The Transformation of the Healthcare Supply Chain

By Eric Swaim, Vice President of Strategic Sourcing at HealthTrust Performance Group

Sponsored: HealthTrust Performance Group- May 2024 – The Journal of Healthcare Contracting

In the last four years, the healthcare supply chain has undergone unprecedented change. Eric Swaim, Vice President of Strategic Sourcing at HealthTrust Performance Group, shares his thoughts on the transformation happening with supply chain.

Q: What is the current state of healthcare supply chain?

Swaim: The supply chain in healthcare is continuing a transformation that began with the pandemic. Backorder rates spiked to 40% at the height of COVID-19 from a standard of about 5% pre-pandemic. Now, they average 10-15%. This has caused us to shift our way of thinking about supply chain – from an expense to be managed with “just-in-time” fulfillment model, to viewing supply chain as a strategic resource that needs to be actively managed because of the impact to patient care. Most health systems and suppliers have, or are currently undertaking this transformation by leveraging technology. We have traditionally talked about supply chain resiliency without understanding what that means. The conversation has evolved to supply chain risk and performance management.

Q: How is HealthTrust impacting this transformation?

Swaim: HealthTrust thinks differently about supply chain resiliency. We believe it starts before a contract is even written with a supplier. Suppliers want to work with us because of our aligned scale. We evaluate their ability to meet performance standards and what, if any, risks are present. We work with suppliers to build in obligations that protect our members’ ability to deliver care. Finally, HealthTrust incorporates AI into our proprietary monitoring model that works to standardize fill rate and other performance measurements that enables us to deliver operational recommendations when necessary.

Q: What should be the role of Group Purchasing Organizations (GPOs) in the supply chain performance?

Swaim: GPOs should be doing much more than just contracting with suppliers in a category. Health systems should expect their GPO to be coordinating the supply chain at a macro level. When disruptions do arise, GPOs should be providing recommended inventory levels, coordinating with distributors to ensure delivery and providing valuable information so that providers can make the most informed decisions to ensure continuity of care.

Q: How can leaders objectively gauge the performance of their supply chain?

Swaim: They should evaluate three key factors:

1. Operating Model: Is there a dedicated focus on supply chain resiliency that evaluates the performance of overall system, an ability to be resilient and manage risk?

2. Strategic Relationships: What protections and mitigations are in the contracts with suppliers, whether negotiated by the health system or the GPO? What economies of scale are being leveraging?

3. Use of technology and data: How is the portion of the supply chain that health system directly manages performing? What is the fill rate performance?

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