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It is time for a revolution in healthcare supply chain management

August 04, 2020
Business Affairs
From the August 2020 issue of HealthCare Business News magazine

By Daniel J. Vukelich

Many healthcare workers will never take hospital supplies for granted again.
Forced reuse of disposable respirators, gowns and face shields have heightened attention to inefficient and wasteful practices in healthcare. COVID’s impact requires immediate attention be given to hospital finances, securing and building a more resilient supply chain and addressing the enormous amount of medical waste created.

We now can hit reset. I imagine a revolution in healthcare where providers insist that medical devices and supplies be designed and built to be reused or reprocessed and ultimately recycled. This transformation requires healthcare providers to adopt a new mindset, that medical devices and supplies are valuable assets, not consumable, disposable, and easily replaced.

From my position representing single-use medical device reprocessors for 20 years, I am all too familiar with inefficiency and waste in healthcare. In 2018 alone, our members helped hospitals prevent nearly 16 million tons of medical waste through reprocessing. I am also intimately familiar with the immense untapped potential we have before us.

Near-term challenges
Health Affairs reports that the direct cost associated with the pandemic could be $654 billion. “Hospitals’ already-thin margins plunged into the red as volumes and revenue fell and organizations prepared staff, supplies and capacity for a surge of coronavirus patients,” according to James Blake, author of a Kaufman Hall report. Further, hospitals have lost revenue because of their inability to perform elective procedures -- a revenue stream that normally keeps hospitals afloat. These factors have created a financial disaster for U.S. hospitals, which has led to layoffs and furloughs. The healthcare industry lost 1.4 million jobs just last April. This will likely mean hospital closures, and sadly perhaps include up to a quarter of all rural hospitals.

Supply chain
The healthcare supply chain was not prepared to deliver the PPE needed to protect our healthcare workers. This put our healthcare workers at risk. This is nothing short of a national tragedy. And while we were underprepared with PPE, we overspend in the supply chain generally. The American Hospital Association’s (AHA) Sustainability Roadmap for Hospitals indicates that the “second largest expense on a hospital's balance sheet (following labor) is supply chain costs.” And much of that is made up of billions on unnecessary spending. A 2019 Navigant analysis found over $25 billion being spent on unnecessary hospital supply chain spending” — each year!

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