The Healthcare Hub

GHX provides a wide range of perspectives on how greater collaboration and visibility across the supply chain can improve both clinical and financial performance in healthcare.

Thursday, November 17, 2011

While the Supreme Court Considers, the Supply Chain Rules

The US Supreme Court’s decision to review the constitutionality of the healthcare reform law will certainly create some good fodder for political pundits, with the oral arguments occurring during the height of the presidential campaign season, but it does little to address the more pressing question: how to lower the escalating cost of healthcare, without negatively impacting patient care and without waiting on the courts or the political process. No matter where they stand on the law, the hospital and healthcare delivery system executives I talk to all agree, they cannot wait; they have to take action to cut costs NOW.

For this reason, I encourage them to take a closer look at the supply chain, which is the second largest and fastest growing expense for most hospitals. Unlike many of the aspects of healthcare addressed in the healthcare reform law, the supply chain is not subject to constitutional questions or divisive debates over the role of government in solving our nation’s healthcare woes. Many other industries, when faced with significant cost pressures, have turned to the supply chain to shore up the bottom line. And there is a growing body of evidence that the same is true in healthcare.

For example, compared to their peers, healthcare providers that invest in back office technology for requisition-to-purchase order automation, electronic data interchange (EDI), analytics and use of shared services achieve:

  • 12% lower ratio of supply costs to total operating expenses
  • 55% percent higher amount of spend handled per buyer
  • 52% higher inventory turns

GHX, under the guidance of the global management firm PRTM, is helping healthcare delivery organizations and their suppliers document the savings they are achieving through increased supply chain automation and improved data accuracy. A running count of the savings being achieved is available at Since the healthcare reform law was passed, those savings have topped more than $1 billion and are expected to reach $5 billion in just five years.

To learn more about the supply chain savings opportunities, check out this white paper:

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Karen Conway

Vice President, Healthcare Value