Before the COVID-19 pandemic, a primary concern for hospital supply chain leaders was minimizing costs. Today, cost control remains vital, but pandemic-induced disruptions brought supply chain resiliency to the forefront. In the current landscape, new best practices are helping hospitals mitigate supply chain vulnerabilities and reduce costs. Jon Pruitt, senior vice president of CHC Supply Trust, offers insight into the state of the community hospital supply chain from his experience working with more than 140 clients of CHC Supply Trust, part of Community Hospital Corporation.
Of all the supply chain vulnerabilities the pandemic brought to light, which was the most readily apparent?
JP: Many community and rural hospitals that were counting on their group purchasing organization to save the day instead got the cold shoulder because their GPO prioritized the needs of larger hospitals. Left to fend for themselves, rural and community hospitals saw the need to reevaluate their GPO. In many cases, this meant switching to a GPO provider like CHC Supply Trust – through their partnership with the HealthTrust Performance Group – that caters to the specific needs of community hospitals. Supply chain leaders now want to know what a GPO delivers besides cost savings. Does the GPO have a diversified product contracting strategy? Has it expanded its vendor networks and identified more domestic sources for supplies? Can the GPO procure alternative products at a competitive open-market price if contract pricing falls through?
These are all important qualifiers, but perhaps the most pressing question is whether a GPO will go the extra mile to help community hospitals. A GPO should be willing and able to provide you with references from a similarly sized hospital.
How can supply chain leaders offset the rising cost of hospital supplies?
JP: A good GPO or supply chain services partner can help hospitals through savings in other areas. Contracted purchased services in particular represent potential cost savings of 10 percent up to 30 percent. Often, service purchasing is a decentralized process, which creates inefficiencies in cost control as well as possible risk management concerns in the contracting and negotiating process. For example, different departments contracting on their own might use courier services or software subscriptions, and without communication, they might be using different couriers or duplicating subscriptions.
In addition to pooling and coordinating resources across the organization, a strong partner enables hospitals to evaluate their spend on purchased services – and benchmark each category against that of similar organizations – to spot potential savings opportunities.
What are the most important new best practices for procurement?
JP: Aside from making sure their GPO is diversifying its product contracting strategy, particularly for personal protective equipment, hospitals should also cultivate their own relationships with non-contract and nontraditional suppliers and be prepared to alternatively source product in the event of another supply chain disruption. Going outside normal channels for PPE and other supplies is a risk, so hospitals should vet vendors and test product samples before placing orders. Prequalifying and onboarding suppliers will speed up response time when a supply chain problem occurs. And hospitals should strategically select a mix of large and small companies spanning different geographical locations.
When hospitals procure products from nontraditional suppliers, they should add this information to the Item Master File and ensure the vendor information is handy in case of a future supply chain disruption. Also, it’s a best practice to identify a core list of the top 100 or 200 critically important products that the hospital must maintain in inventory. Thoroughly vet this core list with the clinical teams to ensure that acceptable product substitutes are identified, training and in-servicing is completed, and the clinically approved list of items is maintained in the ordering platform in the event of manufacturer backorders.
Have any new best practices emerged for inventory management? If so, what are some examples?
JP: Generally, just-in-time inventory management is still a cost-effective approach for most medical and surgical supplies. However, one lesson learned from the pandemic is that safety stock of PPE and key items from the critical products core list should be more plentiful. That’s why hospitals are adopting a hybrid approach by stockpiling certain critical supplies while keeping other on-hand supplies to a safe minimum. Policies and procedures should be in place to track and rotate stockpiled inventory, keeping in mind that during the pandemic, the Centers for Disease Control and Prevention permitted hospitals to use expired PPE as long as there was no visible loss of product integrity.
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