Will our healthcare supply chain hangover carry over through 2024
December 11, 2023
Part 1 of a 2-part series on the healthcare supply chain
When the COVID-19 pandemic hit the healthcare supply chain with all its fury in the spring of 2020, the immediate challenge for hospitals, health systems and medical practices was sourcing enough personal protective equipment (PPE) to safeguard their patients and their frontline clinical staff from the potentially deadline virus. Many providers had to go directly to China to source products. The heroic and innovative efforts by providers, their distributors and their group purchasing organizations (GPOs) to procure PPE are now well-documented in supply-chain history.
Four years later, as we step into 2024, the healthcare supply chain continues to deal with the aftermath of the pandemic. The pressing question is: will the healthcare supply chain be able to move on from the pandemic this year or will it continue to suffer from its own version of long COVID?
The answer is, that it’s going to be a little bit of both. The good news is the lessons learned from the pandemic will serve the healthcare supply chain well in the years and decades to come.
More on the good news in a bit, but let’s start with the lingering hangover from the pandemic. Here are some of the symptoms still being experienced by the healthcare supply chain.
Supply and equipment shortages
Many healthcare providers are still dealing with back orders, or orders for supplies and equipment that have yet to be filled because of supply-chain issues created by the pandemic. The items aren’t necessarily related to the pandemic. They are your routine, run-of-the-mill supplies and equipment. The goal of having the right product at the right time at the right price in the right unit of measure is proving hard to reach. Recent surveys show supplier shortages are even more widespread in 2023 than during the height of the pandemic in 2020, with over 90% of providers reporting ongoing challenges receiving critical supplies.
Inventory management struggles
Effective inventory management also is proving hard to reach. The unpredictable ebb and flow of supplies and equipment tied to an ebbing and flowing supply chain means you’re constantly battling to know exactly what you have and what you need. What do I carry? How much should I carry? Where do I carry it? Unexpected changes in patient volume, unpredictable supply availability, and workforce shortages have made the situation even more difficult.
Storage and warehousing challenges
All that, in turn, makes warehousing an issue. When everything is predictable — knowing what you’re getting and when you’re getting it because of steady patient volume — it’s easy to know how much space you need. Today, you could order a thousand, get 500 and use 50. And the 50 you use may be a substitution for an item your staff has used for years. This, on top of inadequate warehouse space to store excess inventory as per the latest industry reports in 2023, results in a critical and pressing issue.
But, as mentioned earlier, disruption has led to supply-chain innovation, as we all know that necessity is the mother of invention.
More PPE self-sufficiency
One thing we’ve seen from hospitals, health systems and medical practices is more self-sufficiency when it comes to procuring PPE. Providers this year will continue to make themselves less reliant on typical sources like GPOs and distributors. Many are buying directly from manufacturers. Others are making their own PPE. Some are partnering with small businesses to produce their own PPE and also selling it to other providers.
More vendor collaboration
Another thing we’re seeing on the vendor side of the supply chain is more collaboration among vendors themselves. Tech companies are talking with manufacturers. Manufacturers are talking with distributors. Distributors are talking with EHR vendors. EHR vendors are talking with GPOs. They’re competitors, but they all share one customer, and that’s the provider. They want to focus on the provider. They want to ease the burden on the provider in terms of coping with the lingering supply-chain challenges. If the customer falters, so do all these other vendors.
Closer provider-GPO relationships
In addition to seeing more collaboration among vendors, we’re seeing more collaboration between providers and their GPOs, especially with regards to technology and data. Thanks to the pandemic, we’ve moved from “you’re the buyer, and I’m the seller,” to “we’re both in this together; let’s work together.” We expect to see more of the latter in 2024. That tighter relationship manifests itself in data sharing. Historically, the GPOs have had the upper hand in contracting because they’ve had their data houses in order. Providers have been at a disadvantage because they haven’t had their data houses in order. We’re seeing more GPOs willing to share their data with their providers to align their clinical, financial and operational objectives. We’re seeing more providers up their data game by building health IT data platforms and putting themselves on par with their GPOs. And we’re seeing both sides agree to data standards, which facilitate the sharing of internal and external sourcing information, data storage and data submission.
The fourth and final supply-chain innovation born from the pandemic is a host of new entities through which providers can buy supplies and equipment. On one hand, we’re seeing closer relationships between GPOs and their provider members. On the other, though, we’re seeing no hesitation by small to medium providers who lack the buying power to purchase outside of their GPO to get what they need when they need it and for the price they want. These new entities are collaboratives, cooperatives and buying groups formed by hospitals and health systems in a specific region or around a specific product. Some are spun out of GPOs by big hospital or system members. Other are independent. Both types offer less-restrictive purchasing options for providers. We also expect this to continue in 2024 and beyond. Their mere existence has made the big national GPOs more responsive to their customers’ needs.