INTERNAL DISTRIBUTION DECISIONS IN A HEALTHCARE CHAIN ORGANIZATION: THE CASE OF DURABLE MEDICAL EQUIPMENT

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INTERNAL DISTRIBUTION DECISIONS IN A

HEALTHCARE CHAIN ORGANIZATION: THE CASE OF

DURABLE MEDICAL EQUIPMENT

Master Thesis

MSc Business Administration: Health University of Groningen Faculty of Economics and Business

January 18, 2021

ERIK BAKKER Student number: S4176863 E-mail: h.e.bakker.1@student.rug.nl

Supervisor: dr. ir. P. Buijs Co-assessor: dr. O.P. Roemeling

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ABSTRACT

Purpose – The purpose of this study is to explore how supply chain characteristics within healthcare

organizations influence the flow of durable medical equipment within healthcare organizations. Prior studies have underrepresented the notion of resource sharing on intra-organizational levels, which is therefore interesting to investigate in more depth.

Method – This study conducted a single case study at a Dutch healthcare organization. Data collection

consisted of 14 conducted semi-structured interviews with relevant actors within the healthcare organization, supplemented by several informal conversations, available documents and data from prior research.

Findings – The findings show that complexity within the internal supply chain is caused by

decentralized budget allocation for durable medical equipment together with different financial structures coherent to specific care paths. Moreover, a lack of visibility due to improper internal integration and insufficient information provision by the absence of an information system. These characteristics are found to influence the internal distribution in a negative way by limiting the possibilities of sharing durable medical equipment on intra-organizational levels.

Research Limitations and Future Work – This thesis shows ambiguity in internal distribution of

durable medical equipment. Therefore, future research should investigate how to overcome the identified inefficiencies, and studies could focus on internal and external integration by taking different perspectives and therefore improve internal distribution decisions.

Practical Implications – This study shows how policy makers and healthcare managers could possibly

implement changes to improve the distribution of durable medical equipment. This could allow for improved budget allocation and more effective sharing of resources on intra-organizational levels. Further, through enhancing the notion of supply chain integration, healthcare managers could achieve better inventory control and simultaneously contain costs.

Keywords – Healthcare organization, durable medical equipment, internal supply chain, supply chain

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ACKNOWLEDGEMENTS

I would like to thank my supervisor dr. ir. Paul Buijs for his thorough support and rich insights throughout the whole process of conducting this research project. Whenever I had questions or unclarities, he gave me useful feedback and steered me in the right direction. I would also like to give special mention to Bart Noort, who assisted me in every way possible. His expertise in the field of healthcare and his advice provided me with new insights whenever I found myself in trouble regarding this research project. Further, I would also like to thank the members of staff of the healthcare organization who provided for the input and relevant data to make this study to a success. Finally, I must thank my parents, partner and friends for giving me the needed support and encouragement throughout my studies and this research project.

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Given that the general population is aging coupled with an increase in demand for care, there is a growing demand for durable medical equipment, including wheelchairs and other medical support devices (Ordway et al., 2020). Scholars have estimated that 30-40% of a hospital’s operating budget is spent on logistics activities, and the costs of medical supplies within hospitals is considered to be the second largest, after personnel costs (Landry & Beaulieu, 2013; Moons et al., 2019; Rais et al., 2018; Volland et al., 2017). In healthcare organizations such as hospitals, care centers, and nursing homes, durable medical equipment can often be shared amongst departments or even across locations (Pohjosenperä et al., 2019). This inter or intra-organizational sharing is a solution to cope with fluctuations in demand for durable medical equipment, as individual organizational units often experience variation in patient flows. Not only does the sharing of equipment allow for leveling out inventory levels, also cost containment can be better managed (Volland et al., 2017). Therefore, sharing of equipment is an interesting concept for healthcare organizations to mitigate the internal distribution burden.

Healthcare logistics management provides benefits in terms of internal supply chain performance but also helps healthcare organizations to improve services for patients (Kritchanchai et al., 2019). However, there is often a lack of focus on logistics activities, which hampers the distribution of medical equipment and could potentially affect the quality of care (de Vries & Huijsman, 2011; Moons et al., 2019; Zepeda et al., 2016). Further, logistics processes in healthcare organizations has not yet reached the same professional level as other industries (Volland et al., 2017). Literature have revealed that healthcare supply chains are often prone to complexities, which leads to internal inefficiencies such as conflicting stakeholder interests, tradeoff between quality and costs, and unpredictability and uncertainty of demand (Anand & Wamba, 2013; Bailey et al., 2013; De Vries, 2011; de Vries & Huijsman, 2011). Furthermore, these inefficiencies are determined to be the result of a variety of supplies, excessive inventory levels and associated costs, and insufficient product traceability (Abdulsalam et al., 2015b; Caglayan et al., 2012; Landry & Beaulieu, 2013; Moons et al., 2019). As a consequence, logistics processes in healthcare environments tend to be unpredictable, and problems are often specific to the healthcare context (Aronsson et al., 2011; Kannampallil et al., 2011).

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important accelerator for operational performance between internal and external partners (de Vries & Huijsman, 2011; Wang et al., 2016). Examples of supply chain integration include the internal and external integration, where the former focuses on the internal organization and the latter on external relations.

