February 2023 – The Journal of Healthcare Contracting
This year, 2023, has the potential to be another transformative year for the healthcare industry. 2021 and 2022 – the years following the onset of the COVID-19 pandemic in 2020 – changed the healthcare landscape dramatically. The pandemic, other public health emergencies, natural disasters, and technology are just some of the factors that have forced the industry to evolve at a rate well beyond its average. Healthcare group purchasing organizations (GPOs) continue to evolve to meet the needs of their provider customers, helping them access the safest and most innovative products and services. While there are many circumstances to take into consideration, and many more than we cannot yet predict, the Healthcare Supply Chain Association and its member GPOs will focus on three key categories in 2023.
Rural hospitals and healthcare access
Year-end projections for 2022 from the American Hospital Association and Kaufman Hall reveal that anywhere from 53% to 68% of the nation’s hospitals will end 2022 in the red, nearly double the 34% reported in 2019. The situation is even more dire for rural hospitals, many of which are forced to reduce hours, eliminate services, and enact pay cuts to stay operational. The new federal Rural Emergency Hospital (REH) payment program – the first new program since 1997 – and a funding boost in the omnibus spending package may help stave off some rural hospital closures in 2023. Rural hospitals who convert to rural emergency hospitals will receive a 5% boost to Medicare outpatient reimbursement and an average annual facility fee payment of $3.3 million.
In exchange, however, they must eliminate their inpatient beds, which is not an attractive option for all rural hospitals. The $1.7 trillion spending package passed in late December included several victories for rural hospitals, including a two-year extension of an add-on Medicare payment adjustment of up to 25% per discharge for low-volume hospitals, a reduction in the physician fee schedule cut from 4.5% to 2% for 2023, and the extension of critical telehealth waivers. GPOs will continue to focus on providing critical cost-savings to small and rural hospitals by reducing transactions costs and helping them obtain discounts for essential products and services.
Future pandemic and public health emergency preparedness
The Biden administration recently extended the COVID-19 public health emergency until April 2023, as they have every 90 days since January 2020. Allowing the public health emergency to expire in 2023 has implications for the entire healthcare industry: the end of provisions like continuous Medicaid enrollment and greater regulatory flexibility will require difficult transitions for patients and providers alike. Evolving out of the COVID-19 public health emergency will also require stakeholders to evaluate future pandemic, public health emergency, and natural disaster preparedness efforts.
The year-end spending package included elements of the Prepare for and Respond to Existing Viruses, Emerging New Threats, and Pandemics Act (PREVENT) Pandemics Act, which the Healthcare Supply Chain offered comments on in 2022. Important provisions to modernize and strengthen the Strategic National Stockpile (SNS), create a White House Office of Pandemic Preparedness and Response Policy, and establish “warm base” domestic manufacturing for public health emergency response through the Biomedical Advanced Research and Development Authority (BARDA) and U.S. Food and Drug Administration (FDA) were all included in the package. HSCA and its member GPOs will continue supporting preparedness efforts and engaging with the Strategic National Stockpile and the Administration for Strategic Preparedness and Response throughout 2023.
Industry transparency and visibility
Transparency is essential to a resilient healthcare supply chain, and equally essential to GPO practices. All GPOs adhere to reporting requirements that maintain a high standard of transparency in accordance with the federal regulatory safe harbor under which they operate. As one of the most transparent industries in healthcare, GPOs are well-positioned to work with other stakeholders across both the private and public sectors to encourage greater visibility across the supply chain. GPOs encourage sharing supply critical data, such as information about the availability of certain raw materials.
Not only can sharing this data help GPOs determine how to best meet the needs of their provider customers, but it can also help manufacturers and distributors proactively identify solutions to gaps in supply. In the spirit of transparency and collaboration, HSCA will host the first annual Supply Chain Leadership Summit in 2023, which will feature research presentations from leading GPOs and policy discussions with supply chain experts in a variety of fields. The summit will take place from Oct. 3-5, 2023, and more details will be available on the HSCA website in the coming months.
As the sourcing and purchasing partners of healthcare providers, GPOs must be flexible in order to respond to ever-changing circumstances and patient needs. HSCA intends to take the same flexible approach in 2023: addressing crucial supply chain issues while evolving in response to industry and global developments.