How Supply Chains Function in Healthcare

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A healthcare supply chain manager inspects boxes in a warehouse.Healthcare is constantly evolving. This evolution takes many different forms and moves well beyond new medical discoveries. Technological innovations such as telehealth and electronic health records (EHRs) can influence the patient-provider dynamic and impact how a clinic functions. Changes in legal compliance can affect a healthcare facility’s treatment strategies. Improvements to supply chain logistics can better prepare a facility to administer care safely and effectively.

Collectively, these changes can dramatically shape the future of healthcare delivery. If facilities aren’t prepared to adapt, their ability to deliver high-quality care will be hindered. As healthcare professionals progress through their careers, pursuing advanced education, such as a Healthcare Master of Business Administration degree, can help them understand the impact these changes can have and prepare their facilities to integrate them into care strategies before industry innovations become industry standards.

Healthcare Business

Some of the most pronounced shifts in healthcare delivery are happening at the business level. One key change is the ongoing consolidation of healthcare organizations. Increased partnerships between organizations may create a narrower market that could drive up costs for providers and patients alike.

The consolidation of organizations dovetails with the trend of growing healthcare consumerization. As costs continue to increase through elements like co-pays and deductibles, patients are becoming more conscious of the quality of care they’re receiving. Additionally, there is a shift in care delivery environments, as technological innovations have turned many inpatient procedures into outpatient procedures.

It’s important for healthcare administrators to fully understand how these changes can impact their operations from a short- and long-term perspective and build strategies to respond.

Healthcare Technology

Technological innovations in healthcare are likely to have an enormous impact on the future of healthcare and healthcare delivery strategies.

Recent developments such as telehealth and EHRs allow patients to have easier access to care and increased information regarding the state of their health. Innovations such as wearable technology help patients to boost their health and well-being — and, ultimately, reduce the number of doctor visits they need and their costs. Advanced healthcare tech applications such as robotics and artificial intelligence (AI) have also played a part in developing more efficient and accurate care delivery solutions.

Health administrators who embrace innovative tech can transform their facilities into leaders in care delivery.

Healthcare Supply Chain Management

Healthcare supply chains are unique. Whereas a retail supply chain revolves around principles of supply and demand (e.g., more stock of a toy is needed to keep up with purchases), these concerns are less central to healthcare.

Certain essential supplies, like prescription drugs and syringes, will always need to be on hand. Plus, patients are not really consumers in the conventional sense, as they frequently require particular services and treatments, such as emergency room care, that are selected for them by healthcare professionals.

For many providers, supply chains are major cost centers, with significant overhead stemming from unoptimized processes. A 2019 report by Health Catalyst stated that roughly 30% of all American hospital spending is allocated to overspending on supply chains — around $25.4 billion per year.

Healthcare supply chain management (SCM) is an ongoing challenge, especially as providers look to align costs with outcomes in the context of the industrywide move toward value-based care. At the same time, efforts to reduce supply chain spending must keep in mind the importance of consistently maintaining sufficient supplies. The COVID-19 crisis drove this point home, as supply chain deficiencies made it difficult for some providers to deliver the best care possible.

To address a wide variety of issues with SCM, providers have resorted to a mix of technological, operational and patient-centric solutions. Here’s a quick look at four approaches that have found some success in transforming healthcare supply chains into more reliable and economical infrastructures.

1. Taking the Warehouse In-House

Warehouses are supply chain fixtures, so it’s no surprise that some providers have looked to assume greater control over these key facilities. Vanderbilt University Medical Center took this route in the early stages of the pandemic. It set up its own space and devised a self-distribution program for supplies, specifically targeting supplies that may be stretched thin due to COVID-19.

2. Betting on Blockchain Technology

Blockchain is the simple database tech underlying cryptocurrencies such as Bitcoin. It also has potential uses in SCM, due to the fact that it’s difficult for anyone to tamper with or corrupt its entries. In healthcare, this could help ensure that the right medicines are being transported and that everyone in the supply chain can trust one another. Organizations like the Food and Drug Administration (FDA) and IBM joined forces to develop tech-driven pilot programs that use blockchain technology to track and trace prescriptions and vaccine distribution.

3. Analyzing Real-Time Analytics

How are SCM costs tracking over a three-month period? Or over the course of a year? Real-time analytics is usually the quickest, most effective way to answer these types of questions. Healthcare providers can implement business intelligence software that fuels analytics dashboards, allowing them to get clear, actionable insights into trends across their operations. This helps pull information from multiple systems and track issues such as short- and long-term cost increases.

4. Customizing Customer Service for Each Patient

Telehealth initiatives offer a creative solution to some SCM issues. Instead of requiring a patient to visit an office and potentially undergo costly diagnostic procedures using particular supplies, providers may be able to conduct an accurate diagnostic via technology such as videoconferencing. A 2019 study found that telemedicine could save between $19 and $120 per visit for many patients. In addition to these savings, providers can better conserve some of their supplies and reroute resources.

Be Prepared to Make an Impact

Healthcare will continue to evolve in the future. One element that will remain constant is the need for leaders to successfully integrate advances into healthcare strategies.

George Washington University’s online Healthcare Master of Business Administration (HCMBA) program can prepare you to provide this important leadership. By enrolling in this fully online program, you will explore advanced topics in both the managerial and health-related aspects of the industry. Courses in regulatory affairs, accounting, and healthcare quality, among others, will prepare you to navigate common administrative issues in a senior role.

Learn more about how George Washington University can help you be a leader in the dynamic healthcare industry.

Recommended Readings

How Data and Decisions Work Together

How Hospital Management Affects Patient Care

The Top Costs Associated With Running a Hospital


BBC, “Pharmacists Warn of a ‘Surge’ in Shortage of Common Medicines”

Food and Drug Administration, Drug Shortages: Additional News and Information

Health Catalyst, “Improving Data Integrity Leads to Lower Supplies Costs”

Healthcare Financial Management Association, “Reimagining the Healthcare Supply Chain to Bolster Resilience and Efficiency”

HealthLeaders, “Cost Savings for Telemedicine Estimated at $19 to $120 per Patient Visit”

IBM, “How the FDA Is Piloting Blockchain for the Pharmaceutical Supply Chain”

IndustryWeek, “How COVID-19 Has Changed the Healthcare Supply Chain”

Managed Healthcare Executive, “Five Healthcare Industry Changes to Watch in 2020”

The Medical Futurist, 10 Ways Technology Is Changing Healthcare