How Cloud and AI Are Transforming Healthcare Procurement

Overview of Cloud Computing and AI in Healthcare

Cloud computing is the on-demand delivery of computing service—such as servers, storage, software, databases and analytics—hosted by vendors over the internet, allowing organizations to access and use IT resources without maintaining on-prem infrastructure.

In healthcare supply chain management, the ERP system, with its item master serving as the source of truth for data on medical supplies and its workflows driving procurement processes, is the foundation for cloud-base procurement operations. Healthcare providers and medical equipment suppliers build upon this foundation through the integration of other cloud-based systems and solutions that drive improved supply chain performance (e.g., EHR and SCM systems, procure-to-pay solutions).

Artificial intelligence (AI) refers to computer systems designed to simulate human intelligence by performing tasks such as learning, reasoning, problem-solving and understanding language. These systems use algorithms and large datasets—analyzing vast amounts of data—to recognize patterns, make decisions and adapt autonomously.

The healthcare supply chain's cloud-based ecosystem is serving to establish the data infrastructure and data quality required for AI and machine learning (ML). Healthcare institutions and manufacturers of critical supplies have leveraged cloud connectivity to integrate internal systems for data sourcing and management across functions (e.g., supply chain, finance, clinical).

More advanced healthcare industry efforts are focused on fostering external data sharing between trading partner pairs and the application of advanced analytics for collaborative supply chain performance improvements.

Whether it is a single supply chain team working to streamline operations in their organization or multiple entities collaborating on a shared initiative to improve operational efficiency across the board, cloud-based healthcare supply chain operations with data driven decision making are essential for modern healthcare procurement.

Through informed decisions, procurement leaders can deliver significant benefits, including greater operational efficiency, cost reduction and enhanced patient safety.

The Shift Toward Digital Procurement

Procurement leaders, challenged by inflationary pressure, rising logistics costs, unrelenting supply risk caused by disruptions, regulatory requirements and heightened cybersecurity threats, are increasingly embracing cloud and AI solutions for their proven success in optimizing logistics. The cloud supply chain is enabling the transparency, speed and efficiency required to address today's challenges and establish a path forward for continuous improvement. It drives improved provider and supplier performance in the P2P process.

In a recent survey, more than 50% of healthcare executives said AI's impact will likely be felt in the next one to three years.

Benefits of Cloud and AI in Healthcare Procurement

Procurement organizations are targeting key areas of inefficiency, waste and risk throughout the healthcare supply chain with the computing power of cloud and AI analytics solutions. The shift from standalone, on-prem systems, manual processes and data silos to cloud supply chain integration with data-driven decision making offers a strategic advantage in today's patient care delivery environment.

Benefits of healthcare supply chain cloud transformation as reported by health system and hospital leaders who have made the transition:

• Improved efficiency and agility

• Reduced manual supply chain tasks

• Streamlined supply chain processes

• Eliminated unnecessary supply chain complexities

• Reduced costs

• Improved supply chain resource allocation

• Enhanced supply chain decision making, including ability to forecast demand

• Resulted in new ideas and approaches

• Reduced the risks of supply chain disruptions

Improved Data Management and Insights

The flexibility and scalability of cloud solutions in the healthcare supply chain support seamless integration and real-time data sharing. A healthcare supply chain team that has in place a clean, enriched and continuously updated item master in its cloud ERP system can leverage data quality throughout its procurement processes, from contract management and strategic sourcing through to inventory management and demand forecasting.

With healthcare supply chain disruptions and supply shortages expanding well beyond personal protective equipment during the pandemic to multiple categories and vast amounts of items in recent years, procurement teams find themselves engaged in risk management daily as they navigate backorders. Staying ahead of supply risk with data analysis for informed decisions around substitutions helps supply chain maintain clinical customer satisfaction and patient care continuity.

The Lurie Children's Hospital supply chain management team, which prioritized procurement data integrity during its migration to its Workday cloud ERP system, leverages data-driven insights to manage anywhere from 300-400 supply substitutes daily in real-time.

Enhanced Efficiency and Cost Savings

Cloud technologies serve as the backbone for AI-enabled automation of healthcare supply chain management. The elimination of human touch points in healthcare supply chain has proven to boost operational efficiency and cost efficiency, reducing errors and operational costs while equipping procurement organizations with analytics for further optimizing logistics.

While most healthcare organizations have digitized and automated some percentage of their procurement processes, those that have extended cloud-based automation across the supply chain on a broader scale report the greatest success in their efforts to streamline operations and reduce cost.

