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98% of Hospital Leaders Say Supply Chain Optimization Ups Margins

Hospital leaders think supply chain optimization can move the needle when it comes to cost and quality, but manual processes are impeding improvements.

Supply chain optimization

Source: Getty Images

By Jacqueline LaPointe

- Almost all hospital leaders in a new survey conducted by Sage Growth Partners (98 percent) said supply chain optimization can improve hospital margins. About 52 percent report better management could increase margins between one and three percent and 35 percent believe margins could increase over three percent.

The survey of 100 healthcare C-suite and supply chain leaders conducted on behalf of supply chain management vendor Syft also revealed that leaders think improved supply chain management has the potential to enhance care quality.

While the supply chain optimization has the potential to bring in millions of dollars for the average hospital, organizations still rely on manual or less sophisticated tools to manage inventory, supply expenses, and other supply chain management (SCM) responsibilities.

“As we move towards value-based care models, hospitals are facing increasing pressures on their margins, and on their ability to deliver quality care,” Todd Plesko, Syft’s CEO, stated in a press release. “It’s amazing that while the large majority of survey respondents believe SCM can improve costs and care quality, fewer say they’re actually deploying advanced supply chain analytics to take advantage of that potential impact, which presents a major missed opportunity.”

As reimbursement rates decline and the industry shifts to value-based purchasing, hospitals are under increased pressure to reduce their costs. Hospital executives ranked financial challenges as their top issue in 2018, according to a recent American College of Healthcare Executives survey.

READ MORE: Data Analytics Add Value to Healthcare Supply Chain Management

With supply chain expenses starting to exceed labor costs, hospital leaders are looking to supply chain optimization as a way to reduce their organization’s costs. In fact, recent research showed that hospitals could safely decrease supply costs by an average of 17.7 percent or $11 million annually per facility.

Hospital leaders agreed that improved supply chain management is key to lower costs.

About 62 percent of hospital leaders also stated that there is a clear economic return on investment for supply chain analytics.

Respondents agreed that supply chain analytics have the potential to reduce costs. But the tools can also help improve care quality.

About two-thirds of respondents (60 percent) said that supply chain analytics can positively impact care quality and another 67 percent think the tools can lead to value-based care and reimbursement success.

READ MORE: Leveraging Group Purchasing for Hospital Supply Chain Management

Seventy-three percent of hospital leaders also already use supply chain analytics to identify ways to enhance care quality.

However, hospitals are not investing in sophisticated supply chain management technologies to drive cost and quality improvements.

The majority of respondents may already be using supply chain analytics to improve quality, but the survey showed that many of the hospital leaders are limited to basic, lower-tech solutions.

Most hospital leaders use basic analytics function, such as inventory tracking (76 percent) and supplier consolidation (71 percent), while fewer respondents use their solutions for accessing operating room (OR) data on a case-by-case basis (57 percent). In addition, just half of the respondents can proactively manage expired goods.

The survey results indicate a “clear need for automation and better technology in the supply chain,” researchers stated. And that is especially true for OR supply chain management.

READ MORE: Why Healthcare Needs Value-Based Supply Chain Management

For OR supply chain management, the survey found that 37 percent of hospital leaders still use Excel or other Microsoft tools to track margins per OR case. Another 27 percent use low-tech tools or simply don’t track margins per OR case or don’t know if they do.

The remaining 36 percent of respondents have a specific technology solution.

Hospital leaders are split on what an optimal supply chain management solution looks like. Thirty-eight percent of respondents favored a single platform with a dashboard and analytics suite, while 32 percent preferred a platform with “easy-to-use point-of-care technologies (e.g., smart cabinets, barcode systems, and RFID).

Fifteen percent of respondents, respectively, wanted platforms that proactively manage supply challenges or that were interoperable with other technologies, like the EHR or enterprise resource planning system.

Supply chain optimization and automation have the potential to significantly reduce costs and improve quality. Hospital leaders are aware of the potential benefits and are making supply chain management a top priority.

But prioritizing supply chain management is not driving investment, the survey showed. Only 13 percent of hospital leaders cited supply chain management as their highest priority for operational investment in 2019. Areas like patient flow, process improvement, perioperative environment, and staff management bested supply chain management.

Hospital leaders may have to convince their chief financial officers (CFOs) to allow for additional supply chain investments in the near future. While respondents agreed that supply chain and materials management leaders are the most interested and most influential in supply chain management decisions, they also said that hospital CFOs still control the budget.

“Hospital leaders are going to need to use every tool in their toolbox to succeed, and they will need to turn the supply chain into a strategic business lever – not only to save money, but to improve clinician satisfaction, patient outcomes, and the care patients receive,” Plesko stated.

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