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Navigating Supply Chain Issues in Light of the Coronavirus Pandemic

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Delphine O’Rourke, Partner at Duane Morris LLP, and Michelle Johnson Tidjani, Senior Vice President, General Counsel and Corporate Secretary of Henry Ford Health System, talk about how hospitals can secure their supply chain in these uncertain times. In addition, the podcast discusses contract management issues and gives practical pointers on establishing an incident command center to ensure clinical and business issues are addressed. From the Public Health System Affinity Group of AHLA's Hospitals and Health Systems Practice Group.

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Speaker 1:

Welcome to navigating supply chain issues in light of the coronavirus epidemic, sponsored by the American Health Lawyers Association. This is going to be the first of a series of podcasts focusing on legal issues critical to preparedness, response and recovery to the Covid 19 epidemic for healthcare facilities. I'm Del O'Rourke. I'm a partner in the healthcare practice of Dwayne Morris, and I advise clients on healthcare regulatory issues as well as emergency response and preparedness. So, and with me today is Michelle Johnson to Johnny.

Speaker 2:

Hi there. I'm Michelle Johnson to Johnny. I serve as Senior Vice President and general counsel for Henry Ford Health System in Detroit. And I have the pleasure of, uh, serving this, uh, organization with oversight responsibilities for the law department, audit, compliance, governance, cybersecurity, um, and insurance. Looking forward to our conversation. Delphine.

Speaker 1:

Great. Thank you, Michelle. So thank you for taking the time in this, in this chaotic period. So, supply chain is a critical component of any risk mitigation strategy, and we're already working environment where there's a fear of global supply chain disruption. So as healthcare entities, uh, develop both their, both short-term and long-term strategies, which be really helpful, is to share some key issues that I'm seeing, uh, with clients that clients are asking me, and to hear how you are handling it, um, because this is becoming an issue of greater and greater importance for healthcare companies, hospitals, and health systems. So one of the questions that I've been getting, uh, consistently is how do we, do we have shortages? Is it just a disruption? How do we find out whether we're going to have shortages and let's say active pharmaceutical ingredients, so the FDA's closely watching and requiring notification when it has the authority to do so of shortages of critical medical products? Uh, currently the FDA's indicated there are no shortages of protective personal protective equipment. Um, while many facilities are ordering protective, uh, equipment in advance, there's no official shortage that there's no shortage of active pharmaceutical ingredients and no shortages of medical devices. Now, it's important to note that, uh, medical device manufacturers are not required to notify the fda, uh, but they're being asked to report, including healthcare facilities. So if you start seeing shortages, please report to the FDA so that as the FDA can communicate. And it's similarly, the FDA's not aware of any cellular gene therapies that are made in China, unseen disruptions or blood and blood pathogens, uh, animal drugs. However, uh, there is a concern that there's some disruptions that could, could lead to shortages. So really closely monitor the FDA sites and the governmental sites, including the C D C, to appreciate whether there's a fear, whether there's an actual disruption, and whether we're gonna see a point where we have a complete supply chain shut down for, for certain critical products. So Michelle, uh, if you could share, you know, what are you doing sort of short-term plan, long-term plan and, and addressing both interruptions that might be temporary or longer term?

Speaker 2:

Yeah, no, that's a great question. So I would say, you know, all of our activity around COVID 19 is really guided by our, what we call our incident command center, which is really set up an execution of our emergency management plan. So, so through the incident command, we have sort of a clinical, uh, team, and then there's also a broader system, operational team. And through that system operational team, we have a supply chain. Um, we have, you know, a line aside into supply chain. And so one of the things that we are, um, doing and being really thoughtful about is use of PPE and certainly communication channels regarding any medication shortages. And so we have tried throughout the organization to, to double down on our communication around appropriate versus inappropriate use of p e in particular, because we know that the, the broader community has a great deal of concern around mask and the light. So reminding our employees of the appropriate use, um, of those tools and reminding our clinicians just to sort of manage, um, h h how purposeful, um, they can be when appropriately utilized and ensure that we don't have shortages. So we certainly have communications around the organization and, and we're appreciative of the fact that we think the organization has been incredibly, um, thoughtful in that space. And so really doubling down on communications and making sure that when there are problems, those things get resulted, uh, um, resolved through the supply chain chain of command, and if necessary, those issues get, um, elevated to our incident command center. And that is sort of the end all of, uh, problem resolution for the organization. So, um, things are sort of centralized, uh, from that perspective, but every, every, uh, department across the organization or every, you know, every working functional unit throughout the organization kind of has a team that's responding and reporting up through, through incident command. And so that's how we've been able to kind of keep a, keep, um, track of things throughout the enterprise.