The Medical University of South Carolina (MUSC) is a recognized leader in supply chain modernization, having transitioned to the Workday cloud ERP system while continuously driving toward increased automation in its P2P transactions for medical supplies. In one year, the MUSC supply chain team added 300+ suppliers to its digital transaction network through the GHX Exchange.

Through P2P automation, MUSC has eliminated hours of manual line matching and back-and-forth work between its supply chain and AP teams to the point where these teams can now extend their services to new facilities without adding head count. When a full-time employee (FTE) who manually handled bill-only orders retired, MUSC automated these orders through GHX. As a result, the health system did not have to incur the cost of hiring a replacement FTE.

Greater Transparency and Collaboration

A cloud-based approach to healthcare supply chain, with integrated systems and data and standardized digital workflows, provides procurement teams a level of visibility and control not possible in a manual, on-prem environment.

Consider a health system where its hospitals each have their own standalone, on-prem ERP system, supply chain operations and procurement data. The system's supply chain leader lacks real-time, enterprise-wide visibility to supply chain management performance and the ability to leverage artificial intelligence and advanced analytics for insights into key metrics: contract management, category management, supplier management, inventory management, risk management, etc.

Conversely, if that health system consolidates to a single, cloud-based ERP solution deployed across all its hospitals and supply chain processes, and centralizes its P2P workflows within a single digital ecosystem, the supply chain leader gains complete transparency into all procurement organizations, procurement processes and procurement data. In turn, they can apply analytics solutions to make data-driven decisions at a system-wide level.

The integration of cloud ERP and EHR systems extends transparency beyond procurement processes and into the realm of inventory management, specifically supply usage among healthcare providers. Aligning procurement data on medical supplies with data on supply usage by healthcare providers in patient care delivery, a supply chain leader can strive for optimal inventory levels.

When a healthcare supply chain leader can demonstrate to clinical teams proactive inventory management with a lower chance of stock outs, they foster improved cross-functional collaboration and trust. Furthermore, when supply chain teams and clinical teams have access to shared inventory management insights through a cloud solution equipped with artificial intelligence backed data analysis, clinicians can engage in their own data driven decisions around item management and usage.

Predictive and Prescriptive Analytics

While analytics solutions that offer a historic perspective on supply chain management, such as spend analysis or supplier performance, can help inform improve future supply chain decisions, predictive analytics leveraging artificial intelligence can equip supply chain leaders with the knowledge they need for improved risk management and healthcare supply chain resiliency.

Predictive analytics refers to the capability to predict future trends in healthcare supply chain, for example, based on supply usage data from the past five years, it is likely demand for personal protective equipment will increase during flu season this year. The ability to forecast demand based on past spend analysis, taking into consideration fluctuations commodity prices and other factors is a tremendous win for healthcare supply chain.

Prescriptive analysis solutions take it one step further and recommend actions to take based on the prediction: Because demand for personal protective equipment is likely to increase during flu season this year, it is recommended healthcare organizations and their supply chain teams stock PPE based on previous years' usage, and anticipate higher procurement costs in this spend category for this time period.

The MultiCare Health System Analytics team has embraced prescriptive analytics in its supply chain as a strategic advantage, helping ensure critical supplies are available to healthcare providers when they need them. Through their MultiCare Control Tower (MCT) the team leverages intelligence to predict a wide spectrum of supply chain disruption scenarios, mitigation areas and potential impacts.

The team integrated core technology platforms (ERP, EHR), extensive data feeds, including external data such as signal intelligence from ancillary sources, and supplier scenario modeling. Strategic use of the MCT has increased MultiCare’s speed to execution, lowered supply chain material costs, and reduced the level of overall disruption felt by its clinical teams and staff.

Applications of Cloud and AI in Procurement

As healthcare providers and suppliers make the transition to cloud ERP systems and supply chain solutions, integrate these technologies for data sharing, and establish timely, accurate, complete and credible procurement data sources, the healthcare supply chain is becoming better equipped to capitalize on artificial intelligence and machine learning capabilities and benefits.

Supply Chain Automation

P2P automation in the healthcare supply chain, with healthcare providers and suppliers transacting digitally through shared solutions, has yielded substantial, proven results in terms of greater efficiency, lower costs and access to actionable data and insights. This in turn supports patient care delivery by equipping clinicians with the supplies they need.

