Healthcare’s pricing enigma: mitigating the risks of the supply chain with data and relationships

There are a lot of questions about the impact of prices on health systems supply chains. And most of the leaders of the supply chain do not have informed solutions to pending challenges.

In response, health care organizations short of resources are in scramble mode, trying to work with their suppliers to identify and mitigate the potential impacts with various degrees of success. Although lobbying efforts are underway on the national scene by hospitals and other commercial groups to exempt medical supplies and drugs, the industry is preparing for the disturbances of the supply chain and potential price increases.

The reality is that the situation will probably become more complicated before it improves, and each financial director of health care seeks to provide chain leaders to understand and articulate the risk of their organizations. Access to good supply chain data is the key to clarity, but health systems are in the whole that are lacking in this area and do not have the resources to extract the information necessary for a variety of sources.

With limited access to data, health systems will have to rely on their group purchasing organization (GPO) and other third -party partners to fill the information gaps to ensure resilience. It is another call for alarm clock after the fallout from the COVVI-19 pandemic. This time, improving prospects begins with a better supply chain model – which goes from a transactional objective to strategic and is built on models of collaborative suppliers and a more domestic supply.

The power of supplier’s deeper partnerships

There are different schools of thought with regard to the way GPO should approach relations with suppliers in health care. Unlike the old decades old approaches which prioritize the quantity of value rather than value, the transition to the construction of long-term stable relationships with fewer suppliers allows greater collaboration and exploration of quality levers far beyond prices.

The advantages and disadvantages certainly exist, but when fewer supplier partnerships are at stake, health systems can become more strategic in contracts and negotiations. This is an important consideration when navigation in the uncertainty of the prices.

For example, to understand the risks, the leaders of the supply chain need data from various sources – country of origin for finite goods, country of origin for the components and the impact of these respective components.

The problem is that no single data source exists, and most suppliers hesitate to share this information with their GPO partners or health system because they fear losing business. Deep relations with fewer suppliers allow the heads of the supply chain to negotiate contracts that are built on trust and transparency, which can lead to better disclosure of information.

In case of transparency, health systems can make better decisions concerning alternative supply before potential benefits. They can also identify bulk purchase opportunities and stocks of stocks before entry into force of prices.

In addition, deep relationships can help health systems overcome the data visibility challenge. Mutual exchange of processes, technologies, capacities, systems and information of best practices can all form an ecosystem which supports the proactive response to pending problems.

For example, a local visualization tool gives visibility to a large health system to the data from the country of origin to identify potential goods which are at risk of price increase. This allows the leaders of the supply chain to provide what the potential financial impact could be based on the future execution rate, to the attenuation of financial impacts or shortages.

Build stronger domestic alliances

Increase in domestic investment is an essential strategy to overcome the risks linked to pricing uncertainty, now and the future. Health systems should seek means to balance the locations of supplies they buy between offshore and domestic suppliers.

Strategic agreements such as the one that produced the opening by Medline in 2023 of a new distribution center in West Jefferson, Ohio, create new supply routes which are closer to them and more reliable – and eliminating the risk of pricing impact. Hopefully the industry will see more collaborative investment agreements in the future.

Although there is certainly not enough current capacity in the United States to meet 100% of demand, the leaders of the supply chain should work with their GPO partners to ask key questions about alternative supply: which countries produce a particular product? Is the impact less in his country of origin? Is there a product in the United States that we can buy?

Thanks to the lessons learned during COVID-19, there are already more interior capacities in many categories of health supply today than before the pandemic. Avant-garde health systems will start to turn to these alternatives.

Overcome fragile supply chains

The pandemic revealed the delicate state of the dependence of the American health system with regard to the world supply chain. From now on, pending price agreements are a new threat to system instabilities. The best preparation strategies are to mitigate and eliminate risks as far as possible. Health systems that adopt relationships with deeper supply chain providers as well as a more intelligent domestic strategy will be better ready to make resilient and stronger supply chains that can meterate pending storms.

Photo: Stockseller_ukr, Getty Images

This message appears through the Medcity influencers program. Anyone can publish their point of view on business and innovation in health care on Medcity News through Medcity influencers. Click here to find out how.