Speaker 1:

So, and Michelle, even on a good day, you know, they said that hospitals see about 5 billion in waste each year from high value pharmaceutical products. And, and part of the challenge is it platforms and also that hospitals generally don't wanna have additional, you know, more stock than they need. So it's, you know, a lot of times a just in time model, uh, what are you doing around inventorying and good practices to inventory constantly, but are you doing anything additional and same with your IT platform, anything else that, any other tips that you could, could share? Yeah, or also, yeah,

Speaker 2:

It's funny. So supply chain, obviously throughout an organization doesn't sit in isolation, right? It has a lot of different dependencies throughout the enterprise. And so one of the things that's really important in your supply chain operations, not only your equipment, not only your supplies, but, but revisiting your contractual relationships that need to be in place oftentimes, uh, of which we're, were negotiated through your supply chain team. So taking a look at sort of critical, um, contractual relationships, making sure of course, that we, we revisited terms so that we are able to execute and or, uh, be serviced by those contractual relationships. The other thing that I think is really pretty critical is that a lot of that, uh, supply chain infrastructure as well as the balance of the enterprise sit upon, um, it systems that, um, are, are more vulnerable at times like this. And so doubling down on our efforts from a cyber perspective, making sure we remain watchful and diligent, uh, around the sensitivity of our data and the, the higher likelihood of, um, people attempting to do, uh, inappropriate things with the system, you know, hacking and the like, those things tend to go up, uh, at times like this. So we are certainly, uh, doubling down on those efforts. And so as a part of our system command, we actually have, uh, the leader of our, um, cyber function, um, the part of the leadership team because we realize how critical, um, that is at this point in time. So revisiting contractual provisions, obligations that people have to us, uh, what we have to them to make sure that those are able to be fulfilled during this time. Most of those originating from the supply chain area. And then being mindful of the infrastructure upon which cyber, uh, our, uh, infrastructure upon which our supply chain sits, which is, um, cyber and, and really being, um, thoughtful deploying resources, additional resources that we need to protect our infrastructure.

Speaker 1:

Yeah, and those are great points, Michelle. Um, I'd like to pause a little bit on the contractual relationships, and those are questions that I'm getting from, you know, clients who, you know, I'm advising, you know, review your mission critical contracts, um, to your point, you said three years, but, you know, make sure that you dust them off if you're not looking at them on a regular basis. And look at your emergency critical provisions, including force measures, surge requirements, you know, are they addressed, pass through requirements, lengths of emergency, um, and are there any other contractual areas that you're focusing on? And then I'll ask about price gouging and if you've seen any of that.

Speaker 2:

Yeah, so I would say we are absolutely focused on kind of doing, um, an inventory of our contractual relationships utilizing our contracting database to pull out key terms. I would say that the, the principal focus has been around, uh, timing, payment terms as well as force manure. Um, one of the things that's interesting around force manure is determining whether covid 19 is actually applicable, um, just depending on how those, uh, provisions are scripted, you know, contract to, to contract. We've certainly, as a legal team, been engaged, um, in, in taking a look at those to figure out what our contractual rights are, um, during times like this. So it is, um,<laugh>, it's been important to spend the time in addition to all of the other things that we're trying to do to, to manage this, to, to be really thoughtful about that and really rely, I mean, this is the time where, you know, you really, um, rely upon those contract management systems and the infrastructure that you have in place, um, to be able to, to, to quickly, uh, retrieve those clauses and, um, determine their applicability. Delphine, there was a second part of that question. I'm not recalling at this moment.

Speaker 1:

Yeah, so the question is, if you, there's been concern about price gouging that very aware, we're already seeing shortages, you know, protecting personal equipment, being one of them, that vendors are coming back and trying to increase the contractual prices to, to benefit from those situations or take advantage of those situations.

Speaker 2:

So I would say, you know, we have not seen that as yet. Um, and I'm hoping that we don't, I think it was helpful that the government sort of doubled down in the communication fairly recently, uh, from the DOJ around the requirement of, of, of manufacturers to be mindful of consumer protection and, and that antitrust laws will continue to be in place, uh, during this time. And so I think that was helpful to the, the, the broader community. And I think we're pretty fortunate because we have not, um, we have not, to the best of my knowledge, experienced any of that at this point.

