What is healthcare procurement?
Healthcare procurement is the process of sourcing goods and equipment for clinicians, hospitals, and other healthcare settings. Inadequate supply chain management can negatively impact profitability at best and severely limit your ability to care for patients at worst.
A healthcare procurement strategy outlines how healthcare facilities and organizations source and purchase necessary equipment, drugs, and other services to maintain operational efficiency. It has significant impact on patient care quality, the financial health of healthcare providers, and the efficient functioning of the healthcare system as a whole.
Procurement strategies often focus on reducing costs, mitigating risk, and expanding organically. According to a recent Deloitte survey, 74% of chief procurement officers around the world identify cost reduction as their top priority procurement strategy.
Understanding the current landscape of healthcare procurement
The external risks to healthcare supply chains include natural disasters, geopolitical crises, epidemics or pandemics, and material shortages, which are difficult to predict and mitigate.
Developing and implementing a healthcare procurement strategy can help you manage costs and ensure quality of supplies, address complex regulatory requirements, and integrate new technology. And, as the industry learned in the last five years, fluctuating demand and supply chain disruptions during emergencies or crises can exacerbate the situation.
Anticipating future trends and challenges
Procurement in healthcare is undergoing a significant transformation driven by technological advancements, evolving patient needs, and economic pressures.
- Digital transformation has already begun and includes AI and machine learning, blockchain, robotics, automation, and cloud-based procurement platforms.
- Sustainability and ethical sourcing will become increasingly more critical to prioritize environmentally friendly products and suppliers, ethical sourcing, and focus on a circular economy.
- Personalized medicine and advanced therapies will require managing specialized products with unique handling requirements, inventory challenges, and identifying suppliers with experience in complex therapies.
- Value-based care, which is still in its infancy, shifts focus from product costs to patient outcomes, relies on partnering with suppliers, and uses data to measure supplier performance and identify cost-saving opportunities.
Address rising costs and budget constraints
Global inflation and deep ongoing supply chain issues put healthcare providers in a position where they must further tighten budgets at a time when resources are already stretched thin. Disruptions to the normal flow of critical supplies force them to react to recalls, shortages, and backorders. This increases the costs associated with providing healthcare to patients.
To overcome disruptions, supply chains must commit to long-term healthcare procurement solutions that allow providers to conduct value analysis and maintain profit margins while simultaneously facilitating continuity of normal operations.
Focus on supply chain disruptions and resilience
Running low on supplies can be anything from a minor headache to an all-hands-on deck situation to find a solution. Supply chain disruptions can mean your organization has to turn away patients, or worse.
By taking a few steps to strengthen your supply chain management processes, you can build a resilient supply chain – one that addresses minor issues so staff barely notice when they occur, and in the case of a catastrophic event, can help minimize workflow disruption.
- Use supply chain management software to promote a holistic, strategic approach to closely track inventory and costs.
- Develop contingency plans for times when your regular vendors can’t keep up with demand.
- Form relationships with other hospitals to share resources during a crisis or long-term disruption.
- Automate and update enterprise resource planning to track and analyze data efficiently so you can be proactive and allocate limited resources effectively.
- Form a clinically integrated supply chain that includes standardized supply chain practices.
- Implement analytics and demand forecasting that consider supply chain disruption and enable better resource and fiscal planning.
Adopt technological advancements and digital transformation
Advancement in technology (think AI, machine learning, and predictive analytics) have revolutionized the procurement process. It has become more streamlined, data-driven, accurate, and efficient.
Implementing a future-proof procurement strategy
The main components of a successful healthcare procurement strategy include effective management of the supply chain, stakeholder engagement, efficient financial planning, comprehensive understanding of the health market, and an emphasis on quality and ethical considerations. It also involves a strategic sourcing process, right supplier selection, contract management, and performance measurement to ensure the procurement goals are met.
You can take six steps to future-proof your procurement strategy to assure that your organization is prepared for supply chain disruptions.
1. Assess current procurement practices and performance
Developing an effective procurement strategy helps you react when something unforeseen happens. Think back to the challenges healthcare systems faced at the onset of the COVID-19 pandemic. It was the worst-case scenario. While you can’t anticipate something of that magnitude, you can be prepared for it.
Vendor relationship management and supplier relationship management are ongoing processes, and it’s essential to assess and evaluate your ongoing partnerships regularly. Identify potential pain points that could negatively affect the relationship and address problems early to minimize potential risk.
2. Define strategic objectives and goals
There’s no secret recipe for defining your strategy. And there’s no one-size-fits-all approach. It’s a complex process and the team should include decision-makers from procurement, clinical, financial, IT, legal and executive leadership.
From the outset, your strategic goals for hospital procurement should align with the overall organizational objectives. The team should focus on improving efficiency, reducing costs, ensuring quality patient care, and mitigating risks.
3. Leverage data and technology
Automation can help you track and analyze data efficiently, respond to shortages quickly, and use limited resources more effectively. Advanced data and analytics can take the guesswork out of supply chain functions by allowing for the possibility of supply chain disruption into consideration to enable better resource and fiscal planning.
4. Strengthen supplier relationships
Flexibility and redundancies are essential when supply chain issues occur. Develop contingency plans and a stable of alternative domestic and global suppliers when your established vendors are unable to meet your needs.
5. Embrace innovation and adaptability
When it comes to innovation, the healthcare industry has been an early adopter. Leaders see the advantages of automating clinical and administrative decision-making. Adopt tools that automate and update enterprise resource planning and materials management information systems. The recent focus on integration and interoperability make it possible to add functionality and customize your system with third-party apps.
6. Continuous improvement and evaluation
Embracing a culture of continuous improvement and evaluation can help your procurement department contribute significantly to the overall success of your organization, improve patient outcomes, and optimize resource utilization.
Prepare your healthcare procurement strategy for tomorrow
A robust supply chain management strategy will ensure your healthcare organization has the resources required to care for patients, remain resilient against disruptions, surges in demand, and address unexpected issues that can potentially affect clinical and operational efficiencies.
Now is the time to create a supply chain management process that promotes agility, scalability, and optimal distribution based on your organization’s needs, now and in the future.