Research shows that relationships between organizations and its suppliers are considered key elements of an organization’s ability to manage supply chain risks (Flynn et al., 2010; Wiengarten et al., 2014). Similarly, inter-organizational relations have long been established as a relevant and determinant factor of efficient and effective healthcare delivery (Fottler et al., 1982; Provan & Milward, 2001). However, little is known about internal relationships and how these behave adopting the notion of sharing resources to mitigate the internal distribution burden. Specifically, sharing of medical equipment between departments and facilities of healthcare organizations in regional settings has been found to be underrepresented in prior studies (Flynn et al., 2010; Wiengarten et al., 2014; Zepeda et al., 2016). It is likely that organizations in local settings, organizations in close proximity to each other and bundling supply chain practices, have a larger degree of integration and are therefore better suitable for integrating supply chain processes to mitigate supply chain risks such as shared inventory control and distribution (Burns et al., 2015; Zepeda et al., 2016). This study therefore seeks to provide insights in supply chain characteristics and its effect on the internal distribution of durable medical equipment, in answering the following question:

“How do supply chain characteristics in a healthcare organization influence the flow of durable medical equipment?”

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2. LITERATURE REVIEW

Healthcare logistics encompasses the process of handling physical goods as well as the physical flow of patients (Lee et al., 2011). This study focuses on the logistics activities of medical equipment in the healthcare supply chain. Durable medical equipment is an umbrella term for equipment that is used for a medical condition, illness, or injury such as wheelchairs, orthoses, walkers, hospital beds and alike equipment (Healthcare.gov, 2020; Jacobs & Lee, 2014).

2.1 Logistics in Healthcare Organizations

Over the past years, healthcare organizations have been seeking measures to improve their logistics performance (Abdulsalam et al., 2015b, 2015a; Bligaard Madsen & Burau, 2020; Dobrzykowski, 2019; Feibert et al., 2019; Franco & Haase, 2015). Healthcare organizations deal with a large variety of supplies that support the delivery of care, either directly (medical supplies, pharmaceutical products) or indirectly (linens, meals, stationary, cleaning products) (Landry & Beaulieu, 2013). Improving the efficiency of healthcare logistics can provide opportunities for healthcare organizations and health systems to increase the quality of care and reduce costs. Further, logistics processes in healthcare organizations are seen as rather complex, and healthcare logistics has not yet reached the same professional level as other industries (Volland et al., 2017). A plausible reason might be the large number of supplies flowing through different channels within the organization (Abdulsalam et al., 2015b; Borges et al., 2019; Chen et al., 2013; Landry & Beaulieu, 2013; Volland et al., 2017).

2.2 The Internal Healthcare Supply Chain Characteristics

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costs can affect the overall supply chain performance and quality of care (Bartlett et al., 2007; Beaulieu et al., 2018; De Vries, 2011; de Vries & Huijsman, 2011; Moons et al., 2019).

External characteristics such as governmental regulations and budgets for specific care paths and medical equipment exist. Governments influence healthcare organizations through regulation, legal authorities, and purchasing on the healthcare delivery (Dobrzykowski, 2019). Porter & Kaplan (2016), for instance, argue that a traditional fee-for-service purchasing is focused on greater quantities and higher volumes of care, but underestimates the quality of care. Contrarily, episode-based payment is a form of single payment for inpatient episodes of care for a specific procedure or condition (Busse et al., 2013). Global budgets entail a fixed amount of funding for a fixed period of time, specifically for a population or care path, as discussed by Porter & Kaplan (2016). On the other hand, innovative payment methods such as pay-for-performance rewards or penalizes providers based on performance, and bundled payments combines episodes of care to decrease fragmentation and reducing costs (Berenson et al., 2016; Shih et al., 2015).

Further, reimbursement of medical equipment is fragmented through different care acts predetermined by a governmental body, the Dutch Care Authority. The social support act, long-term care act, and health insurance act are included in the selection of financial flows. Moreover, a Care Intensity Package is a predetermined budget for clients paid for under the long-term care act (Heilbron et al., 2018). Kaplan & Porter (2011) argue that locally managed budgets lead to fragmented care delivery where multiple organizational units are involved. In turn, this adds to complexity by negatively influencing costs and effectiveness of care (Kaplan & Porter, 2011). Lee et al., (2016) state that changing reimbursement policies require for renewed stakeholder incentives and operating conditions that can cause deficiency in healthcare operations, specifically in the field of treatments. Reimbursement policies and processes are therefore determined to have a substantial impact on operations within the healthcare setting. Moreover, the aforementioned characteristics have a considerable effect on the flow of information, reporting requirement, delivery mechanisms, access, quality, and costs in healthcare settings due to the believe that governments are payers in this domain (Dobrzykowski, 2019).

2.3 Inventory Control in Healthcare Organizations

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data provision within the supply chain which causes insufficient product traceability, distribution challenges, low insight in performance, and lower product utilization. (Lee et al., 2011; Moons et al., 2019; Rakovska & Stratieva, 2018; Volland et al., 2017). However, integration and coordination on inter and intra-organizational levels can be improved by the implementation of an information system for the sharing of data (Huang et al., 2020; Sundram et al., 2018). Moons et al. (2019) further state that a streamlined hospital material management process by the means of a proper inventory management such as information systems or ERP systems in a centralized manner, the supply chain performance improves through lower material costs, reduced inventory levels, and better materials traceability. Furthermore, literature revealed certain complexities within the internal supply chain in the area of inventory control. This inventory control in healthcare settings is perceived as rather complex due to variable demand, specialized products, limited insights in inventory, and essential treatments (Moons et al., 2019). Organizations often implement organizational measures to counter shortcomings in inventory deficiencies. These organizational factors include allocation of tasks, decision-making processes, stakeholder involvement, and communication processes. However, these organizational factors are introduced between different stakeholders and different perceptions could influence the processes of inventory control (De Vries, 2011). In addition, the different perspectives and goals of stakeholders involved in the healthcare supply chain (Moons et al., 2019). Hence, it is found that healthcare organizations often have relatively large inventory levels present to cope with uncertainty of demand, as care processes are subject to high variety and forecasting is limited (Zepeda et al., 2016). Due to the inadequacy of inventory control, high inventory costs and handling costs are therefore prone to exist within healthcare organizations (Moons et al., 2019). Contrarily, outsourcing is a concept that gained popularity to create flexibility towards managing variability in demand and quick reactions to changing environments, as initial investments in equipment are not required (Brunetta et al., 2013; Volland et al., 2017). However, outsourcing also has its drawbacks, including loss of control and knowledge, loss of quality, longer waiting times, and lower quality of care (Brunetta et al., 2013; Kavosi et al., 2018)