Speaker 1:

Well, that's, that's great to hear. That's great to hear. Yeah. And you know, the force measure clauses, those are interesting clauses. Um, they often don't get much attention, particularly right. Relating to disease. Um, yep. Not generally clauses unless you're in high risk, maybe oil contracting, but not high risk clauses that we usually focus on in the healthcare industry. Yep. So President Trump is, you know, just declared national emergency. How do you see that affecting interpretation of force measure clauses we're even state, uh, states announcing, um, uh, state, you know, state national er, or state emergencies. How do you see that affecting the interpretation of course, majeure?

Speaker 2:

Well, I think you have a stronger argument. Obviously, you have to take a look at the language that you have and be, you know, read it. Um, it varies from contract to contract, but I think that the fact that in Michigan we have, um, a, a declarative emergency in our state, the, the president, uh, declaring a state of emergency I think is favorable. Uh, but we are just calling upon the organization to let's retrieve those critical agreements, um, and be thoughtful about, um, what it says and, and, and where we have appropriate arguments be made. But, um, I think, I think that's more helpful, uh, than hurtful in this situation, obviously.

Speaker 1:

And what also clients have been asking, you know, even if their force measure clause would, could be interpreted in their favor, there's also a com a client relation piece and an optic scheme. Yes. And you refer to, you know, the doj, um, that a vendor who is enforcing clauses to the detriment of public health will not be viewed in the court of public opinion very favorably.

Speaker 2:

Right. Do

Speaker 1:

You think, you know, I mean, it's, it's, you're taking advantage, uh, of a, of a really devastating situation. Um, social support of any, you know, risk mitigation strategy, we'll say diversify, you know, um, and just, but diversify your vendors if possible. In your opinion, is it, is it too late for some of these critical, um, medical devices or, or, uh, drugs to diversify

Speaker 2:

Or I would say if we, if we were to, if we receive instances of that kind of activity, we absolutely would, uh, revisit our relationship with that vendor. It is very tough in, in this moment to, to consider having to do that right. Practically, because we're, yeah, managing under emergency circumstances. But certainly most of these relationships are not new, right. To the fact that we've identified them as critical typically means, um, that these are long, long standing or, or, or just important relationships to the institution. I would imagine that, um, once this has substi subsided, and we've gotten to a little better point, there was no question in my mind that if there was a vendor, um, that was problematic or attempting to price go or do things, if that didn't align with the law, um, and certainly, um, and even if it wasn't, you know, per, per se, illegal, if it was inconsistent with our culture, right? We don't expect sure prices to creep, um, inconsistent with a contractor or prices to, um, more significantly creep year over year or month over month, depending on, um, the terms. Um, then they would have under ordinary circumstances. So that's certainly would jeopardize, um, the relationship and require us to evaluate other vendors. But of course, I mean, we are where we are in this moment, and so, um, we've been fortunate we haven't had to, to deal with any situations like that at this point, but we are carefully, carefully monitoring. So I think the cautionary note to, not only to, to, to us, but I, I'm certain this is an issue for all healthcare organizations, just to be mindful, but importantly, double down, revisit those contracts, pull'em up, dust them off, uh, pull out those clauses so you can partner, um, with, with, with, with folks like us, you know, the, the lawyers to make sure that we have clauses that make sense. Um, and if there are, uh, declarative of emergencies in our respective states, figuring out how those might be helpful to us.

Speaker 1:

So Michelle, you've talked about both communications and relationships, and we're also talking about long term, and that's not, you know, advising clients, um, in, in this context, but also in many other emergencies that, that I've been involved with is communicate, communicate. And if you have relationships with your counterpart, um, at, you know, significant suppliers or relationship with your counterpart at your neighboring healthcare facility, reach out to them. It's now, it's not the time to, you know, when you're in the middle of a crisis, it's not the time to absolutely yourself. Um, yes, if you're gonna have to transfer patients, whatever it is, but if you haven't done so already, reach out, communicate, develop those relationships, reinforce those relationships because they are so critical when time is sensitive and making sure that the resolution is positive for, for everyone. Um, I would just

Speaker 2:

On that, yeah, just, just on that point though, Del I think you make an excellent point. In Michigan, we have the Michigan Hospital Association, which has done a great job pulling together providers, um, across the organization, administrative professionals, and then we also have a general council forum, um, of, of, of lawyers in healthcare in the state that sort of informally connect. I would say that I have been incredibly impressed with the, with the commitment of my partners across the state to really dig into issues as we see them in our respective enterprises and partner around trying to, to get to resolution. So to your point, delphine around communication, um, it has been just incredibly helpful to share, uh, best practices, um, and being really transparent to each other in all the appropriate ways, of course, but being transparent around ways that we could, uh, meaningfully support each other as we go through this together.

