Where does the U.S. healthcare supply chain stand post pandemic?
January 2024- The Journal of Healthcare Contracting
The U.S. healthcare supply chain is better off than it was March 2020. But it’s not exactly an apples-to-apples comparison, according to several supply chain leaders.
“We’re better than we used to be, but the issues aren’t the same as pre-pandemic,” said Bob Taylor, Senior Vice President, Supply Chain, RWJBarnabas Health (New Jersey). Before, the issues were huge, but concentrated in a narrow space. During Covid, it was PPE.
Right now, it’s something every day or several things, Taylor said. “The best laid plans are generally built upon the things you’ve experienced. But what’s getting put in front of us is new. It’s not as big as N95s, but it’s still significant. It’s more niche products but those still impact patient care.”
There’s a huge risk for global geopolitical issues, which would dwarf what the U.S. supply chain experienced during Covid. “That could be an instant shut off of a supply pipeline.”
In a webinar sponsored by Premier, several supply chain leaders shared where patient volumes are compared to previous years. They also discussed trends such as inflation, workforce shortages and how prepared the industry is for the next pandemic. Participating in the discussion were:
- Richard Bagley, Vice President, Supply Chain, UC Health (Colorado):
- Bob Taylor, Senior Vice President, Supply Chain, RWJBarnabas Health (New Jersey):
- Pamela Bryant, Chief Supply Chain Officer, Parkland Health (Texas):
- Kyle MacKinnon, Senior Director, Operational Excellence, Premier Inc.:
Patient volumes
Patient volume is back to normal, at least in the state of Colorado, said Bagley. “It’s a little seasonal based on the flu season, but demand is crazy and it’s high.” The state’s growing at near double digits. “We have a $2 billion construction pipeline to address it, but we can’t build it fast enough. We can’t get physicians fast enough. The challenge is how do we manage growth in a compressed environment. In the old days, it translated into revenue. I don’t know if it will translate into revenue or an obligation. How can we scale out in a way to be sustainable with the demand there and in a state that’s growing?”
Taylor said it’s similar for New Jersey-based RWJBarnabas Health. The patient volumes are back. “Maybe not to 100% pre-pandemic, but certainly up there. With all the other challenges with cost and labor, that’s just another challenge. We’re starting to see the volume come back, which is helpful. Volume covers a lot of sins because it restores the profitability of most organizations.”
Texas-based Parkland Health is back to pre-Covid numbers and probably beyond. “Volume is an issue, but volume is something we’re going to have to figure out,” Bryant said. “We have capital projects going that are converting shell space to address. As you continue to have that kind of volume, you still have to have labor to take care of it. That’s usually where we get into the crunch.”
Premier is looking at the financial pressures on profitability margins and the challenges of a closure in a community and how that pivots volumes to existing infrastructures. Unpredictable volumes can create unpredictable demand and a subsequent challenge around product availability or pricing. Volatility makes it difficult to effectively manage inventory usage in a healthcare setting.
“It’s good to see volumes stabilize,” MacKinnon said. “That alleviates some of that bullwhip effect that was magnified globally with Covid and challenges across multiple markets when suppliers were trying to predict demand across the U.S., Asia, Africa and Europe. Premier is leveraging the power of a GPO and an alliance that can leverage committed programs and provide aggregated demand signals and greater supplier assuredness. We’re happy where we are now.”
Preparedness
Overall, the industry is in a better position than it was March 2020, said MacKinnon. There’s greater communication and collaboration between providers and suppliers and other stakeholders. “Over these last 36 months, we probably have a playbook for any sort of disruption. We need to leverage what we’ve learned. There’s more progress being made in the domestic and diverse space, but there’s still an opportunity to implement programs like that. And there’s improvement in policy reform.”
The biggest challenge is a lack of data and transparency around supply availability and visibility across the supply chain, MacKinnon said. “We need to understand product availability and risk of that product. That stems from the raw materials to the production and where it’s made and coming from. That’s not a short-term build.”
Pre-pandemic, the U.S. healthcare supply chain was under the just-in-time model and sole sourced contracts. “During the pandemic, we realized we needed relationships with a lot of people,” Bryant said. “There’s still work to do with transparency with vendors and providers sharing data. I worry about something happening outside of the country because we don’t have the domestic manufacturing. So, how do we alleviate that and make some of it better? Cost is always a driver.
Bagley agreed with the other panelists that ultimately, we’re in a better place. “I’ve seen major movements in distribution and in manufacturing to build that domestic supply,” Bagley said. “I like what I’m seeing from organizations like SMI, HIDA and others to get transparency and standards which we’ve never had. But all this compression with inflation is now being pushed to suppliers and we’re seeing a lot of suppliers consolidate and lay off staff or readjust. A significant portion of our account executives that we’ve built relationships with have moved around the table. So, there’s a lot of market shakeout that will continue because of the financial pressure. We must stay in communication and work through these headwinds. I’m optimistic about supply chain and we make a difference every day.”
To watch the Premier webinar on Supply Chain Stability, visit www.jhconline.com/events.