“Past the pandemic” priorities: What they mean for supply chain

March 24, 2022

I have been asked a lot of late: “What are the priorities for hospitals and health systems as we move beyond, if not past, the pandemic?” In this month’s column, I explore some of those priorities, including the implications for supply chain.

Financial recovery

The financial pathway forward starts on ground sown rough by the pandemic. Front and center are ongoing labor and supply shortages that increase expenses, while creating capacity constraints that limit higher revenue generating elective procedures. For some hospitals, labor costs now represent 45 to 50 percent of revenue; drug costs were 40 percent higher in September 2021 than the year prior, with supply costs up 14 percent. To address an unsustainable financial scenario, healthcare financial executives are actively exploring partners and technology to reduce manual work, while improving the work experience, especially for clinicians. For many, the use of robotic process automation (RPA) is being used for a variety of repetitive administrative functions, from revenue cycle to patient intake and scheduling.

From the Supply Chain Perspective: RPA holds promise for automating supply chain tasks, from managing contracts to auto-ordering items that reach low par levels. The pursuit of the perfect order has also experienced renewed interest, as supply chain departments work to minimize the need for manual intervention by reducing discrepancies. Hospitals are also investing in technology to automate clinical documentation and alert clinicians when products are expired or recalled, thereby minimizing the time nurses must spend on supply chain activities and increasing patient safety. Healthcare management company Kaufman Hall recommends health systems unable to invest in their own capabilities consider use of more third-party operational solutions, something the vast majority of hospital executives say they intend to do.1

The great patient migration

Before the pandemic, we had begun to witness a slow, but relatively steady, migration of care from the acute care hospital to settings from ambulatory surgery centers (ASCs) to the home. Enter COVID-19, and the move to virtual (especially telemedicine) grew exponentially. As the pandemic begins to release its monopolistic grip on hospital operations, patients who delayed care during the pandemic are starting to return to hospitals, while others are staying home. Thanks to advances in remote patient monitoring technology, more discerning patients looking for comfort, convenience and cost savings are choosing virtual and/or hospital-at-home (HaH) care. According to recent research:

• 40 percent of the amount of virtual care provided during the pandemic is expected to continue, even in the absence of the virus2.

• 28 percent of hospitals say they have fully or partially implemented a HaH program, while another 42 percent say they are planning their programs3.

• As a result, outpatient volume is expected to grow by 19% by the end of the decade, compared to just one percent for inpatients. Ambulatory surgery center volume alone is on track to grow by 25 percent4.

From the supply chain perspective: Suppliers, such as Stryker, Baxter, Cardinal and Owens & Minor, have acquired companies with capabilities to support the transition of care beyond the hospital and into the home. Baxter and Cardinal joined Mayo and Kaiser Permanente in investing in Medically Home, which enlisted long time group purchasing association veteran Mark Scagliarini to run its supply chain operations, which include the movement of both products and people to patients’ homes. Supply chain professionals will increasingly be called upon to determine how to most efficiently and effectively serve a far more distributed footprint for healthcare delivery.

In pursuit of preparedness

The pandemic intensified the focus on emergency preparedness and resiliency, with healthcare leaders from both the public and private sectors vowing not to be caught in the future unable to secure critical products. Both providers and suppliers are exploring how to gain better upstream visibility into potential or pending shortages. Strategies range from an increased use of third-party supplier risk management companies to the creation of the industry-driven Health Industry Resilience Collaborative (HIRC). With better upstream monitoring, manufacturers can determine when raw materials, components or products are or will be in short supply and take corrective action and/or communicate possible or pending shortages to customers and regulators. Providers, meanwhile, are augmenting a near relentless pursuit of product/vendor standardization with proactive identification of clinically acceptable alternatives. Recognizing there will still be times when even the alternatives are in short supply, providers are also pursuing a number of other strategies. Some are fairly traditional responses, such as investing in more inventory on hand and working with 3PL companies for inventory management and storage. On the other hand, some strategies will change the role of and relationships between various healthcare organizations. For example, Ochsner entered into a joint venture under which it is has become a manufacturer of personal protective equipment. Other healthcare institutions are investing in more enterprise-level inventory visibility to support moving product to where it is most needed, while others are exploring how they might collaborate with peer institutions to increase preparedness by managing and sharing critical products and resources as during emergencies.

From the supply chain perspective: The supply chain is core to emergency preparedness, a realization that only gained broad recognition with the pandemic. Beyond the creative operational responses mentioned above, the real game changer will come when providers and suppliers are able and, most importantly, willing to share data. Data on product levels and utilization is key to collaborative work at any level, whether across facilities within the same organization, among peer health systems, or between providers and suppliers. The pursuit of better preparedness will drive new capabilities that support inventory visibility across trading partners and demand planning. New data sharing opportunities will also present themselves as hospital and health system boards of trustees prioritize equity and the environment. Providers are already asking their individual suppliers to share how they are addressing both social issues, from minimizing the carbon footprint of their products to the use of diverse suppliers for their supply chain needs.

The pandemic has left its scars on nearly every aspect of society, but with adversity also comes creativity. When that creativity becomes a collaborative effort, real transformational change can occur. Perhaps nowhere is that spirit of co-creation more alive than in the healthcare supply chain, and working together, we are saving lives.

1.  Kaufman Hall, 2021 State of Healthcare Performance Improvement: COVID Creates a Challenging Environment. https://www.kaufmanhall.com/insights/research-report/2021-state-healthcare-performance-improvement-report-covid-creates. Accessed March 7, 2022.
2.  Oliver Wyman, “Five Things to Know about Consumer Sentiment and Virtual Care Adoption,” blog post, August 25, 2021. https://health.oliverwyman.com/2021/08/five-things-to-know-about-consumer-sentiment-in-the-time-of-covi.html. Accessed March 7, 2022.
3.  Healthcare Innovation, “Doors to the Future: Our 2022 State of the Industry Survey.” https://www.hcinnovationgroup.com/policy-value-based-care/article/21250235/doors-to-the-future-our-2022-state-of-the-industry-survey. Accessed March 7, 2022.
4. Vizient, “2021 Impact of Change Forecast Highlights COVID-19 Recovery and Impact on Future Utilization.” https://newsroom.vizientinc.com/content/1221/files/Documents/2021_PR_ImpactOfChange.pdf. Accessed March 7, 2022.