The application of artificial intelligence to digital P2P workflows can drive further healthcare supply chain performance. For example, automating discrepancy resolution during the digital transaction process can increase the volume of touchless, perfect orders.

In a recent Healthcare Financial Management Association (HFMA) webinar, UPMC Senior Director of Procure-to-Pay Kelly Coxon and GHX explored how procure-to-pay automation, including AP automation, robotic process automation (RPA), and artificial intelligence, can drive a significant amount of efficiency, reduce financial risk, and generate revenue from traditional payments.

Risk Mitigation

As evidenced in the MultiCare Health System example earlier in this post, healthcare supply chain teams are using artificial intelligence algorithms to identify vulnerabilities upstream and downstream in their supply chains and surface actions for risk reduction.

In the GHX Top 10 Healthcare Supply Chain Predictions for 2025, the company's leaders highlighted the role of artificial intelligence in healthcare supply chain risk management, noting its ability to:

"Analyze complex supply chain patterns, flag potential risks and suggest alternatives to maintain continuity. This will enhance resiliency and help ensure critical medical supplies reach the right place at the right time, supporting value-based care by helping to reduce waste and improve patient outcomes."

Personalized Supplier Relationship Management

Healthcare organizations and their suppliers are increasingly leveraging cloud-based supply chain solutions and artificial intelligence driven data analysis to enhance collaboration, improve their relationships and strengthen healthcare supply chain resiliency for improved patient care delivery.

When P2P transactions—from purchase order (PO) to payment—are consolidated within a single, cloud-based solution, supply chain trading partners can access the same digital insights at the same time, in real-time.

Integrated artificial intelligence tools analyze supplier performance and present to healthcare providers actionable information, including supplier risk profiles, they can use in optimizing their supplier management strategies. For example, insights into suppliers' backorder and fill rates could influence a healthcare supply chain leader to prioritize one supplier over another.

It is not only provider procurement organizations that can use these tools and analytics solutions. Suppliers with access to external P2P performance data, including supply chain metrics generated from transactions with provider customers, can identify supply chain automation gaps.

For example, a supplier can determine which of its provider customers rank high in price discrepancies, which drive costly invoice exceptions, and collaborate with them on a solution to improve pricing accuracy and reduce costs. This can serve to improve customer satisfaction, providing a competitive advantage in the demanding healthcare marketplace.

Data-driven healthcare supply chain insights in action: VCU Health and Owens & Minor have worked collaboratively toward a more touchless transaction experience, moving to a 99.75% invoice match rate in just nine months (a close to 20% increase in improvement).

Challenges and Solutions in Implementing Cloud and AI

While supply chain modernization is critical to healthcare organizations' operational, financial and clinical performance, rising costs, competing priorities for technology investments, and resistance to change can stand in the way.

Data Security and Privacy Concerns

When exploring opportunities to transition from on-prem systems to cloud based supply chain solutions, healthcare supply chain teams sometimes express concerns about the risks associated with storing sensitive healthcare data in the cloud.

But research has revealed how cloud supply chain transitions can strengthen the security of sensitive data. Nearly three quarters of hospital and health system leaders from organizations that have transitioned to cloud technologies for supply chain management said the move has improved data security and privacy.

GHX Chief Product Officer Archie Mayani spoke to these findings, stating:

"The utilization of cloud technology can offer advanced cybersecurity measures, a crucial factor given the escalating frequency of cybersecurity threats and their substantial associated costs.”

Integration with Legacy Systems

When transitioning healthcare supply chain processes and data to the cloud, integration with legacy systems can present a challenge because most were not built with integration in mind. Similar problems can be faced when integrating AI tools with existing IT infrastructure.

A phased implementation approach can take the pressure off a health system or hospital's supply chain and information technology (IT) teams. Expert advice from cloud system and AI solution partners can also help overcome hurdles and accelerate the transition.

"Moving to the cloud requires reimagining and recreating workflows that have been ingrained in the healthcare business for years or decades. Figuring out how to unwind all the custom configurations that has gone into legacy applications is a daunting task." - KPMG

Skill Gaps in Procurement Teams

Modernization of the healthcare supply chain through cloud-based solutions and the application of artificial intelligence tools requires a supply chain workforce equipped to use these technologies. Additionally, as modernization shifts supply chain responsibilities from tactical to more strategic, the roles of supply chain leader and team members shift as well.

"As the healthcare supply chain grows more complex—due to advancing technologies and care delivery extending beyond hospitals— organizations must focus on building a workforce equipped for this new age of innovation," noted GHX leadership team members in their Top 10 Healthcare Supply Chain Predictions for 2025.

