The COVID-19 pandemic exposed flaws in the healthcare supply chain, which continues to be challenged. Today, supply chain leaders face a complex situation. They still need to control costs, but as COVID-19 made clear, supply chain efficiency and resiliency depend on many other factors. Jon Pruitt, senior vice president of CHC Supply Trust, believes community hospitals must take action and implement practices that reflect the new realities of procuring and delivering medical products.
New best practices to secure community hospital supply chains
In the new normal, leaders must evaluate the past and plan for the future
JP: As COVID-19 vaccine distribution gains momentum and the number of new COVID-19 cases declines from the January 2021 peak, our country’s leaders and local hospital leaders alike are taking a step back to address supply chain risks and establish more resilient supply chains. For example, in late February, President Biden signed the Executive Order on America’s Supply Chains, directing an immediate 100-day review of supply chain risk in four key areas including “critical items needed to combat the COVID-19 pandemic, such as personal protective equipment.”
JP: There are four primary insights we are using to help community hospitals prepare for the future. First, it’s critical to develop a strategic plan to address supply chain vulnerabilities. Second, we can’t underestimate the potential for supply shortages in times of crisis. Third, it’s time for community hospitals to evaluate their GPO’s pandemic performance and find a partner focused on their needs. Finally, we need to offset increasing PPE prices by reducing cost in other areas.
JP: Greater shares of PPE and other scarce supplies went to larger hospitals or hospital systems, while smaller community and rural hospitals suffered more severe shortages. There were two primary reasons for this. One, larger hospitals and healthcare systems could afford to pay more for the scarce supplies. Two, many GPOs prioritized their larger accounts when allocating PPE.
JP: This year we have heard from many hospital leaders who were frustrated during the pandemic and are now seeking a new GPO that caters to the needs of community hospitals. Additionally, hospitals are budgeting for higher supply costs. We are seeing price hikes of between 3 and 5 percent for PPE and even as high as 10 percent or more for some products. Hospitals are also maintaining stockpiles of PPE while using more traditional inventory management strategies for less critical supplies.
JP: During and in the aftermath of the pandemic, our recommendations include:
- Multi-sourcing product to reduce demand from specific suppliers or certain geographic areas. We recommend that hospitals include non-contract and nontraditional suppliers to provide options in the event of another supply chain disruption. This takes time because it’s important to carefully evaluate vendors and secure and test product samples before placing orders.
- Involve clinicians in the supply chain decision-making process to build in more flexibility. Once established, clinical product review and value analysis teams can quickly convene to make sure alternative products pass muster.
- Leverage technology to improve global supply tracking. The pandemic emphasized the need for a globally standardized system for healthcare product tracking and traceability—from raw material and manufacture to storage and patient treatment. It’s recommended that hospitals use electronic data interchanges (EDI) as a first step toward automation and Item Master File optimization.
- Analytics and supply chain strategic planning is necessary to face an uncertain future. Data analysis gives hospitals an understanding of trends and cost-saving opportunities across departments. A third-party supply chain services partner can provide data analytics technology that flags issues and tracks improvements.
- Creating regional collaboratives with healthcare providers in a region helps create and manage collective stockpiles. Sharing information can reduce uncertainty and minimize the urge to hoard.
The COVID-induced supply chain disruption deeply underscored the need for greater efficiency and resiliency. To avert further threats to the supply chain, the industry must adopt best practices to better prepare for new challenges, reduce waste and help offset costs related to disease outbreaks and other widespread public health crises.
To learn more, please visit www.CHCSupplyTrust.com.