Tier 2 supply constraints identified and mitigated against, whether by inventory or through domestic development of local suppliers.

Dis-satisfiers that would make it useless

• Federal ownership of private sector companies
• Appointees of key roles made through political connections, not capabilities (e.g. what we are seeing at FEMA)

3) Energizers

Exciters that would make it highly desirable to use or consider

• Transparency established through central control towers, made available to all parties through publicly available portal
• Tracking of materials in the supply chain
• Clear metrics (e.g. fulfillment, etc.) would be needed to show response times, but also to map to demand to avoid hoarding
• Strong “demand sensing” capability will be needed – investments in technology will be required

Enragers that would turn users off to even the idea

• States may push back that this is too much federal control
• Hospitals and GPO’s may say they don’t want to be dictated to by a central authority
• May be viewed as “socialism”
• If bureaucratic and inefficient, takes too long to make decisions – it will fail.

These are just a few of my initial thoughts.  It’s a start, but clearly whatever emerges needs to meet these criteria..