(888) 383-8000

Add Your Heading Text Here

November 21, 2023

The Future of Supply Chain Is Not the GPO

The traditional approach to health care supply chain operations is facing a transformative shift. In an article with Healthcare Purchasing News, Jimmy Chung, MD, chief medical officer at Advantus Health Partners, sheds light on the future of supply chain transformation. As health systems recognize the pivotal role of supply chain in clinical transformation, it becomes evident that the traditional model, centered around group purchasing organizations (GPOs), is outdated and fails to align with the goals of value-based care.

Jimmy Chung

According to estimates, a staggering 97% of hospitals rely on GPOs to optimize pricing for supplies through collective purchasing power. While this model has served health care for over a century, its shortcomings are becoming increasingly apparent. Gartner research reveals that supply chain costs in the average health system contribute to a substantial 37% of the total cost of care. It’s clear that the need for supply chain reengineering is not just a matter of cost reduction, but a strategic imperative to elevate the efficiency and impact of health care delivery.

Building strategic supplier relationships: driving innovation and value

The shift from a transactional to a strategic supply chain involves building long-term, stable relationships with fewer suppliers. Unlike the traditional approach of numerous suppliers on contract with pricing tiers revisited every few years, this new paradigm encourages collaboration and exploration of value beyond mere cost considerations.

Dr. Chung emphasizes the importance of collaborative design of contracts, where shared goals are established upfront and tracked over time. This not only fosters trust and stability, but also allows for ongoing value chain analysis, ensuring continuous performance improvement in patient care delivery and supply chain practices. By making supply chain strategy more supplier-centric, health systems can harness innovation, incorporating diverse processes, technologies and data into an ecosystem that drives excellence.

Resilience strategies for health care’s drug shortage crisis

The recent challenges faced by the health care industry, especially during the COVID-19 pandemic, have brought the issue of drug shortages to the forefront. Drug shortages, at an all-time high this year, underscore the need for proactive and smart strategies. Health systems have often found themselves reacting to shortages, scrambling to secure lifesaving medications.

Dr. Chung advocates for a transformational mindset that leverages supply chain automation, solid inventory management, and data insights to anticipate and mitigate drug shortages. In an era where specialty drug spending has surged, reaching $300 billion in 2021, a proactive approach becomes imperative. Resilience in the face of a crisis requires not only reactive measures but a strategic overhaul that empowers health systems to predict and navigate the complex pharmaceutical landscape effectively.

Improving the patient and clinician experience through supply chain transformation

Dr. Chung shares there is a correlation between a robust supply chain and the experiences of patients and clinicians. A recent report from the American Society of Health System Pharmacists highlights the negative effects of drug shortages on both clinician burnout and patient outcomes.

Strategic supply chain management, therefore, becomes pivotal for optimizing care delivery. Evidence-based reduction of variations and building resilience for critical items contribute to a positive patient experience and improved clinician well-being.

Foundations of Transformation: Technology, Leadership and Collaboration

The path to a strategic supply chain requires a fundamental shift in organizational mindset. Elevating supply chain executives to the c-suite level is crucial, recognizing that supply chain touches every facet of health system operations and care experiences.

Technology plays a central role in this transformation, with health systems requiring advanced solutions for real-time data capture and reporting. GPOs, as key partners, should actively support supply chain leaders in maximizing the value of data insights.

The journey toward supply chain transformation is a collaborative effort. Identifying partners who share common goals and are open to advancing supply chain strategy are essential. When health systems and GPOs align their objectives, they can create a strategic, innovative supply chain model.

As health systems strive for greater efficiency, cost-effectiveness, and improved patient outcomes, supply chain transforms from a background player to a strategic powerhouse. The insights provided by Dr. Chung serve as a guide for health care leaders navigating this journey, emphasizing the need for strategic supplier relationships and resilient strategies to ensure the supply chain becomes a catalyst for positive change in the health care ecosystem.

Contact Advantus to learn how we can help transform your supply chain.

As featured in these top news outlets

Find out more about how we can help you transform your supply chain.