Category: “Supply Chain Management”

Hospitals are increasingly looking to electronic processing in their supply chain to achieve cost savings.

1. Regulatory compliance — 63 percent
2. Product security — 53 percent
3. Managing supply chain costs — 51 percent
4. Product damage or spoilage — 43 percent
5. Access to global markets or new customer bases — 37 percent
6. Changing distribution and market channels — 25 percent

"Now a new online direct contracting service called aptitude is attempting a similar coup, letting hospitals and other healthcare organizations negotiate with suppliers in an attempt to speed up the contracting process and reduce costs." The Irving, Texas-based company, which is owned by Novation, one of the nation’s largest group purchasing organizations, brings more transparency to both the buyer and seller, said Kirchenbauer. Aptitude has a database that covers about 40 percent of products bought and sold in U.S. healthcare, so “we are able to tell buyers whether their spend is contemporary with the market … And when they receive a bit back, we can tell them whether that offer is competitive with the kinds of prices that the supplier offers to other customers ….”

In fact, supply chain costs are one of the biggest expenses in any hospital's budget. At close to 40 percent of the operating budget for some institutions, the supply chain represents the second largest expense after labor costs. Because the supply chain occupies an outsized space on the balance sheet, implementing more effective inventory management strategies and improving supply chain performance can have a significant impact, with reductions of 10-12 percent possible with even moderate supply chain improvements.

"As American hospital operators consolidate, medical-device companies can no longer woo individual doctors over filet mignon, but must present their wares to skeptical, centralized hospital bureaucracies."

"Hospital executive teams around the country, in both private and nonprofit organizations, are being challenged by their boards to remove cost from the annual budget."

Hospitals and insurers are partnering to reduce prices from manufacturers. This could be a sea change in the current supply change model where customers will dictate price and not suppliers. United Healthcare formed SharedClarity in 2012 with Dignity Health. SharedClarity has expanded to include such prominent IDNs as Advocate Health Care in Illinois and Baylor Scott & White Health in Texas.