From Dashboards to Decisions: Healthcare Supply Chain Transformation Still Lags

Healthcare supply chain leaders entered 2026 facing a familiar reality: persistent financial strain, limited structural progress, and growing urgency to modernize operations.

Despite years of discussion around transformation, many of the industry’s core challenges, like technology gaps, supplier concentration, and inefficiencies in procurement, remain largely unresolved. At the same time, new forces are beginning to reshape the landscape, from the cautious adoption of AI to a more measured shift toward ambulatory care.

In a recent conversation, Lars Thording, a longtime healthcare supply chain advisor, shared where the industry is making progress and where it continues to fall short.

Progress Is Incremental, But Directionally Important

While sweeping transformation has yet to materialize, there are early signs of change. One of the most notable is a shift in how health systems approach technology.

“Organizations are becoming more mature in how they think about AI,” Thording said. “Not just as a concept, but as a necessary lever for efficiency and cost control.”

That shift is being driven less by innovation and more by necessity. With margins under sustained pressure, health systems are increasingly viewing technology as essential to long-term financial sustainability and not optional.

There are also early indications of regulatory and legal scrutiny around supplier market dynamics. Recent rulings could help rebalance competition in a space long dominated by a small number of large manufacturers.

At the same time, the anticipated rapid migration to ambulatory surgery centers (ASCs) has been more gradual than expected. Rather than a disruptive shift, the transition has unfolded in a more measured and manageable way, giving health systems time to adapt.

Financial Pressures Continue to Mount

If progress has been incremental, financial challenges have been anything but.

Hospital operating margins hovered around 1% in 2025 and that leaves little room for error. That fragility has translated into real consequences, including an increase in hospital closures and widespread workforce reductions.

“We’re seeing hospitals make layoffs in the hundreds, sometimes thousands,” Thording noted. “That’s a direct result of sustained financial pressure.”

At the same time, the underlying cost structure continues to worsen. New technologies are driving higher supply costs, while reimbursement rates fail to keep pace. The result is a widening gap that forces health systems into increasingly difficult trade-offs.

Compounding the issue is the industry’s ongoing inability to effectively aggregate demand. Despite decades of reliance on group purchasing organizations (GPOs), many providers still lack the leverage needed to counterbalance large suppliers.

Rethinking the GPO Model

That reality is fueling growing skepticism around the traditional GPO model.

Originally designed to pool purchasing power and improve pricing, GPOs have struggled to deliver on that promise in today’s environment. Prices continue to rise, and many supply chain leaders question whether these organizations are effectively shifting negotiating power.

“The value proposition hasn’t fully materialized,” Thording said. “Hospitals are still facing rising costs and limited flexibility.”

Adding complexity is the financial relationship between health systems and GPOs. Many organizations receive payments tied to participation, creating a dependency that can discourage alternative sourcing strategies, even when performance falls short.

The result is a model that, in some cases, reinforces the status quo rather than enabling transformation.

AI’s Opportunities and Pitfalls

Against this backdrop, AI has emerged as one of the most discussed, and misunderstood, opportunities in healthcare supply chain.

According to Thording, the key to success lies in shifting the starting point.

“Too many organizations begin with the technology,” he said. “It should start with identifying inefficiencies and then applying the right tools to solve them.”

There is no shortage of potential use cases. Demand forecasting, inventory optimization, warehouse automation, supplier risk management, and compliance tracking all represent areas where healthcare lags other industries.

However, one of the biggest risks is over-indexing on visibility without enabling action.

“Supply chain leaders don’t need more dashboards,” Thording said. “They need decision support and execution.”

In other words, the next phase of AI adoption must move beyond reporting and toward operational impact.

A Persistent Gap Between Healthcare and Other Industries

Part of the challenge is that healthcare continues to trail other sectors in supply chain sophistication.

Companies like Amazon have spent decades refining logistics, forecasting, and inventory management capabilities that healthcare is only beginning to explore.

“There’s a significant gap—easily a decade or more,” Thording said.

Closing that gap will require more than internal investment. It will demand greater willingness to learn from, and collaborate with, other industries that have already solved many of these challenges.

Supplier Power and the Innovation Bottleneck

While technology offers a path forward, structural market dynamics remain a major constraint.

Large medtech manufacturers continue to hold significant negotiating leverage, often leaving individual health systems with limited ability to influence pricing or terms. In some cases, bundled agreements further restrict choice, tying purchasing decisions to broader supplier relationships.

“The power imbalance is still very much in place,” Thording said.

That imbalance also has implications for innovation. Smaller suppliers face significant barriers to entry. With large distributors controlling the majority of hospital spend, many never gain meaningful access to the market.

“In reality, a small supplier often only becomes relevant once it’s acquired by a larger company,” Thording said.

The result is a system that can stifle competition and slow the pace of innovation.

Where Opportunity Still Exists

Despite these challenges, there are clear areas of opportunity.

AI, when deployed strategically, has the potential to unlock significant efficiency gains across the supply chain. At the same time, the continued growth of ambulatory care presents a chance to rethink how and where care is delivered.

While hospitals often view ASCs as a threat to revenue, they also represent an opportunity to build more flexible, cost-effective care models.

“The organizations that embrace both technology transformation and care model evolution will be best positioned going forward,” Thording said.

Why It Matters

Healthcare supply chain is at an inflection point. Financial pressures are forcing action, but structural barriers continue to slow progress.

The path forward will require more than incremental change. It will demand a rethinking of long-standing models, from GPO relationships to supplier dynamics, and a more disciplined approach to technology adoption.

For health systems, the stakes are clear: those that move from insight to execution will be best equipped to navigate the challenges ahead.