Whether transitioning to a cloud-based system or deploying an AI tool, it is critical to incorporate supply chain team change management, education and training into the plan. By training procurement staff to leverage cloud and AI effectively, an organization can maximize its investment in these technologies. Solutions providers who serve as true partners will prioritize user education and training pre-implementation, during go-live and post-go-live to support a supply chain team's success.

"Health systems may need to invest in education and training to help staff navigate the digital world." - Deloitte Center for Health Solutions

Costs and ROI Justification

In most healthcare organizations, supply chain teams are under constant pressure to reduce costs; therefore, convincing the C-suite to invest in cloud modernization and AI can seem like an uphill battle.

But digging deeper, the costs of on-prem legacy systems can be much higher than transitioning to the cloud, considering the upfront capital investments in expensive hardware and software and the long-term costs for managing and upgrading systems, as KPMG explained in its report, Prescription for Cloud Transformation.

Supply chain teams can make the case for modernization by communicating to their C-suite the long-term benefits of investing in cloud and AI solutions. Providing clear ROI examples from other healthcare organizations that have made the transition can help overcome budget constraints.

"Given that labor typically accounts for a significant percentage of a health system’s costs, technology that improves staff productivity and efficiency could have a positive return on investment." - Deloitte Center for Health Solutions

Real-World Examples

Case Study 1: Cloud-Enabled Procurement in Action

The supply chain team at McLeod Health, a locally owned and managed, not-for-profit health system in northeastern South Carolina, has done what many have deemed impossible, leverage its cloud-based technology infrastructure to automate bill-only implant and consignment orders with suppliers.

The results: 96% contract compliance rate and 98.8% perfect order rate for bill-only implant and consignment orders; significant staff resource and time savings for McLeod Health and its suppliers; and improved, financial planning and cash management control.

Case Study 2: AI Transforming Vendor Management

Virginia-based Mary Washington Healthcare (MWHC) leveraged GHX machine learning based analytics for category management to implement evidence based supplier and product selection. One focus category was coronary stents. With robust clinical evidence—and each product clearly benchmarked against average market pricing—MWHC approached the vendors with a stronger negotiating hand, driving them to be more competitive.

The result: MWHC is saving nearly seven figures across the supply chain for its coronary portfolio, while maintaining high-value patient care. This translated to a 40–50% cost savings on coronary stents, one of its most successful ventures in terms of supply chain savings.

Lessons from Industry Leaders

Here is what successful adopters of cloud and AI in the healthcare supply chain have learned:

Kelly Coxon, Senior Director of Procure to Pay, UPMC

“Don't be afraid to take a risk. We can't run our operations the way we always have. We've got to continuously be innovative and try new and different things...As suppliers and providers increase their collaborative efforts, we can have stronger order-to-pay solutions, increasing operational efficiencies for both parties, as well as reducing our costs to operate.”

Josh Grulke, System Director of Supply Chain Operations at Allina Health

"AI is a function of when, not if. To that end, Allina Health is actively determining our internal AI approach for supply procurement and management as well as implementing many AI technologies across our supply chain. This includes using optical character recognition (OCR) for invoice processing and employing machine learning to help requestors identify the correct items to procure.

Additionally, Allina is collaborating with expert suppliers to advance our AI and automation capabilities to support business continuity, contract optimization, sourcing and supplier selection, and creation, maintenance, and optimization of surgical procedure cards (cards that list supply needs within surgical areas)."

Chris Jakubek, Director of Supply Chain Data Management at Inova Health System

"The key takeaways of price management in the new era is taking the time to align your data, scrub your item master along with your contract data, so those systems are aligned as the data synchronization begins, all subsystems get the right pricing you."

Future Trends in Cloud and AI for Healthcare Procurement

AI-Driven Sustainability Initiatives

Recognizing the impact of patient care delivery on the environment, many healthcare supply chain leaders are striving to reduce their carbon footprints through sustainable procurement processes. Using AI enabled tools, they can direct requisitioners during procurement processes to suppliers and products aligned with their healthcare organizations' environmental sustainability goals. Through spend analysis, category managers can benchmark progress toward these goals.

There are many resources available to healthcare supply chain teams seeking information on sustainable procurement strategies. For those working toward supplier management in these efforts, it can be as simple as visiting a supplier's website to assess the company's priorities when it comes to sustainable procurement processes. Recognizing how their provider customers prioritize products with sustainability in mind, suppliers engaged in these efforts promote their work in part to enhance customer satisfaction.