2.4 Healthcare Supply Chain Integration

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where internal integration lays the foundation for effective SCI. Furthermore, scholars found that sound integration on both the internal and external level improves the quality and delivery of distribution (Leuschner et al., 2013; Rakovska & Stratieva, 2018).

However, to ensure supply chain integration, organizations and firms have to align processes by enhancing the notion of interwoven collaboration between departments or organizations (Betcheva et al., 2020). This alignment of processes can be established within the organization or tied to external relations, however, the latter can only be effective when internal integration is adequately in place (Flynn et al., 2010). Beaulieu et al. (2018) add to that by stating that internal processes should be streamlined before external integration to prevent excessive costs by a poor integration. Furthermore, SCI is a concept that in some literature is described as an effective mechanism to manage supply chain risks. The relationships between organizations and suppliers is considered a key element to deal with risks regarding demand forecasting, planning and inventory control, and therefore improving delivery performance (Flynn et al., 2010; Wiengarten et al., 2014). In addition, Flynn et al. (2010) state that internal integration breaks down functional barriers and fosters internal cooperation between different organizational units to increase performance.

Further, literature defined two key elements relatable to supply chain integration in the form of information integration and process integration (van der Vaart & van Donk, 2008; Zhang et al., 2015). Information integration explains the sharing of information and often done through advanced information systems which allow for efficient sharing of information through a platform. In addition, process integration is achieved by having adequate connections between different supply chain processes such as order fulfillment and handling of returns. (Zhang et al., 2015). However, according to Wieser (2011) information systems can also establish internal problems, especially when multiple systems are in place that cause redundancy and complexities in flows and resources. Similarly, absence of information sharing supply infrastructure has been found to allow for limited visibility on processes caused by incomplete information transferring between different points (Böhme et al., 2016).

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3. METHODOLOGY

This study aims to explore how supply chain characteristics influence the internal distribution within a healthcare organization. As the phenomenon has not yet clearly been defined in literature, case studies are well suited during theory development (Eisenhardt, 1989). This research will be conducted in a single-case study and follows an inductive, exploratory approach which allows for in-depth understanding of the context of the matter (Karlsson, 2016; Yin, 2003). Case studies are a respectable choice for studying phenomena in natural settings by allowing questions such as what, why, and how to be answered in the context of exploratory investigations with limited sights (Voss et al., 2002).

3.1 Research Setting

This study is conducted at a Dutch healthcare organization that operates on a regional level. It is a chain organization consisting of several facilities including home care, residential care, and hospital care. This research setting allows for gaining a thorough understanding of how durable medical equipment flows through the internal supply chain of this organization and, more specifically, the impact of supply chain characteristics on internal distribution decisions such as sharing of durable medical equipment. At the time this research was conducted, the healthcare organization under study made the decision to outsource an even larger part of the supply chain processes related to durable medical equipment (DME), by setting up a sale-and-leaseback contract for non-standardized equipment with a rental company, which entails all equipment previously owned by the organization itself.

DME can be best described by equipment and supplies for everyday use provided by a care provider (Healthcare.gov, 2020). It is important to note that during the research project, the organization was in negotiation with the rental company to finalize contractual formalities. For this specific reason, this study refers specifically to the flow of DME in the internal supply chain.

3.2 Case Selection

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3.3 Data Collection

Initially, the focus of the data collection was on gathering perspectives of care personnel and managers at multiple levels dealing with the processing of DME within the healthcare organization. Though, the scope was eventually broadened to external payers, support staff and a supplier.

Data was collected in the period from October 2020 to December 2020. The researcher spent one full day at the healthcare organization, which allowed for several informal conversations to gain better understanding of the matter. For primary data, a total of twelve interviews were held with thirteen employees of the organization. One interview was held with two civil servants from the local community where the organization is located. In addition, one interview was conducted with an external supplier. Further, secondary data by the means of interview transcripts from previous alike research projects conducted by Janson (2019) and Van der Meulen (2020) were available to the researcher to assimilate relevant findings.

Table 1: Overview of interview data

Interview questions were developed consisting of open-ended questions covering different areas of the research topic such as ‘how’ and ‘why’ questions. The aim of the interviews was to get an in-depth identification how different actors within the organization perceive the flow of durable medical equipment within the organization. By such a semi-structured approach, posing open questions and leaves room for further elaboration to gain more in-depth knowledge in specific areas (Karlsson, 2016).

Interview Nr. Function Department Reference

1 Local community - LC1

2 Occupational Therapist Rehabilitation OT1

3 Occupational Therapist Rehabilitation OT2

4 Team Leader Long-Term Care TL1

5 Care Administrator Care CA1

6 Senior Purchaser Purchasing P1

8 Head Facility Services Facility Services FS1

9 Team Leader Rehabilitation TL2

12 Care Control Finance CC1

13 Operational & Manager Supplier OM1

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Consequently, interviews had a duration ranging from fifteen to sixty minutes. In order for organized interviews, questions were prior to the start of the study conducted by the use of an interview protocol (Appendix A). Interview partners were selected on the basis of the involvement in DME and subsequently contacted through contacts within the organization and through the use of LinkedIn. An overview of interview partners including the departments can be found in Table 1.

