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Despite heroic efforts by hospitals across the country, the healthcare supply chain has struggled in the fight against COVID-19. Current shortages include PPEs, ventilators, and drugs-and patients, physicians, and nurses are suffering grave consequences. While no hospital could have anticipated a supply chain disruption of this magnitude, they were unprepared.  

The healthcare supply chain has long operated decades behind other industries. Once considered a leader in innovation-hospitals were among the first companies to utilize enterprise resource planning (ERP) systems and materials management information systems (MMIS)-they have not kept pace. Resource limitations and competing priorities, including mounting pressure by public and private payers to reduce costs while improving quality, have placed supply chain optimization on the back burner. 

Many hospitals have yet to fully transition to automated supply chain management technologies and processes, and while they do use several tools to support supply chain management, these tools are not unified under one platform and are not fully integrated with EHRs and ERPs. As a result, hospitals can’t quickly track and analyze their data in order to use their limited resources most wisely. They also aren’t using supply demand forecasting technologies, which could have helped them better prepare for a disruption of this magnitude.   

Hospital leaders recognize healthcare supply chain shortfalls-and they did so even before COVID-19 hit the United States. In February, healthcare consultancy Sage Growth Partners surveyed 100 hospital and supply chain leaders. 

 said supply chain management in healthcare is on par with or ahead of other industries, and nearly half (46%) acknowledged that they manage the supply chain only moderately well, slightly well, or not well at all. 

Hospitals must ensure that when the next supply chain disruption arrives-whether that be a second surge of COVID-19, another infectious or viral outbreak, or an event such as a strike or natural disaster-they are ready. That means moving quickly to automate supply chain management, implement AI-based analytics that account for disruption scenarios, and incorporate demand forecasting technologies. 

They must also update and revise their supply chain management disruption contingency plans, as the models they had in place prior to COVID-19 were no match for an event of this scale and duration. Finally, they must create plans for secondary and tertiary resources, and begin developing coalitions with other hospitals to pool resources when necessary. 

The great news is that hospital leaders are already signaling a commitment to optimize the supply chain. In early April, as we approached the peak of the curve, Sage Growth Partners issued 

. When asked to identify the technology solutions that have grown in importance over the past four weeks, supply chain analytics ranked second on the list-just behind virtual care technologies. Respondents also indicated that supply chain is now the second most important of their competing priorities, outranked only by patient safety. 

Of course, there are limits to what hospitals can control when it comes to the supply chain. This pandemic shows just how dependent the U.S. is on foreign supply, device, and drug manufacturers-something we must examine after this crisis subsides. In addition, the federal government has failed to adequately support the healthcare supply chain with additional resources. As of early April, the Strategic National Stockpile of emergency supplies was nearly depleted. According to reports, it contained 

in early April, when New York state alone required an additional 37,000.  

Still, there are some elements of the healthcare supply chain that hospitals can control, and they must move quickly now to ensure they are more prepared for the next serious supply chain disruption. The speed at which they need to move cannot be overstated. Healthcare supply chains are likely to be tested again in a few months, and patients’ lives may hang in the balance. 

, a leading provider of AI-enhanced inventory control and end-to-end supply chain management software and services for hospitals and health systems

several healthcare technology companies. 

Articles

Despite heroic efforts by hospitals across the country, the healthcare supply chain has struggled in the fight against COVID-19.

Opinion: Why the Healthcare Supply Chain Buckled Under COVID-19

Hospitals can’t afford to overlook cost-savings opportunities, yet many are failing to make supply chain management improvements that could save them millions.

of 100 healthcare executives and supply chain leaders by 

, a healthcare strategy, research, and consulting firm. The survey was conducted for our company, Syft, which offers the most advanced clinical supply chain platform for hospitals and health systems.

Most survey respondents agree that improved supply chain management can reduce healthcare costs and improve quality. In fact, more than half of respondents say it can increase margins by 1 to 3%, and nearly one-third say it can increase margins by more than 3%.