Speaker 1:

Yeah, that's, again, that's fantastic to hear for a variety of reasons. And I think generally we have a really positive bar at a H L A, I'll put a plug for HLA plays a major role in that. Absolutely. Uh, absolutely. Issues are coming, you know, and the issues are coming fast and furious and every day, uh, if not, you know, every hour there's a new issue that a facility maybe didn't think of or it's presenting in a different manner. Um, so that's great to hear. And we're hoping that part of these podcasts share that in a real time. Um, we're talking about short term, um, you know, there, there's a lot of speculation as to how long the epidemic's gonna last. Um, but there's no agreement, there's no certainty. So it's not just, you know, I've worked on floods or tornadoes. This is not an acute event. Right. What is your, how are you approaching this so that we can sustain into the future and have a long-term plan around supply chain?

Speaker 2:

Yeah, so I would just say, um, you know, so we have, um, that sort of to the point on communication. We have daily calls, we have weekly calls, we have executive leadership, um, meetings on a regular basis, um, dealing with all of the issues arising under, uh, under covid 19. And so supply chain is, um, no different. So the supply chain team itself is meeting quite regularly, and when issues come up, they get escalated to incident command, and then we are taking action, um, immediately across the system, um, throughout departments, including supply chain where appropriate. So I think it's, one, making sure that you have good vis visibility around the issue. And then two, um, making sure you have leadership at the right level to respond to the issues. And we are planning, I mean, you know, so we can't say to your point, Delphine, that this is a two or three week, um, thing. We have incident command in place for the long term. Um, it's an infrastructure that we've had. We bring it up of course, when emergencies arise, and so mm-hmm.<affirmative> it is up indefinitely.

Speaker 1:

That's great to hear. That's great to hear. And I think, um, you know, and going back to Trump's, uh, announcement that hospitals now need to deploy the emer, their emergency preparedness plans, can you touch a little bit on that? I mean, we, we should all, we should all have them, right? And

Speaker 2:

Hopefully them off. Yep,

Speaker 1:

Yep. And now they're, they're more than ready to go. So can you touch on that then? That would be great.

Speaker 2:

Yeah, sure. So, um, you know, throughout the organization, um, we have, um, an emergency preparedness plan. And one of the, the, the tenants of that is, uh, you know, quickly establishing an incident command center. And so we have a number of hospitals throughout southeast Michigan, and each of those has its individual incident command, which rolls up to a single incident command. Um, that oftentimes is very focused on a lot of the clinical issues. We've expanded our efforts to establish an INS incident command infrastructure around many of the operational and what I would call running the business issues, so that together we are aligned sort of clinical, operational, running the business issues and reporting into an executive team around things that are coming up, uh, with our incident command centers. And so we've got, um, we were fortunate in that we had a, an infrastructure that we just needed to activate. And then on activation of that infrastructure, it's not been perfectly seamless. I sh I don't wanna suggest that, but we have, uh, been able to really execute against, you know, the, the, the areas that we know need to, uh, be responded to. So it's, it's, it's nice to have that infrastructure. And then for folks who don't have those yet in place, I mean, there's lots of material on, um, setting them, you know, setting these types of, uh, processes up, but it's really being able to touch all of the critical areas in the organization, prioritizing, and then more importantly, perhaps communicating standardized information across the enterprise. I think one of the, um, things that, uh, is very apparent when you're dealing with crises like this is that it is, it is often a case that you have large swaths of folks in various parts of the organization who may be inclined to do X or y relative to remote access or other, you know, sort of business operations or, you know, or utilization throughout the enterprise. But when you've got 35,000 employees, you kind of don't want everybody doing something different. But there is a need to sort of standardize some key areas, um, with an, with an appreciation for the fact that not everybody can do it exactly the same, but there is a need to message out, um, an approach to handling things throughout the organization that is, um, somewhat consistent. And so the incident command infrastructure really born out of our emergency preparedness has been a really critical tool.

