Partnering for Optimal Supply Chain Performance

By Jon Pruitt, Senior Vice President, CHC Supply Trust

December 2023- The Journal of Healthcare Contracting

If the pandemic ushered in the worst of times for hospital supply chain managers, would a decline in COVID-19 cases bring about the best of times? The reality is that hospitals are still being challenged by ongoing – and unabating – pressures, including raw material and pharmaceutical shortages, declining patient volumes and inflation.

That’s why strategically minded supply chain leaders are focused on resilience – due to the pandemic’s exposure of supply chain weakness – without losing sight of cost-saving opportunities.

Looking to group purchasing organizations (GPOs) for greater stability and savings makes sense as a first step. After all, a GPO, by definition, leverages the collective purchasing power of member hospitals to secure discounts on goods and services. However, the pandemic changed how hospitals evaluate GPOs, and the need to curb supply chain costs has altered how hospitals approach GPO partnerships.

Hospitals hit by supply shortages during the pandemic now tend to ask what a GPO delivers besides cost savings. Does the GPO have a diversified product contracting strategy, for example? Will the GPO go the extra mile to help hospitals of all sizes procure alternatively sourced supplies in times of scarcity?

Supply chain teams are partnering with hospital leaders and their GPO partners to create a proactive plan for supply chain disruptions and shortages. A key element is creating a core list of products that must be available. One example is an IV catheter. This clinically sensitive product is critical to patient care.

Our client hospitals are convening clinical committees to evaluate alternative products, adding two selected alternatives to the hospital item master, and moving ahead to train staff to use the alternatives – all before any shortage occurs. This effort has become part of daily operating procedures for hospitals in the post-pandemic environment.

Even as hospitals address ongoing shortages, financial pressures remain. Supply contracts are an area to identify potential relief. Many hospitals lack the resources to monitor contract pricing compliance and rely on us to ensure contract adherence while continually scrutinizing new contracts to ensure the best possible terms for the hospital. Supply and service contracts are also figured out with automatic annual changes and price hikes built into their terms.

Contracted purchased services also represent savings potential. Often, service purchasing is a decentralized process, with departments contracting on their own with different providers and missing out on volume-based discounts. Hospitals often overpay for laundry and courier services, for example, due to a lack of centralization and aggregation in the procurement process.

Faced with escalating supply chain costs and lingering pandemic-related apprehensions, some hospitals have taken a noncommittal approach to GPO membership, with some going so far as to “play the field” by joining multiple GPOs in an attempt to cherry-pick savings on specific items. This is seldom the best way to leverage group purchasing power and maximize savings. Instead, this practice can snarl rather than streamline the procurement process and potentially worsen cost-control inefficiencies.

Likewise, hospitals that don’t fully integrate with a GPO and continue to make large purchases on their own might be missing out on significant cost savings, as well as putting supply chain consistency at risk – especially in times of uncertainty and scarcity.

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