Group purchasing organizations (GPOs) have been around for a long time, allowing health care organizations to align and use their combined purchasing power to secure the best available pricing for a range of goods and services.
GPOs have been a boon to health care organizations. Indeed, Advantus Health Partners, an end-to-end supply chain solutions company, includes a GPO. As a secondary GPO provider, our customized solutions enable our clients to drive value to their strategic priorities. But supply chain management has a far wider sweep today than contracting with GPOs and leveraging their benefits.
Health care organizations were prompted to assess the weaknesses in their supply chains during the COVID-19 pandemic. Now that the crisis has subsided, health care leaders have shifted their attention toward evaluating how supply chain management impacts the long-term sustainability of their organizations, while becoming a strategic partner in generating savings and value.
In the process, supply chain management has moved from its role as a transactional, tactical function — keeping storage rooms stocked and essential equipment on hand — to a strategic function that brings numerous benefits to organizations, patients, and the communities they serve.
At Advantus Health Partners, we recognize the critical importance of supply chain management, viewing it as an indispensable and equal partner alongside functions such as medicine, pharmacy, human resources, operations and finance. Our aim is to achieve the triple goal of health care: delivering better individual care, promoting healthier populations, and reducing costs.
“In leading health care organizations, supply chain leaders also play a key role in shaping health system strategy,” wrote John Wright, Advantus Health Partners chief operating officer in Chief Health Care Executive.
Why is supply chain management so important?
The COVID-19 pandemic brought supply chain management from behind the scenes to center stage. Ongoing financial pressures guarantee that its turn in the spotlight will endure. Beyond cost considerations, there are other compelling reasons why supply chain management holds immense importance. It plays a crucial role in enhancing patient outcomes and mitigating health care’s environmental impact.
A 2023 report by the American Hospital Association revealed how much financial pressures continue to affect hospitals and health care systems. Non-labor costs per patient have increased by 16.6% since 2019.
Among non-labor expenses, three areas have experienced substantial increases—drugs, medical supplies and equipment, and purchased services, such as information technology, hospitality (including food) and environmental services.
Meanwhile, declining payer reimbursements and reduced government aid following the end of the public health emergency are pushing organizations to increase the rigor they apply to cost management efforts.
Given that payer contracts increasingly connect reimbursement to outcomes, health care leaders are turning to their supply chain experts for assistance. Utilizing data analytics, for example, can identify variations—including in supplies and equipment—that can enable clinical leaders to explore potential avenues for reducing care variability.
Additionally, health care organizations bear a significant environmental burden. Supply chain management can also play a vital role in reducing this impact.
“About 10% of carbon emissions created by this country come from health care, and surprisingly about 80% of that comes from supply chain activities,” Jimmy Chung, MD, who leads clinical transformation for Advantus Health Partners, told Becker’s Health Care Podcast.
“I know a lot of health organizations and companies have already committed to achieving net-zero emissions by 2030 or over the next couple of decades. So, this presents a tremendous opportunity for health care systems and manufacturing facilities to invest in reducing carbon emissions and minimizing the impact on our planet.”
Why it’s time for a strategic approach to health care supply chain management?
McKinsey surveyed U.S. health system executives and supply chain leaders in late 2021. About two-thirds of respondents acknowledged the pandemic had sharpened their perception of the supply chain’s function in their organizations. Nearly three-quarters of respondents believe that the supply chain has the potential to play an even more strategic role.
“In our experience, a high-performing supply chain function can boost resilience, enhance care, increase satisfaction among physicians, reduce supply spend by up to 10 percent, and better position health systems to achieve their growth ambitions,” wrote the authors of the subsequent McKinsey article, “Optimizing health system supply chain performance.”
At Advantus, we wholeheartedly support this perspective. Our practice addresses the three key components identified by the McKinsey survey respondents as characteristic of high-performing supply chains:
- Clinical engagement
- Goal setting to achieve supply chain optimization
- Data and analytics
We’re a forward-thinking organization that is made up of doers, including experienced supply chain operators and clinicians. And because we hail from a large health system, we possess an understanding of the issues at hand and can quickly engage in assisting organizations of all types and sizes, from small community hospitals to academic medical centers and national health systems.
How Advantus supports strategic supply chain management
Advantus Health understands the diverse needs and stages of organizations on their journey toward optimizing their supply chain. We offer a range of services that align with these specific requirements:
- Clinical transformation: We help identify areas of opportunity for clinical improvement, analyze the value chain for products, complete contracting, and measure patient outcomes.
- Pharmacy services: Advantus applies a strong emphasis on standardized processes, efficient purchasing, and optimal clinical outcomes to create resilient pharmacy services.
- Purchased services optimization: We help organizations capitalize on opportunities in health care technology management, hospitality, environmental and other purchased services to reduce costs while improving services.
- Integrated logistics and distribution: Advantus experts in logistics management help organizations reduce waste and improve efficiencies by assessing supply chain operations, channel effectiveness, and integrated distribution partnerships.
- Insights and technology: Data analysis combined with business intelligence and experience uncover insight that organizations working with Advantus put to work to improve their supply chain management.
- Management and consulting: Advantus can provide expert guidance and support to transform and augment an organization’s strategic thinking and, ultimately its direction.
And, of course, our GPO. Our strong relationships with reputable suppliers provide organizations with best-in-class pricing without the need for frequent renegotiations. We forge innovative partnerships that help make health care supply chains more resilient, agile and effective.
“To succeed in an environment of diminishing resources and staffing challenges, our vision at Advantus is that supply chain needs to be a highly strategic enterprise that looks for new ways to reduce expenses and sustain savings,” Dan Hurry, chief executive officer, told the Talking Supply Chain podcast, produced by Supply Chain Management Review.
For health care organizations elevating supply chain management to a strategic partner, Hurry advises:
“Challenge your operation in terms of waste and utilization. Ask what benefits standardization could bring to you. We have so much customization in health care. Limit the options while still making sure quality is still in check. You can apply the same equation to services. There are so many challenges staring at us right now. There are services you’re paying for that you don’t need or consume.”
Get started today
At Advantus Health Partners, we enjoy speaking with health systems and health organizations as they embrace supply chain’s role as a strategic partner. We welcome the opportunity to hear about your challenges and initiatives to explore how we can potentially assist, by completing the Contact Us Form.