Executive Briefings

The Evolving Healthcare Supply Chain

Nationwide healthcare reform is having a significant impact on the industry's supply chain, says Eric O'Daffer, research director with Gartner. The effects are especially being felt in the executive suites of hospitals. Reduced reimbursement levels, along with the ever-growing need to scrutinize cost, is creating a "burning platform" for healthcare managers. What's more, given that supply-chain processes today account for between 40 percent to 45 percent of a hospital's total operating costs, "supply chain is on the hot seat."

Managers are being driven to standardize processes. They are being forced to become more aggressive about controlling users' preferences for certain products. "They're now needing to look at what the patient outcome is from that procedure," says O'Daffer, "and how much they're getting reimbursed."

Purchasing groups, which control the spend for multiple hospitals, are gaining in importance. At the same time, their overall goal and purpose are evolving. Today, they are looking to achieve lower levels of cost by aggregating demand locally, and committing to specific volumes. The strategy involves making targeted purchases. "People don't say, 'Here's our volume in theory,'" says O'Daffer, "but 'Here it is in aggregate.' They're willing to be held accountable for their decisions."

O'Daffer sees three major changes occurring in the healthcare sector. There's a strong move to capture and standardize products, allowing managers to gain control over all non-labor-related spend. There's an attempt to tie the choice of products to patient outcomes. And hospitals are increasingly moving toward owning their distribution processes, opening consolidated service centers, and taking control of "hundreds of millions of dollars" in supply-chain expense.

To view this video interview in its entirety, click here.

Nationwide healthcare reform is having a significant impact on the industry's supply chain, says Eric O'Daffer, research director with Gartner. The effects are especially being felt in the executive suites of hospitals. Reduced reimbursement levels, along with the ever-growing need to scrutinize cost, is creating a "burning platform" for healthcare managers. What's more, given that supply-chain processes today account for between 40 percent to 45 percent of a hospital's total operating costs, "supply chain is on the hot seat."

Managers are being driven to standardize processes. They are being forced to become more aggressive about controlling users' preferences for certain products. "They're now needing to look at what the patient outcome is from that procedure," says O'Daffer, "and how much they're getting reimbursed."

Purchasing groups, which control the spend for multiple hospitals, are gaining in importance. At the same time, their overall goal and purpose are evolving. Today, they are looking to achieve lower levels of cost by aggregating demand locally, and committing to specific volumes. The strategy involves making targeted purchases. "People don't say, 'Here's our volume in theory,'" says O'Daffer, "but 'Here it is in aggregate.' They're willing to be held accountable for their decisions."

O'Daffer sees three major changes occurring in the healthcare sector. There's a strong move to capture and standardize products, allowing managers to gain control over all non-labor-related spend. There's an attempt to tie the choice of products to patient outcomes. And hospitals are increasingly moving toward owning their distribution processes, opening consolidated service centers, and taking control of "hundreds of millions of dollars" in supply-chain expense.

To view this video interview in its entirety, click here.