3.4 Data Analysis

All interviews held both in online and face-to-face settings were recorded, transcribed, and coded. The method used for analyzing data was done through individually analyzing of conducted interviews by coding and interpreting through the software program ATLAS.ti, which allows for adequately conducting a within-case analysis. (Eisenhardt, 1989; Karlsson, 2016). The coding scheme used as for the analysis consists of three steps, as discussed in Corbin & Straus (1990) and Karlsson (2016). The first step is open coding which entailed the summarizing of transcripts and assigned short text codes. Continuing to the second step, axial coding was applied to focus on typical characteristics, inefficiencies, and complexities present within this healthcare organization. By focusing on the similarities and differences among the codes, a selective process on the first order concepts lead to more refined second order themes on the notion of complexities and inefficiencies regarding the processes of durable medical equipment. Thereafter in the last step, the selective coding, aggregate dimensions came forward were thoroughly analyzed for the presence of ties to literature and the possible emergence of new concepts which were determined most relevant (Gioia et al., 2013).

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4. FINDINGS

This study particularly focuses on the flow of durable medical equipment (DME) within a care chain organization. Initial findings show that the internal distribution is affected by several internal and external factors that will be elaborated in this section. The presence of a swift flow of DME between departments and sites of the organization is considered to be of relevance to provide for better chain care quality and save costs. Further, the integrated structure of the delivery of care calls for a sound coordination of processes, including the one of DME.

4.1 Financial Flows Within the Organization

This healthcare organization is a care chain organization which offers a wide selection of care including home care, hospital care, nursery care, and rehabilitation. With the provision of several types of care comes the consequence of having to embrace different financial flows inherent to specific care paths. These flows differ on the characteristics of care provision and stakeholders involved. The social support act is prevalent for home care settings, whereas the long-term care and health insurance act surround care provision in the areas including hospital care, nursery care and rehabilitation care. More specifically, multi-flow presence seems to be a fundamental characteristic of a care chain organization. An interesting finding that came to light is the complexity that comes with the presence of several financial flows within an organization, especially for healthcare staff.

“A care chain organization is great to the extent that everything can be offered under one roof, and the fact that it can be perceived as client-focused because clients can be treated within the same organization. However, with all of this it gets rather complicated due to the fact that one has to deal

with all different aspects of healthcare care, namely the different financial flows.” (CC1)

The Dutch healthcare system has experienced several changes over the last years with regards to the responsibility of healthcare purchasers. As a result, the organization of home care and nursery care has seen rigorous changes regarding care provision and financing. Recent regulatory revisions induce a shift from purchasing medical equipment through the social support act towards the long-term care act, meaning that healthcare organizations or nursing homes are now responsible for providing DME for clients.

“We are working on a new scheme to transfer equipment provided under the social care act towards provision under long-term care act. That is something where the rental company plays a role in, but

we are still looking for ways to give design to this. That is quite a challenge.” (OT2)

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4.2 Care Paths and the Management of DME

The flow of DME differs due to the prevalence of financial flows which determine remuneration for specific care paths. A distinction is made on the basis of care provision, which is divided into different sites and departments due to the regional setup of the organization. Subsequently, each care path involves a different financial structure, with the occasional overlap of different structures when clients move between departments. Specifically, the latter is the case with the rehabilitation department, where often clients from hospital care get admitted.

In the geriatric rehabilitation care department, care provision is focused on rehabilitation care and reimbursed through the health insurance act on the basis of a Diagnostic Treatment Code (DTC) which is predetermined care provision for a specific care path. As this department offers a plethora of treatments, various types of DME are provided. Interestingly, this organization seems to have a close collaboration with a rental company that not only provides DME but is also highly involved in the logistics and coordination of DME. In the case of a wheelchair, when a client first gets admitted for geriatric rehabilitation care, occupational therapists request for a standard wheelchair through the rental company. Consequently, the rental costs will be allocated to the department, as this equipment is considered to be for general usage.

“The organization has a contract with the rental company for the delivery of wheelchairs within the geriatric rehabilitation care department. The department is then responsible for the

corresponding rental costs.” (OT1)

When clients are in rehabilitation and due to types of treatments specialized DME such as a tailor-made specialized wheelchair is needed, this specific DME is financed through the health insurance act or DTC. The latter requires for correct administrative measures and selection of the right supplier. A rule of thumb that is used by policy makers is that every type of equipment in and around the bed is financed through the health insurance act. This implies that costs for individually used equipment can therefore be claimed on this financial structure.

Regarding standard DME that is used for multiple clients, DME such as transportation wheelchairs, commode chairs, matrasses, mobile lifts etc. is rented through the rental company. The corresponding costs are allocated to the organization itself. Specialized DME such as specialized wheelchairs and protheses, reimbursement is done through ‘regional care offices’ that belong to healthcare insurance companies. When clients receive rehabilitation care and in need of specialized DME which is retrieved from inventory, no specific cost center has to be allocated. Considering the latter, departments seem to have specialized DME in stock.

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Whenever there is an extramural movement of clients, DME in use by the client will be given along upon dismissal to avoid waiting time. A complicating factor is then added to the process, as the finance structure changes once again, dependent on the duration of DME needed in home settings. Up to 6 months of rehabilitation care is financed through the Health Insurance Act, whereas from 6 months and longer is covered under the social support ac by the assumption that clients need to maintain the use of supportive DME in home settings.

