The Healthcare Hub

The Healthcare Supply Chain: The Last Bastion of Savings

posted by: Derek Smith
Monday, January 14, 2013

When I think about what’s most important in healthcare today, I’d have to say it’s value:

  • Value for patients, so they receive the care they need for the dollars they spend.
  • Value for employers, so they’re able to provide insurance coverage to the employee base they work to keep healthy.
  • Value for healthcare companies, as they work to deliver new life-saving products or provide high-quality care to patients.
But the pressure on healthcare is huge and it’s coming at us from three major areas: 
  1. Households (consumers) can’t afford healthcare
  2. Employers can’t afford healthcare
  3. And finally, significantly, the government can’t afford healthcare:

With healthcare consuming 50% of the government spend, it’s a key driver toward the fiscal cliff, and it’s ramping up. Ten years ago, 14% of adults didn’t visit a doctor because of out of pocket expense.  Today, 26% of adults don’t visit a doctor for this reason.  More and more consumers are going without the care they need to protect and preserve their health.

As I look back at 2012, there were huge changes in how healthcare organizations worked to achieve business value, as well as to provide value to existing and new patients.  How can this happen? One word: Collaboration. Five years ago, discussions between providers and suppliers focused on price – how can a hospital acquire the products it needs at the lowest possible price, while the supplier worked to try to protect margin. Today, the conversations have changed. Providers and suppliers sit together to look at how they can reduce costs and become more efficient, so they’re collaborating on things like how to ship products, how often and how products are bundled. They’re talking about how to send POs, receive PO acknowledgements, send and receive invoices and ensure more accurate pricing. What changed was the recognition of the untapped savings in the healthcare supply chain –the last bastion of savings that we must capture.

Supply chain savings is critical because it can be achieved without impacting patients’ choices about care. A stronger supply chain has only positive impacts on care, as efficiency, accuracy and visibility can, in turn, help improve quality.

With a more holistic supply chain, hospitals can improve everything from how they procure to how they pay for products, and simplify their multiple, siloed supply chains into one single end-to-end process.  For example, hospitals have a supply chain for consumable products, and a completely separate process to support the purchase of implantable devices (hip replacements, cardiac stents, etc.). GHX is focusing on how to help a hospital achieve a single, efficient and electronic business process, regardless of what type of supply or device is being purchased.  And as the consolidation of provider organizations continues to pick up speed, the supply chain can connect these new and more complex organizations, acting as the technology backbone for information.

At the same time, suppliers are looking to improve business process efficiency, and they’re motivated to work with their customers on those shared processes. As a result, this will help drive costs down for providers and suppliers, and what could be better for a manufacturer or distributor’s business than helping their customers save?

The savings we’re achieving and the new business processes being created are real value for healthcare. Given the GHX background – a company created, owned and operated by healthcare companies – we’ve been lucky to be on the forefront of this large-scale collaboration in healthcare. The saving we’re achieving and the new business processes being created are providing real value for healthcare and solving existing and emerging problems in a turbulent, exciting time for the industry.