A benchmark study by Prodigo Solutions revealed ample opportunity where healthcare supply chain practices can have the most impact on cost, quality of care and patient outcomes:
- Less than 65% of healthcare supply chain purchases are tied to a valid, active contract.
- Less than 45% of supply chain spend is flowing through the item master, leaving most spend flowing through the least compliant channels: special requests, vendor managed inventory, blanket purchase orders and purchasing credit cards.
- Less than 85% of purchased lines have the right price.
- Over 30% of processed invoices contain errors that require manual intervention.
Supply chain plays a prominent role in the profitability equation for a health system. Expenditures on supplies and purchased services are the second-largest cost category (following labor cost), adding up to 37.3% of the total cost of patient care (Gartner 2020).
Mergers, the proliferation of legacy systems and competition for investment dollars between clinical and operational departments leave many IDNs with a supply chain that is more complex, more fragmented and less transparent than systems in other industries. As a result, decision makers struggle to track performance metrics and take informed corrective action.
In light of the pandemic, even the best-run health systems are experiencing the erosion of operating margins. This is forcing CEOs and CFOs to drive supply chain management leadership to find more supply chain savings in addition to mitigating the risk of supply disruptions.
As these gaps and opportunities are exposed, how can supply chain leaders begin to make meaningful change?