“We give the bed bracket with the client when they go home, and we order a new one and the costs are then charged to the client. This is done to prevent long delivery times with the chance that

the bed bracket is not delivered in time.” (OT1)

As stated by an occupational therapist, the ordering of equipment for clients upon dismissal is experienced as a lengthy process. Provision of DME to clients themselves, outside of organizational policies, is therefore present. Noteworthy, the geriatric rehabilitation department is an exemption in this regard, as this department deals with clientele through multiple financial structures which therefore adds complexity. On the contrary, apart from hospital care, other departments are defined as a last resort for clients and considered to be permanent residents. The latter has a direct consequence on the organization of care and the reciprocal financial flows which then switches to long-term care act, as the provision of care becomes long-term. DME then is paid for out of Care Intensity Package budgets. Furthermore, the presence of different financial flows within the organization often requires for adequate skills from personnel to make distinctions between the financial structures with corresponding suppliers. Within the department but also the organization as a whole, DME is provided through different distribution routes established by individual suppliers and often levels of hierarchy, which adds to complexity. Consequently, multiple suppliers are involved in the provision of the equipment and selection is made on the type of DME that is needed. Further, the prevalence of several care paths allows for a department-bound orchestration of DME.

“There is also a difference between reimbursed equipment within the framework of long-term care act, social care act, and unfunded equipment which has to be acquired by clients themselves. Then there is that part which goes through short-term lending which is through the health care act

without additional costs.” (OT1)

4.3 A Diverse Supply Base for DME

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supplier for specialized DME such as tailor-made wheelchairs and orthoses. As the occupational therapists state, for the geriatric rehabilitation care department most equipment is tailor-made due to the nature of their treated patients, and thus require for equipment from the right supplier that provides tailor-made equipment of sufficient quality. The latter is often subject to made-to-measure principles for complex cases. However, care administrators pointed to the selection of a third supplier when supportive equipment is needed that cannot be rented through the rental company.

“A problem occurs when an anti-pressure pillow is needed, then we have to order this from another supplier. Hence, you have the wheelchair from supplier A, and you need the pillow from supplier B or

C and use this together.” (OT1)

“For the long-term care in nursing homes we use another supplier. The rental company only provides rental wheelchairs for the rehabilitation department.” (OT2)

Standardized DME is ordered through the rental company. The ordering process is uncomplicated by the means that care personnel can easily request by email for DME and delivery options. Moreover, interviewees stressed the easiness and speed of delivery, and highly satisfied with the service delivery of the rental company. At the same time, the ease of renting equipment is also found to enhance a certain loss of control on rented DME.

Non-standardized DME can be ordered through an online portal, through the purchasing department, or by placing direct orders. It seems that especially occupational therapists have to deal with a diversity of suppliers due to multiple care paths within the rehabilitation department.

“We order equipment by sending an email to the rental company and most of the times it gets delivered quite fast.” (CA2)

The distinction between the different financial flows needs to be known for adequate ordering of DME by the right supplier. Therefore, care personnel are skilled and have deep knowledge regarding the process of ordering DME. In addition, every team has a dedicated care administrator which has the end responsibility for ordering DME within the team. Consequently, care personnel have to define the purpose of DME before ordering to select the right supplier to fit the financial flow regarding the provision of care. Interestingly, a clear discrepancy exists between individual and general usage of equipment, both for practical and financial implications.

“We have mobile lifts which are not client bound. These lifts are acquired by departments and used for every client which is in need of one.” (CC1)

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4.4 Internal Distribution of DME

Together with the inflow of new clients, DME is brought into the organization from an external supplier. Clients often have personal DME through the social support act that needs to be returned to the initial supplier upon admission. Interestingly, there is an absence of taking over equipment between suppliers of different financial flows, especially between the social support act and long-term care act. Specifically, a physical swap of DME when clients from external sources is needed upon fist admission to a department.

“The wheelchair under the social care act provided by the local community has to be returned and then I have to apply for a new one through the care office under the long-term care act. That is

according to a budget from the ZZP which people are entitled to.” (OT2)

“The moment that she (client red.) gets admitted into a nursing home the wheelchair returns to the local community and a new one is provided through the long-term care act. That could be a totally different wheelchair. In principle, the particular wheelchair is never acquired by the health

insurer or long-term care act, there will always be a physical replacement.” (LC1)

The sharing of DME is subject to financing decisions that predetermine the flow of equipment and is therefore complicated. Care administrators pointed out that usage of general DME is sometimes shared between teams located on the same floor in a specific department. Specifically, mobile lifts are often shared on the initiative of care administrators. Conversely, sharing DME on inter-departmental levels is complex due to a lack of coordination between inter-organizational units. Departments within the organization operate as independent units instead of collaborating together. Also, no organizational policy exists to foster collaboration in terms of DME provision. Care personnel know about possibilities of sharing equipment between departments but due to practical matters such as a lack of insight and decentralized budget decisions, this tends to be ignored.

“The rental company can only claim on the cost center of the geriatric rehabilitation care. The

moment that a client moves to another department, for example the dementia department, the rented wheelchair has to be returned to the rental company.” (OT1)

“The equipment is not transferred, maybe we could, but it actually is not. I have never done that. It is one organization so you would expect it to happen, but we hardly ever do.” (CA3)

“But that also leads to other discussions, because once I have bought equipment at my cost center and the occupational therapist takes it to her department and I need it back after some time, I have to

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4.5 Decentralized Budget Allocation

The organization is frequently faced with multiple financial flows. And, budgets are formed on the basis of these financial flows. Apart from care personnel, the finance department addresses possible complexities with regard to the presence of multiple financial flows.