For most hospitals, even a 1% margin increase could make a big difference. Take, for instance, a 

hospital with an average total revenue of $900 million

. That hospital could gain between $9 million and $27 million by improving supply chain performance.

While hospital executives recognize the value of containing supply chain costs, the survey indicates that not all of them are taking the steps necessary to optimize supply chain management. Here are three mistakes hospitals are making, and how they can turn things around:

1. Failing to invest in supply chain management

Most survey respondents (98%) said supply chain management is a high or medium priority at their hospital, but only 13% said it’s a top investment priority for hospital operations in 2019.

In fact, when asked about their top operations investment priorities, supply chain management received the lowest response rate of all choices, which included:

Staffing turnover, retention, management: 15%

While all of these areas deserve investment attention, supply chain management should be higher on the priority list. The supply chain is one of the biggest areas in which hospitals can reap cost savings, so investments have big payoffs.

Sage Growth Partners’ survey is not the only one to find that investing in supply chain management is a smart move. An October 2018 report from Navigant consulting firm found that tightening control over and identifying waste in the supply chain management can help reduce expenses by an average of 

The Perks of Asking Hospital Physicians to Go In-Network

Another reason investing in supply chain management should be a top priority: Supply costs will grow significantly over the next few years. The Association for Healthcare Resource & Materials Management projects that they will

2. Underestimating the value of analytics

Hospitals have several options when it comes to supply chain management tools, but the survey indicates many aren’t using solutions that lead to the greatest cost savings.

Nearly one-fifth of hospitals don’t analyze their supply chain at all, according to the survey, and many are performing only basic functions for supply chain management, such as tracking inventory. This means they are missing out on sophisticated data analytics capabilities that can reveal important trends related to cost savings.

Take the operating room as an example. This is one of the highest cost areas of a hospital when it comes to the supply chain, but more than half of survey respondents said their hospital uses manual or spreadsheet processes to track supply chain information in the operating room.

Without more sophisticated data tools, hospitals can’t identify important trends related to surgeries, such as how different surgical supplies correlate with patient outcomes.

For example, a hospital might find that some surgeons are using a much costlier supply or device for the same procedure than other surgeons. With analytics tools, that hospital could then run a utilization and cost report along with a patient outcomes report to analyze with the surgeons performing that procedure for clinical/operational decision making. The opportunity offers significant cost savings while supporting quality patient outcomes.

3. Relying on data snapshots, rather than the bigger picture

As hospitals participate in more value-based payment models (such as bundled payments) they’ll need to find cost-savings across full episodes of patient care (such as all the services and supplies associated with a hip or knee replacement).

For that level of insight, they’ll need supply chain management solutions that provide an enterprise-wide look at usage and costs. The broader look enables hospitals to assess the best opportunities for cost savings system wide, and it can help align clinical and business optimization goals across the entire system.

More and more hospitals are recognizing the need for supply chain analytics tools and enterprise-wide systems, according to the survey. Nearly two-thirds of respondents said supply chain analytics can positively impact success with value-based payment models, and more than 40% said a single platform with an intuitive dashboard and analytics suite has the most potential to positively impact business operations.

To be actionable, analytics need to be delivered daily and in real-time. Syft has built its clinical supply chain automation platform to provide analytics on activity as it’s happening, allowing operators to make real-time decisions which can impact performance before the week, month or quarter is over. 

In the next few years, leading hospitals will move beyond this recognition to action. They will invest in more sophisticated supply chain management tools, prioritize their usage, and reap the rewards.

, a leading national provider of inventory control and end-to-end supply chain cost management software and services.

The mistakes hospitals are making-and what they can do.

Todd Plesko

Articles

Opinion: Why the Healthcare Supply Chain Buckled Under COVID-19

Most Hospitals Miss Out on Millions in Supply Chain Management Savings