Author: Ramy Hanna, CEO HealthTrust Supply Chain Continental/Roi
Various complexities like supply chain disruptions, labor shortages, elevated costs of living and more have become a permanent part of the post-pandemic landscape. Simultaneously, there has been a large shift in payer dynamics, global inflation, ambulatory growth, home health and virtual visits that also contribute to thinning margins – ultimately trickling down to a health system’s supply chain. While margins may be improving, hospitals are still feeling financial distress, according to a July 2023 report from Kaufman Hall. According to the same report, many hospitals underperformed financially in June compared to May while under pressure from ongoing issues like high expenses and inflation.
While health systems have been laser-focused on addressing the immediate, transformational challenges posed by continuous disruptions, they’ve shifted attention away from exploring less urgent opportunities with potential for positive impact – like investing in technology to offset labor demand or standardizing inventory to reduce unnecessary spend. And as a result, health systems are still struggling to perform, and therefore, must adopt a refreshed perspective on the current realities and explore nontraditional avenues and transformative strategies for cost-savings, operational efficiencies and growth.
Current Realities and Needed Shifts
Over the past three years, health systems have been largely focused on managing crises from a reactive standpoint – preventing them from holding a proactive posture against unexpected or emerging risks or developing a continuity plan based on the risk realities of today. To succeed, health systems instead need to prioritize establishing stable footing in a post-pandemic landscape, including pivoting focus to tackling one of the industry’s largest problems: supply chain disruption.
Because of supply chain disruptions, health systems face dozens of backorders that can last for months, with alternative items often going on allocation or backorder due to an influx of demand – leaving many without cost-effective options. For example, healthcare providers across the country continue to navigate drug shortages because of compounding external factors caused by the pandemic. The American Society of Health-System Pharmacists even found that ongoing and active drug shortages are the highest they have been since 2014.
Supply chain disruptions and other factors like high labor costs have caused acute care providers to compensate for lost revenue by performing more surgeries, expanding with new construction (including in the rapidly growing ambulatory care market), and adding new service lines without increasing investments in infrastructure to support. This means health systems are finding it difficult to add value beyond pricing in their operations, but fortunately there are other areas where they can add value while also mitigating supply chain disruption, including:
- Inventory: Healthcare systems should frequently review inventory to determine ongoing needs and unnecessary spend. This often leads to refreshing and adjusting inventory organically with volume and growth.
- Physician Preference Cards: Partnering with physicians on preference cards can help decrease cost per case.
- Administrative Tasks for Staff: Reducing administrative duties in departments where nursing may be managing supplies ensures their attention is focused on patient care.
- Purchased Services: Leveraging benchmarking and analytics to understand and re-evaluate spend in nontraditional categories like purchased services can present significant cost savings.
Adapting to current realities and driving new thinking are essential for health systems to avoid failure and remain competitive. For instance, backorders will remain post-pandemic, and relying solely on staff and people-heavy processes is not sustainable due to ongoing labor shortages. Simultaneously, disruption is now a perpetual aspect of the healthcare industry – from employee turnover and diminished talent pools to more frequent emergencies like pandemics (and threats of more in the future), emerging viruses, weather impacts and raw material shortages. To combat these challenges, healthcare systems must find nontraditional ways to accelerate value and redefine their approach to deliver meaningful outcomes in their facilities.
The focus on solving immediate challenges brought on by the pandemic such as patient capacity, community vaccination and reductions in elective surgeries caused many health systems to overlook quick-win opportunities in cost-savings and in creating operational efficiencies – like revamping care delivery rooms so they are easier for staff to use and reduce delays.
At a time when the pandemic has waned but much of its impact remains, health systems need to reset the table and consider nontraditional methods to identify new areas for improvement, such as:
- Reintegrating continuous learning practices – Adaptability is crucial, but informed adaptability is even more so. Health system leaders should take time to visit outside hospitals and IDNs, attend conferences, partner closely with clinician and administrative teams, read global health news and engage with third-party experts for fresh perspectives. It is easy for leaders to become comfortable with what they are operating with – but those ways may not always be the most efficient.
- Investing in technology to offset labor demand and build efficiencies – Investing in technology can help alleviate labor demand and more efficiently manage supplies through By implementing technologies such as smart cabinetry or Radio Frequency Identification (RFID) technology, healthcare professionals can focus more on direct patient interaction. Additionally, leveraging artificial intelligence and predictive analytics can optimize resource allocation and improve decision-making, further reducing the need for excessive manual analysis and staffing requirements.
- Standardizing inventory and reducing stock keeping unit (SKU) variation across facilities –Standardizing inventory and reducing SKU variation brings several advantages – including better prices through creative contract renegotiation, which could include rebates, bulk buys, free repairs, etc. Standardization also eliminates waste, optimizes storage space, simplifies training, and enables more accurate data analysis for informed decision-making, ultimately improving overall patient care.
- Resequencing care rooms and optimizing product utilization – Resequencing care rooms will not only make frontline supply management more user friendly and efficient, but it can also minimize patient wait times, reduce staff travel distances and improve overall processes. Additionally, optimizing product utilization ensures that supplies and equipment are readily available when needed – reducing delays as a result.
Leveraging a dedicated team, such as HealthTrust, to overhaul existing processes will provide valuable insights and significant improvements. Having a team with operational experience across a wide spectrum of healthcare facilities – from medical office buildings to Level 1 trauma centers – allow for impactful changes tailored to each facility.
In the post-pandemic landscape, health systems must recognize that supply chain disruptions and other complexities like staffing shortages are here to stay. They should adopt nontraditional and transformative approaches to create broader value beyond just pricing. As a result, they can navigate the challenges ahead and enhance operational excellence in the ever-changing healthcare environment.
I’m glad to discuss these issues and how HealthTrust can find untapped opportunities at your facility. Please feel free to reach out at Ramy.Hanna@HealthTrustPG.com.
Ramy Hanna is Regional CEO of HealthTrust Supply Chain Continental/ROi
Connect with HealthTrust
Please provide your contact information if you are interested in being contacted by HPG.