“There are not many care chain organizations. Regular care organizations tend to have to deal with only one or two financial flows which is already complex. Here we have to deal with all of them which

demands quite a lot from our personnel.” (CC1)

In this organization, the budgets for medical equipment are decentralized to department levels. For long-term care, these are mainly reliant on the CIP budgets. The rehabilitation department, however, receives a production-based predetermined budget. Budgetary control is centralized to team leaders and managers, which are responsible for the control over department-bound budgets but lack inclusion in the ordering process itself. The process is therefore delegated to care personnel, and results in low awareness of costs. Not only does this add to a lack of oversight, but also cost containment is more complicated due to the lack of active involvement from team leaders. However, team leader involvement is in place for the ordering of DME with excessive costs that cannot be rented. Further, when excessive costs are accounted for, the finance department is involved when costs of DME exceed budgets. In turn, the finance department will manually claim these costs to the corresponding regional care offices.

“(...) then it needs to be discussed with the team leader because it is a costly product.” (CA3)

In the case of non-standardized DME at third party suppliers, orders have to be approved by the purchasing department prior to being processed. Inefficiencies tend to be present, especially regarding the processing times. Therefore, this department is seen as distant that lacks affiliation with care provision. The purchasing process takes up several weeks due to profound background checks for new suppliers. In turn, long processing times are explained by internal hierarchy, as the approval of costs and supplier has to be made on different levels.

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“The problem lies in the area of approval and hierarchy, as orders are usually requested through a quotation which has to be approved by the team leader on site. That slows down the

process because we do not have any influence on it.” (P1)

4.6 Autonomy of Care Personnel

There exists unclarity on the selection of DME for ordering by care personnel. A diverse supply base allows for complexity in this regard. The absence of an online catalogue limits insights in the availability of equipment, and therefore the selection of the equipment becomes more complicated.

“Our professionals can manage with the rental company themselves directly. Things that have to be ordered separately can also be done by a professional, but due to the complicated system and lack of

a proper catalog, the step for placing orders is rather high.” (TL1)

Further, care professionals, including caregivers and support staff, have the autonomy of renting equipment. In essence, this would suggest a swift process of acquiring DME. However, as care administrators stressed, autonomy is restricted to rental DME only. Further, both team leaders and care administrators addressed the process of returning DME when not in use is rather inefficient. This is explained by care personnel that returns are not processed accordingly, which allows for the ordering of new equipment whilst unused equipment is still in place. Hence, a lack of control from team leaders on care personnel exists regarding the handling of DME.

This implicates that autonomy for care personnel to place orders tends to negatively influence rental costs. Furthermore, the level of autonomy requires care personnel to deal with the administrative burden of ordering equipment. As interviewees pointed out, it is part of their job to organize DME for their clients, but it requires for extra handling and organizing of tasks common in all departments. However, it is questioned whether care personnel, and especially the occupational therapists which deal with a variety of suppliers, should be responsible for DME as it affects production.

“I wonder whether occupational therapists should do this, they should be providing care instead of production.” (CC1)

4.7 Lack of Visibility on DME

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“What I often see is that we lost equipment or do not know where things are exactly, or if it is even used and if so, to what extent.” (TL1)

Both owned and rented equipment is prone to this lack of visibility. Owned equipment relates to DME that was acquired by the organization before the outsourcing of standardized DME to an external supplier. Specifically, inventory levels of this equipment are still present and in use. A major issue is the maintenance of DME, which is a precondition for appropriate use of equipment on clients and it seems that unregistered equipment is in use by care personnel. A recent find of bathing gear that after a thorough check was determined outdated without a recent track record of required yearly maintenance, and therefore not safe for clients. This seems to happen occasionally, and conflicts with the international healthcare standard JCI, that grants qualifications to care organizations for excellent quality and safety.

“Sometimes when you open up a storage room you will find random wheelchairs. The maintenance is not registered, there is no Activa number present in Oracle. It used to be a muddle of equipment and

it still is. Nobody really knows what we have in stock exactly.” (P1)

The rehabilitation department lacks oversight on inventory and rented equipment, as the team leader pointed out that she relies on the knowledge and skills of the care personnel for the handling of DME. Further, inventory levels in different departments are not up to date or known to care personnel across different departments. The team leader of the long-term care department also states that within the organization there is not really a clear policy on renting equipment and the consequences hereof. As a matter of fact, the team leader also lacks clear visibility in inventory. Consequently, inadequate insight in inventory levels is present within the organization as a whole, caused by the absence of an integrated IT system which entails all information regarding the management of DME. In all levels of the organization this absence is noticed and clearly constructs to the lack of visibility on DME.

“We do have some equipment of our own, mostly small things. I notice that people do not check in a closet for instance to see whether or not we have that specific thing available but rent it

immediately.” (CA1)

“I cannot check in a central system where everything is. We do not have such a system. Therefore, I have to ask colleagues whether something is in use or not.” (CA2)

4.8 Lack of Visibility and the Effect on Rental Costs

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“I think there is a lack of structure and lack of visibility in ordered equipment. There is also little insight in what is rented and what the associated costs are. It happens that a shower-toilet chair has been rented for weeks that I did not know about. Often, this is rented and can therefore be returned.”

(CA3)

“I think that rental expenses are quite high, maybe even for equipment that is not here or is not used anymore.” (CA4)

The lack of visibility therefore adds costs for rental DME. To illustrate, the inefficient process of returning unused DME resulting in the fact that rented equipment often is kept while it should have been returned due to limited visibility. Moreover, care personnel are not always aware of the rental costs of DME. The role of care administrators is therefore of great importance to stress the importance of costs in care teams.