The Association for Health Care Resource & Materials Management (AHRMM) is another resource for supplier management in the sustainability space, where healthcare supply chain teams can assess supplier performance in green initiatives by accessing AHRMM's many online learning resources.

Blockchain Integration with Cloud Systems

Healthcare has been exploring use cases for blockchain technology to enhance transparency, data security and further streamline workflows. As researchers state, "The healthcare industry might greatly benefit from the increased privacy, transparency, and accessibility that these technologies provide."

Potential application of blockchain in healthcare supply chain include:

Secure data storage: "Data is hard to hack due to BT’s decentralized architecture. Data is kept on several computers throughout a network, not in one place. Another key aspect of BT is immutability. It ensures that ledger data cannot be manipulated without discovery. This feature protects against data modification and fraud."

Downstream visibility: "Authenticating the origin of medical supplies to assure the legitimacy of medications is a problem facing the healthcare industry. Supplies may be tracked from manufacture to every step of the supply chain with the use of blockchain technology. This makes it possible to acquire items transparently and visibly."

Upstream visibility: "One of the most challenging problems in supply chain is reversing operations. The system could trace every single product from retailers, distributors, or wholesalers using Blockchain."

AI-Powered Virtual Procurement Assistants

Leveraging AI, machine learning and natural language processing, virtual assists hold tremendous promise in healthcare supply chain management.

In its Top 10 Healthcare Supply Chain Predictions for 2025, the GHX leadership team comments on the role of AI in simplifying procurement processes:

"Intelligent co-pilots will assist supply chain teams by identifying and resolving operational anomalies, such as delayed shipments, mismatched purchase orders or demand spikes. These tools will automate repetitive tasks, provide real-time recommendations, and enable teams to focus on higher-value activities."

FAQs

Q. How are cloud and AI transforming healthcare procurement?

A. Cloud solutions and AI analytics are transforming healthcare procurement by facilitating system integration, automating workflows, enabling data sharing, and surfacing actionable insights.

Q. What are the benefits of using cloud platforms in procurement?

A. Benefits of using cloud platforms in procurement include increased flexibility, security, scalability and functionality. In P2P processes, workflow automation increases efficiency, lowers costs and reduces waste.

Q. What challenges come with implementing AI in procurement systems?

A. On-prem legacy systems, with their lack of interoperability and data stored in silos, can serve as a roadblock to implementing AI in healthcare supply chain operations and procurement processes. Effective use of AI tools requires an accurate, complete, real-time data source, which is lacking in health systems stuck with rigid legacy systems.

Q. How can AI improve vendor management in healthcare?

A. AI can help improve vendor management in healthcare with its ability to analyze vast amounts of spend data and surface insights to supply chain decision makers. Procurement teams can leverage insights to optimize P2P transactions with their suppliers, drive spend to align with organization wide goals (e.g., sustainability), identify trends for proactive decision making (e.g., substitutions in the event of back orders), and much more.

Q. What are the future trends in AI and cloud for healthcare procurement?

A. According to GHX Chief Product Officer Archie Mayani, "AI will move from experimentation to execution, tackling persistent challenges such as fragmented data, supply chain bottlenecks and operational blind spots. By addressing these critical barriers, AI will empower healthcare organizations to build more adaptive, efficient and resilient systems, helping solve critical problems that can expose a supply chain to vulnerabilities."

Conclusion

Embracing the Future of Healthcare Procurement

The healthcare supply chain is a critical component of care delivery that requires investments in technology modernization to operate with greater efficacy and efficiency while driving out unnecessary costs and waste. Automation of P2P processes has yielded significant benefits to healthcare providers and suppliers alike. The transition from on-prem systems to cloud solutions is supporting expanded automation for greater value generation.

At the same time, the emerging cloud-based supply chain technology infrastructure is establishing the comprehensive, accurate and timely data sets procurement teams need to leverage AI analytics. The advent of AI in the healthcare supply chain has spurred fundamental change—equipping supply chain leaders with powerful insights they can use to proactively identity and address challenges, mitigating risk and safeguarding supply continuity.

Healthcare organizations wanting to modernize their supply chain infrastructure, operations and processes, have vast resources at their disposal to build the case for change. Other articles in this blog series cover specific optimization areas where cloud and AI innovations are making a difference, including automation of the bill-only implant and consignment order process, digital payments, and value analysis.