Speaker 1:

So Michelle, you mentioned 35,000 employees and, and Henry for, you're, you're huge. You're a major player, you have, and you know, you have the infrastructure, you have a contract database. What are you, are you doing anything with smaller hospitals, rural hospitals? Are you partnering anyway, even if it's just, just give advice. Um, you know, we know that even in 2019, uh, there's a record number of rural hospitals and smaller hospitals that have closed, and this is gonna be a challenge. Uh, has, has there been any coordination within, within Michigan or within your group to, to reach out?

Speaker 2:

So, I would just say that we partner, um, anybody who calls and asks a question or wants to lean upon our, our system, we are more than happy to do that. And we do that on a day-to-day basis, either through our, you know, questions directly to our incident command or one-off situations that come to us via email from other, uh, organizations we have, I mean, to the point earlier around, you know, the willingness of organizations to kind of reach out via email, we have, we have done that and we've had others do it. Uh, for us it has been, I think, uh, pretty collaborative with a number of organizations. There's no formal, um, sort of, um, program for doing that. And most of it's been informal, but certainly from our leadership perspective, our leadership's perspective, it is, um, you know, there's a tremendous amount of willingness to, to reach out. She's practice and then ask, you know, how other people are handling specific situations that arise generally under this.

Speaker 1:

So Michelle, anything else that you would like to share, um, that we haven't touched on? And, and again, our audience is broad. What's also including what's really critical, if there's just a couple pieces of advice around supply chain, there's a lot of concern and buzz that we're gonna have, you know, personal ventilator shortages that we're gonna have, testing, test shortages. You know, if you could just, again, elaborate on that, your thoughts and what you're doing as a major player in, in our healthcare, uh, industry.

Speaker 2:

Well, so what I would just say is, you know, there is, uh, quite a bit of information out there and to the extent possible, you know, using your regulatory team, your legal team, to make sure that they're getting as much information as can be published and processing that for your incident command or your leadership team so that people are aware of the options available to them. From a supply chain perspective, I would say just very generally communicating to the organization about, um, you know, use of the equipment. Just a reminder, I think our organizations are all well intentioned in times like this, though. People don't always behave as you might expect them to, uh, in calmer times. And so just a reminder to the organization about, um, the importance of your P P E and, and how that should be used. I, I think it's, it's is pretty critical. Um, there's been some great guidance, um, and reminders from CMS around the use of some of these things. And so, again, back to the point on on communication so that people are aware, I would also just encourage people to pull your, your biggest, most important contractual relationships. Um, your folks on the finance team and your supply chain team will know exactly, uh, what those relationships are. Take a look at those contracts and, and, um, dust off some of the, some of the, the key provisions just to make sure that you're going to get the commitment that you need or are able to execute in the way that it's, uh, anticipated for you, um, to execute during this time. And then, and then don't lose sight of the fact that all of our infrastructures are at risk. And so whoever's monitoring your, um, IT infrastructure, this is a time where some organizations can be very vulnerable. So I would just encourage people to be mindful of that and not lose sight of that as we get, you know, um, as, as we double down on our focus on the clinical and other parts of the operation, be mindful that this is, um, a time where hackers are out there. So you wanna, um, you wanna, you, you wanna, um, be thoughtful about those efforts, I guess maybe finally, you know, offer some calm, um, to your teams. I mean, this is a, um, an incredible, um, time, uh, in healthcare for all of our organizations. It's very difficult, um, to navigate through this. But if there is, um, some thoughtfulness about your process, um, and, and an ability to kind of create some calm in the organization, I think there is, um, an oppor a real opportunity to promote collaboration throughout the organization. Sometimes in ways you didn't know could even exist, because in healthcare, I think there is a real strong culture of coming together when things matter. And so I know that's one of the things that, you know, we've experienced, uh, here through this and other things that have come up, but, but, but, but not notably, um, through this, uh, particular occurrence. And I, and I trust and believe that that is happening at so many organizations across the country. So, so trust your people, communicate with your people, collaborate with people, share information as it becomes, um, available. And we'll get through this. I mean, it's changing day by day. And so just staying abreast of what is happening is, is, is pretty core. But, um, I, I think I am, um, in fact, I know I'm committed that we're all gonna get through this. Um, we'll get through this together,

Speaker 1:

Michelle. I love that in your final thoughts, you're, you're sharing, you know, be thoughtful, be reassure, uh, keep calm, um, make sure we have trust that we communicate, and that in healthcare we do have a culture of coming together when things matter. Um, so thank you. Thank you for that. And you know, also to your of podcast. So this first one has been on chain. Our next podcast will be, um, and again, Michelle, thank you and thank all of our listeners for tuning in.

Speaker 2:

Thank you.