“We discussed several times in our team that the rental costs are fairly high, and it is just a waste of money.” (CA4)

Another reason for unclarity around rental costs can be linked to the notion of information sharing. Care administrators pointed to the existence of a rental overview of all equipment priorly existed to check rented equipment and corresponding costs. However, these are not being shared with care personnel, which limits the possibility to get insight in rental expenses. It remains unclear why these are not being shared anymore. This lack of overview is experienced by both team leaders and care administrators which believe that visibility could be enhanced by the use of sharing information regarding DME.

“I remember that the list was shared once a month. I used to check everything thoroughly once a month to make sure what equipment is in stock and what should have been returned already, because

that is what you pay for. That created visibility. But right now, I have no idea.” (TL2) “(…) I cannot name ten things that we currently rent in our team. Where are all those things? There

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5. DISCUSSION

This study identified several characteristics present within the internal supply chain that influence the distribution of durable medical equipment within healthcare organizations.

5.1 Visibility in the Internal Supply Chain

Similar to prior studies conducted in the field of healthcare supply chain management, this study found that typical supply chain characteristics in terms of different stakeholder interests, various supplies, and insufficient product traceability exist in the internal supply chain (Landry & Beaulieu, 2013; Moons et al., 2019). Adding to the insights of these studies, this study found that, particularly, a diverse supply base causes ambiguity concerning the purchasing and distribution of durable medical equipment. In this thesis it is observed that suppliers of both standardized and non-standardized durable medical equipment have their own distribution channels in place, which limits for adequate overview on distributed equipment for care personnel.

In addition, the findings described in this study show that this ambiguity is caused by an internal lack of visibility on medical equipment within the organization as a result of having multiple suppliers for medical equipment in place. Care personnel stressed the limited insight in inventory levels, usage of equipment and associated costs, which results in excessive inventory within departments and increased costs. This is in line with prior work of Moons et al. (2019) and Volland et al. (2019) who state that low visibility and low quality of data is a common characteristic of healthcare organizations. Furthermore, the lack of a proper information system which can capture the peculiarities of the many suppliers, exacerbates the lack of visibility – a finding that confirms earlier empirical work (Huang et al., 2020; Sundram et al., 2018). However, it is worth mentioning that in our study an external rental company fulfills the role of managing the supply of durable medical equipment on all levels within the organization and is therefore responsible for information sharing. In turn, this lack of visibility adds a considerable administrative burden on care personnel, as it seems that manual processes have to be maintained. Further, due to a proportion of medical equipment which is directly rented, items are often overseen by care personnel and managed less precisely – as portrayed in the work of Beaulieu et al. (2018).

Proposition 1a: A diverse supply base results in a lack of visibility regarding the purchasing and

distribution of durable medical equipment.

Proposition 1b: The lack of a modern information system within healthcare organizations results in a

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5.2 Complexities in Organizational Levels

This study finds that different remuneration schemes for durable medical equipment are complex and not clear to interviewees. Financing structures for care provision including medical equipment predetermined by the Dutch government adds complexity to the internal supply chain. It is found that care paths are subject to selected financial flows which require individual suppliers of medical equipment. Specifically, this seems to complicate processes within departments dealing with a variety of care paths for the management of medical equipment. A similar pattern of results was obtained by Lee et al. (2016), who stated that changing reimbursement policies affect operating conditions in healthcare settings by adding a level of complexity to internal operations such as extra required knowledge and tasks for healthcare personnel. Furthermore, medical equipment within departments is either acquired for general usage or tailored to individual patients. Findings show that care personnel have the autonomy to make these distinctions, dependent on specific care paths and financing thereof. However, the complexity of financial flows limits the possibilities for sharing medical equipment. In line with the findings of Dobrzykowski (2019), it is thus found that the Dutch government as a payer in this regard does not only add complexity in care delivery mechanisms, but also in the internal distribution of medical equipment in healthcare settings.

Proposition 2a: The presence of multiple financial flows within healthcare organizations adds

complexity to the internal distribution of durable medical equipment.

Findings show that care personnel have high levels of autonomy for purchasing medical equipment. It seems that this is a result of decentralized budget allocation, which delegates the management of medical equipment to care personnel (e.g. care administrators and nurses). For this reason, care personnel are responsible for the purchasing and control of durable medical equipment. However, budgetary control is centralized to department-specific team leaders and managers. Interviewees reported that team leaders are often excluded from the purchasing process, with exceptions such as for costly equipment. As a result, care personnel seem to be unaware of the associated costs of medical equipment. This then results in increased rental costs due to autonomy and unawareness. This is in line with previous work in the area of healthcare supply chain that found complexities such as supply chain intermediation, range and criticality of products, product complexity, and staff involvement in supply selection to be factors that affect the supply chain (Abdulsalam et al., 2015a).

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the purchasing department is prone to long processing times which encourages care personnel to find work-around methods to avoid long waiting times. These methods include purchasing through a claim form.

Proposition 2b: Decentralized budgets allocation adds complexity in the purchasing processes of

durable medical equipment.

5.3 Supply Chain Characteristics and the Effect on Internal Distribution

The findings of this study show that complexity through different financial flows and a diverse supply base are complexities that lead to internal supply chain inefficiencies such as additional administrative burden, higher equipment costs, and internal deficiency between departments. Further, it is observed that the organization lacks proper coordination between departments regarding distribution processes and information sharing. This study shows similar findings to the study of Leuschner et al. (2013) that improper information sharing affects performance, as it in this regard causes for extra administrative burden for care personnel, which leads to manually processes for ordering equipment and control of inventory. Additionally, it seems that departments respond to this complexity by overstocking on equipment. A direct effect thereof can be defined by an increase of costs for durable medical equipment, and therefore waste is present within the ordering process – a conclusion that is in confirmation with earlier research by Moons et al. (2019).

