As pressures mount to reduce costs, and payers roll out value-based reimbursement models, the healthcare industry has experienced a rapid period of consolidation.
According to consulting firm Kaufman Hall, there were a record 155 mergers and acquisitions in the industry in 2017, and the value of these deals grew by 146 percent between 2016 and 2017 (based on data from PricewaterhouseCoopers). Like-sized hospitals are merging, while larger healthcare organizations acquire physician practices and other facilities.
This activity has given rise to larger, regional health systems. These new organizations must manage a broader portfolio of sites and facilities, which has made the supply chain more complex and challenging to optimize.
Healthcare costs in the U.S. are rising at a rate of 5 percent annually, and could hit a whopping $5.7 trillion by 2025, according to the Centers for Medicare and Medicaid Services (CMS). Supplies represent the second-largest expense after labor, and account for one-third of healthcare operating expenses.
However, the healthcare supply chain is one area where there is great reward for reducing costs, improving efficiency and incorporating data into processes—in fact, a 2018 study from the consulting firm Navigant identified an average total supply expense reduction opportunity that was equivalent to $11 million per hospital, or roughly the cost of the annual salaries of 160 registered nurses, or the price of building two outpatient surgery centers.
Given the enormous potential for driving costs out of the healthcare supply chain, what strategies are leading hospitals implementing to lower the cost of supply chain operations?