By Alex Card
We did it, folks. COVID-19 is finally over.
OK, not really. While infection rates have dropped sharply across the U.S., the reality is that we’ll probably be living with COVID for the rest of our lives, as the virus moves into the endemic phase. Indeed, long-term physiological and mental health effects will be part of the "new normal" for countless individuals.
On the professional front, it’s clear the healthcare industry and supply chain will deal with the after-effects of COVID for years to come.
But at the 2022 Federation of American Hospitals (FAH) Conference and Business Exposition last week, COVID-19 sure sounded like a past-tense topic.
We attended FAH 2022 in Washington, D.C. last week to meet hospital providers, suppliers and government leaders and discuss issues affecting the industry.
Featuring sessions with titles like “Pandemic to Endemic? – Pharmacy Looking Ahead” and “COVID-19: Where do we go from here?”, this year’s conference focused largely on the supply chain issues that continue to hamper routine business operations, even as many organizations are shifting toward a post-COVID mindset.
COVID-19 isn’t done quite yet, but the discussions we had at FAH 2022 make it clear the industry is working to build a new normal while grappling with the pandemic’s lingering effects. Read on to see what insights we picked up.
Everyone is still feeling the impact of COVID-19—but some are feeling it more
COVID-19 affected the healthcare supply chain in a variety of ways—namely, by increasing demand for personal protective equipment (PPE) and other single-use supplies, hindering the productivity of the manufacturers who produce these supplies, and slowing the speed at which these products can be processed and shipped.
Today, the U.S. 7-day average for newly reported COVID-19 cases is just under 35,000. Only three months ago, that figure was well above 800,000.
Even as COVID-19 slows its spread in the U.S., the supply chain is not ready to bounce back to normal:
- Group purchasing organizations (GPOs) are increasingly relying on smaller, nontraditional or overseas suppliers to meet providers’ needs.
- Hospital “hoarding” has contributed to rising supply prices and reduced access to necessary supplies in some health systems.
- Some providers are turning to lower-quality suppliers to make ends meet.
The greatest supply chain burdens often continue to fall on smaller providers and health systems—especially those serving underserved, impoverished or minority communities, where health equity disparities have amplified the risk of severe illness or death from COVID-19.
On the supplier end, many companies are facing losses from material costs, labor shortages and shipping issues. Even some larger, prominent suppliers are being ignored by providers and GPOs in favor of smaller or overseas manufacturers who charge less for lower-quality products.
Supply chain visibility is shaping provider purchasing behavior
If supply chains had weather patterns, FAH’s 2022 forecast would likely be “foggy.” Both providers and suppliers are struggling with lack of visibility into domestic and international logistics.
In a world where you can track your Amazon or Uber Eats delivery down to the minute of arrival, it might seem surprising that healthcare supply distributors rarely offer such granular views of their shipping process.
If providers can’t be certain when a medical supply shipment will arrive, they tend to make purchasing decisions that prioritize readiness over precision. COVID-19 obscured the supply chain even further, leading many providers to respond by overstocking and hoarding supplies, which put greater pressure on competing providers and their suppliers.
Providers who typically rely on—or were forced by circumstance to rely on—overseas suppliers have even less visibility into their shipments. This challenge has created an opportunity for optimized digital supply chain planning, and distributors like Cardinal Health have taken notice.
Some of the largest integrated delivery networks (IDNs) in the country have since updated their inventory guidelines to ensure 6 to 12 months’ worth of critical supplies are always available. It will be interesting to see whether this crisis leads to manufacturers and distributors developing a greater tolerance for added inventory costs on their quarterly balance sheets.
Strong GPO-supplier relationships can combat rising costs
Providers’ hoarding, supply-side barriers and inflation are ratcheting up costs across the medical supply chain. A big focus of FAH 2022 was how GPOs and suppliers can form strong relationships to help mitigate some of these costs.
GPOs form purchasing relationships with suppliers and providers to benefit both parties. Providers (especially smaller ones) benefit from their industry expertise and savings from high-volume purchasing agreements. Suppliers get contracted sales and access to growing networks of providers and facilities.
Strong GPO-supplier relationships help providers maintain a necessary stock of supplies at a fixed rate for the duration of their agreement, discouraging hoarding and panic buying, whether at higher costs or lower quality. Suppliers, in turn, can guarantee the sale of specific product volumes and cement their market share, regardless of unforeseeable factors like global pandemics.
By keeping hospitals and post-acute care facilities well-stocked with high-quality supplies, strong GPO-supplier relationships make the entire healthcare continuum more resilient to disruption and better prepared to serve patients.
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