Our findings conflict with the assumption that care chain organizations mitigate supply chain risks and coordination of supply chain processes by bundling forces between facilities and departments. A lack of visibility triggered by the absence of an internal information system that allows for the management of durable medical equipment is found to hamper internal integration. Our findings are therefore consistent with prior studies on supply chain integration which determined adequate information and process integration as the key functions of effective supply chain integration (van der Vaart & van Donk, 2008; Zhang et al., 2015). Although it is found that the organization has integrated an external supplier for the distribution and management of durable medical equipment. As this study indicates, supply chain integration shows paucity on internal and external levels, which impairs the notion of sharing durable medical equipment. For that reason, this study finds contradicting results compared to the study of Burnes et al. (2015) and Zepeda et al. (2016), which advocate that organizations in local systems have a better degree of supply chain integration, and can therefore better cope with supply chain risks such as inventory sharing and distribution.

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limitation to share durable medical equipment across inter-departmental settings. Similar to Betcheva et al. (2020), this study underlines the notion that the absence of having clear visibility in durable medical equipment and the swift coordination hereof by adequate coordination between departments induces waste and limits intra-organizational flow of durable medical equipment.

Proposition 3: Complexity and a lack of visibility negatively affect the internal distribution of durable

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6. CONCLUSION

This study explored supply chain characteristics such as complexity and a lack of visibility and the influence on the distribution of durable medical equipment within the healthcare supply chain. Research is conducted by a single case study at a healthcare organization in the Netherlands. The main purpose of this study was to explore how supply chain characteristics influence the flow of durable medical equipment, and a special focus was on the sharing of durable medical equipment on intra-organizational levels. The results of this study showed that complexity and lack of visibility hamper the internal distribution of durable medical equipment. Decentralized budget allocation, different financial flows, absence of an information system and a diverse supply base are found to be drivers for the limitations on sharing durable medical equipment on intra-organizational levels.

6.1 Theoretical Implications

This study contributes to the ongoing debate on healthcare supply chain management by providing insights in the internal distribution of medical equipment and the effect on performance. This study adds empirical evidence to the papers of de Vries & Huijsman (2011) and Volland et al. (2017) by gaining understanding of supply chain management in healthcare settings and how the role of information sharing impacts internal distribution of medical equipment specifically.

Furthermore, this study adds to literature by showing complexity as a result of healthcare purchasing system – orchestrated by the Dutch government – which is found to be an accelerator for care fragmentation through the presence of different care paths and reimbursement schemes. Results show that care chain organizations in particular face the presence of several care paths due to multiple facilities for care provision.

Subsequently, this thesis adds to the more general healthcare management literature by showing the influence of typical supply chain characteristics on internal distribution decisions. Prior work focused more on the area of hospital supply chains (Moons et al., 2019; Nyaga et al., 2015; Volland et al., 2017; Zepeda et al., 2016), whereas this study focuses particularly on a healthcare setting.

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6.2 Implications for Managers and Policy Makers

Next to theoretical implications, this study also provides several managerial implications for managers of healthcare organizations and policy makers.

Policy makers could reevaluate the current financial flows in the Dutch healthcare system to allow for improving the healthcare system by easing the provision of durable medical equipment. Specifically, switching of medical equipment between care paths is found to cause increased costs for healthcare purchasers, due to the provision of new equipment when switching between financial flows. Easing this process would therefore result in less administrative burden and a more efficient allocation of resources, as durable medical equipment can be used more sustainably.

When healthcare managers are confronted with separate departments, the notion of sharing equipment should be considered. Decentralized budgets add to complexity within care processes and could result in extra costs. Therefore, healthcare managers could discuss the possibilities of centralized budgets within organizations, which could suffice for more cost-effective provision of durable medical equipment and lead to less fragmented care.

Further, this study shows that supply chain integration has been evolved to some extent but is far from operating efficiently. Therefore, healthcare managers could reassess the internal and external integration to avoid complexities within the internal supply chain. A special focus should lay in the area of the provision of information, by the introduction of an adequate information system for inventory control. This is important for a more efficient management of durable medical equipment. Adding to that, internal integration should be improved before external integration. Healthcare managers could set requirements for contracting external suppliers for the provision of equipment, to provide for an information system to allow for centralized ordering, keeping track of rented equipment and associated costs.

6.3 Limitations and Future Research

Although this study provides insights in the functioning of the internal supply chain regarding the management of durable medical equipment, this study is limited in several ways.

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Not only did this study find that a lack of visibility on durable medical equipment is partly caused by an external supplier, the internal integration within the organization was also found to be prone to inefficiencies which affects the sharing of durable medical equipment on inter-departmental levels. Further, information sharing came forward as a major accelerator of lack of visibility. An area of interest to investigate for future researchers is the effect of information systems on healthcare supply chains and more specifically, the application of an information system for the sharing of durable medical equipment within organizations.

In addition, this study addressed the notion of sharing durable medical equipment within healthcare organizations. Although the results showed limited insights in barriers for the options of sharing durable medical equipment, more research should be conducted in the area of intra-organizational sharing of durable medical equipment to elaborate findings in this field, as it is expected that other healthcare organizations have already adopted the notion of sharing medical equipment on intra-organizational levels.

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INTERNAL DISTRIBUTION DECISIONS IN A HEALTHCARE CHAIN ORGANIZATION: THE CASE OF DURABLE MEDICAL EQUIPMENT