Why Your Hospital Needs Supply Chain Excellence
Already aware of this growing trend, health systems have long sought new strategies to cut costs in this critical area.
Across the US healthcare sector, there is now unprecedented pressure to find cost savings opportunities. It is just one of the reasons why your hospital needs supply chain excellence.
High-performance hospitals invest in and build world-class analytics, sourcing, negotiating, and contracting capabilities, but it is critical to creating a solid supply chain. External dynamics are forcing hospitals to track nearly every dollar they spend, and the healthcare supply chain has had to adapt in multiple ways.
I am a big supporter of building internal supply chain teams and creating a center of excellence, with the supply chain at its core.
Challenges in the supply chain
As supply chain costs have become the #1 cost in US healthcare, eclipsing areas such as labor expenses, healthcare leaders have been forced to seek low-cost solutions to minimize the financial pressure on their hospitals.
Already aware of this growing trend, health systems have long sought new strategies to cut costs in this critical area. COVID-19 has dramatically highlighted and exposed the existing weaknesses in the US supply chain. But the lessons learned from the pandemic can help to create a more resilient and adaptable supply chain.
Some of the challenges include:
- Reliance on Imports
80% of active pharmaceutical ingredients (APIs) in the US are produced overseas. This means that any disruption in the supply chain from those sources is potentially devastating to the entire nation’s supply. In 2018, the US topped the list of countries that imported the highest dollar value of drugs and medicines. - “Just-in-time” Inventory:
There has been an increase in this approach due to immense pressures on hospitals to make cost savings in any way possible. The risk with this strategy is that any disruption can mean hospitals are running out of critical supplies to patient care. - Squeezed Financial Margins
Studies suggest that already thin or negligible margins are at breaking point. The COVID-19 pandemic has pushed the national median hospital operating margin to -8%. This is not sustainable in the long term
Solutions, especially in a time of global crisis, are often complex. Healthcare supplies are notoriously expensive, and reimbursement has fallen. Almost every healthcare organization relies on supplies from international sources to try and drive down costs.
Roadmap to Supply Chain Excellence
I encourage hospitals to bring their supply chain back to the United States, supported by a robust internal supply chain team. The first step is to understand your organization’s vulnerabilities through a post-pandemic supply chain audit, covering areas such as:
- The creation of a Vendor Map to identify potential shortages
- Extensive contract reviews
- Purchased services mapping
- Auditing of several areas, including processes, utilities, and medical gases/waste removal
In addition, gathering accurate data and identifying supply chain disruptions must be a priority. Buy-in will also be required from your vendors to implement the changes necessary to avoid any supply shortages.
Now is the time to implement innovative policies to ensure the delivery of cost-effective services and enhanced patient care.
Hospitals need to develop data-driven “Spend Analysis’,’ to include an in-depth review of current spending and priorities to ensure an effective cost savings strategy. And cost savings initiatives are carried out by a cross-functional team.
Seek out interim help
Start by identifying cost savings in the supply chain. You can start with:
- Supplementing the supply chain workforce with expertise across outsourced services
- Data analysis, including unmatched benchmarking experience
- Contract analysis and negotiation, including vendor negotiation as required
- Telehealth: its use has rapidly expanded from an estimated 11 percent of US consumers in 2019 to 46 percent during the pandemic
- IT/telecom: we have comprehensive knowledge in auditing, analyzing, and uncovering cost savings in this complex area
If you want to see an in-depth analysis of our exclusive research report, you can check out Why Your Supply Chain Needs To Come Back To The United States.
Originally published on viehealthcare.com
