Top 8 Challenges Facing The Healthcare Supply Chain

The healthcare supply chain is unique to the supply chains in every other industry. Yes, it does involve monitoring the acquisition of products and their path from origin to destination, but many of these supplies can be a matter of life and death. On top of this, managing the supply chain creates a significant expense for healthcare providers. In fact, a recent survey found that it is the second biggest expense that providers have. When prescription drugs, medical devices, and other medical supplies fall into an optimized supply chain, healthcare providers see their costs lowered, their revenues enhanced, and, most importantly, their quality of care improved. To optimize the supply chain, providers need to address the biggest challenges that they face:

1. Overnight Shipping

Cargo man checking on digital equipment

In the healthcare industry, there is no debate about the necessity of overnight shipping. Unexpected situations occur and hospitals have a responsibility to address them—no matter the cost. While one or two overnight orders will not have a detrimental impact on a provider’s bottom line when this regularly occurs—as it inevitably will—providers will start seeing significant losses in their revenues. For example, FedEx will charge nearly $100 to overnight a 50-pound package within 150 miles. This cost will only escalate for further distances or heavier items.

With better inventory software, providers have the ability to completely eliminate their overnight shipping costs that are caused by stockouts. While some emergency items may need to be overnighted on an occasional basis, the regularity of the situation will drop dramatically.

2. Hidden Costs

Another challenge that healthcare providers face is the hidden costs of every product. Most providers have historically just looked at the product cost and the shipping cost. But there are additional expenses, such as inventory holding.

Providers need to plan their budget around total landed supply costs. They need to be aware of the losses they will incur from the unavoidable aspect of expired products and excess supplies. They need to look at product standards and purchase price variance.

This is where quality healthcare software comes in. Providers can start taking a more holistic approach to pricing their products, including the costs associated with moving and managing supplies. This means product utilization, special deliveries, internal distribution, and much more.

3. Drug Shortages

Because of the unpredictability that comes part and parcel in the healthcare industry, drug shortages seem inescapable. This can create a mess in the healthcare supply chain. It forces providers to either purchase alternatives that are much more expensive or maintain a comprehensive backup inventory of products that are at risk of being in short supply, which then leads to the added cost of inventory management and product expiration.

The best option for dealing with this is the use of technology that assists with early notification and response, especially in the case of certain surgical agents, cardiovascular agents, and IV fluids. This technology enables providers to more effectively manage and monitor the long-standing shortages of hundreds of drugs and to be prepared for unforeseen shortages in other drugs.

Happy pharmacist doing the inventory at a drugstore using a tablet computer

4. Data Shortage

Data is helping to improve efficiency and effectiveness in every sector. It allows organizations to see what they have been missing, to gain a bird’s-eye view of their operations, and to optimize their processes. And this is exactly what it can do for healthcare supply chains.

A lack of actionable data is something that is endemic among providers. Executives in hospitals recognize that their decisions are not sufficiently informed because they do not have access to advanced modeling systems and real-time reports. One of the reasons for this lack of data is that supply chain data is very siloed due to the inherent vertical internal structures of providers. However, this is a problem that must be addressed, as over two-thirds of healthcare IT professionals believe that the supply chain is where the most actionable data lies—especially the data that goes beyond purchasing activity and into consumption activity.

Attainia offers several software solutions that can help hospitals optimize their supply chain. While their BUDGET software allows healthcare practices to streamline their equipment request process and enhances all routine replacements, Attainia’s PLAN software is specifically designed to help with new construction projects. Their cloud-based point of entry empowers hospitals to plan out all capital equipment needed for a specific renovation or construction project and enables enhanced collaboration among stakeholders.

5. Lack Of Integration

Healthcare practices, facilities, and hospitals are becoming more consolidated. Health systems are growing, merging, and acquiring. As this happens, supply chains within these siloed yet merged organizations remain separate. Healthcare providers need to address this because inconsistency between these supply chains will negatively impact the bottom line.

These supply chains need to be integrated. Purchasing channels need to be centralized. Facilities need to share contracts so that they can gain access to higher tier pricing. Without these adjustments, the supply chain will not be cost-effective and the processes that it contains will remain inefficient.

6. Weak Charge Capture

Year after year poor charge capture is the main reason for revenue leakage. And revenue leakage is a major source of losses for healthcare providers. Automating charge capture can drastically reduce this issue. According to HHN Magazine, the $5 billion in supply chain waste that providers face would be significantly lowered.

7. Physician Preferences

Different physicians and healthcare professionals have different preferences for the products that they use. Most organizations allow this to be the final say in purchases. Unfortunately, physician preferences are rarely tied to more successful outcomes and can often lead to cost variation.

The fact is not that physicians do not care about the higher cost or that the product does not offer better patient outcomes. Rather it is that they are unaware of the true cost of their choices. A study found that surgeons only correctly estimate the cost of items just over one-fifth of the time. Helping physicians to understand the costs and the alternatives can help them find products that will offer comparable or better outcomes at a better price.

8. Poor Workflow Design

Throughout the healthcare supply chain, many processes are unnecessarily duplicated. The reason for this is that the systems and entities that make up the supply chain are disconnected. Many of the tasks could be automated and integrated in a way that would allow all participants to share information more freely.

The healthcare supply chain is complex and delicate. So while these challenges can and should be addressed, it will take the right technology and solutions.

Tiffany Lok
About The Author

Tiffany Lok

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