The High Cost of Unmanaged Spend in Healthcare

Unmanaged, off-contract healthcare spend bypasses strategic procurement, leading to unnecessary services, inefficient operations, and overpriced products.   reports that U.S. hospitals waste billions of dollars annually on unnecessary supply spending, underscoring a significant opportunity for organizations to improve their procurement strategies.

Healthcare supply chains will continue to face rising costs for raw materials and freight, as well as tariffs on imported medical supplies, and shortages of critical items such as drugs and IV fluids. However, centralized visibility and control can help prevent inefficiencies and the diversion of resources from patient care and financial stability.

The Hidden Dangers of Unmanaged Spend

Fragmented purchasing, a lack of transparency, ineffective receipt verification, inventory gaps (overstocking/shortages), and reliance on costly non-standardized products can lead to serious consequences:
•Financial Implications. Higher prices result from a lack of volume discounts, negotiation leverage, and increased administrative costs.
•Ineffective Inventory Management:
•Operational Inefficiencies. Duplicated efforts, redundant purchases, limited spending visibility, and difficulty enforcing policies waste time and resources.

Ineffective supply chain management clearly has a significant financial impact on healthcare facilities in numerous ways.

Why Do These Problems Persist?
Unmanaged and off-contract spend remains a persistent challenge in healthcare supply chains despite the clear financial consequences. Several systemic and operational factors contribute to these problems, including:


•Historically siloed departments with independent purchasing authority
•Inadequate tracking systems and data analytics capabilities
•Not taking advantage of innovative procurement and supplier management tools
•Pressure to procure quickly, sometimes bypassing established processes
•Resistance to change and a lack of awareness about the impact of unmanaged spend

A Roadmap for Improvement

Effectively managing healthcare spend is achievable. Consider these solutions:
•Conduct a comprehensive spend analysis: Analyze all expenditure data systematically to understand spending patterns and pinpoint off-contract purchases or price variations. This helps identify where money is being wasted and dependencies on single suppliers.
•Invest in technology: Implement integrated technologies like e-procurement and advanced analytics to automate workflows and enforce purchasing policies with real-time spending and inventory visibility. They also help standardize processes, optimize stock, and direct purchases through approved channels.
•Define roles, responsibilities, and approval workflows: Clear policies must establish who can buy what and define necessary approval steps to prevent maverick spending, ensure accountability, and streamline processes.
•Collaboration is essential: Partner with other departments on your findings to gather their input, identify areas for improvement, and collectively iterate policies and workflows.
•Establish key performance indicators (KPIs): KPIs allow organizations to measure procurement and supply chain performance against defined objectives. This essential data leads to continuous improvement and demonstrates value to leadership.

The ripple effect of unmanaged spend in healthcare extends far beyond financial spreadsheets. Uncontrolled expenditures and supply chain failures can compromise the quality and safety of care delivery.

Want a deeper understanding of your organization’s purchasing patterns and where to lower costs, improve efficiencies, and increase growth? Visit business.amazon.com/healthcare to learn more.