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Healthcare Supply Chain 2.0: Tapping Actionable Data for Resiliency

Key takeaways:
  • Health systems on average are experiencing shortages of hundreds of different products, with larger health systems seeing shortages for ~600 unique med/surg supplies and 200-300 drugs per month.
  • In pharmacy alone, PINC AI™ data shows $1.1 billion in increased hospital spend tied to purchases of substitute products when the original product was unavailable due to shortage.
  • Providers need actionable data and insights backed by next-generation enterprise resource planning (ERP) technology for risk mitigation, resource optimization, cost containment and long-term resiliency.

After a tumultuous 3+ years for the global supply chain, a new PINC AI™ data analysis highlights the disruptive environment health systems and supply chain teams are still experiencing today:

  • Health systems on average are experiencing shortages of hundreds of different products, with larger health systems seeing shortages for upwards of 600 unique products and 200-300 drugs per month.
  • ~16 percent of med/surg manufacturers had at least one product shortage over the last 12 weeks.
  • 20 percent of critical care categories (such as personal protective equipment) had at least 5 percent of items in shortage.
  • The rate of product backorders is currently double the rate prior to the pandemic in early 2020.

Supply shortages have also proven costly to healthcare providers. In pharmacy alone, PINC AI™ data from 2022 shows $1.1 billion in increased hospital spend tied to purchases of substitute products when the original product was unavailable due to shortage.

While this data relates to health system IDNs, these challenges spread across the continuum of care, including physician practices, long-term care facilities and many others.

COVID-19 was the wakeup call that real change is necessary across the healthcare supply chain information technology (IT) ecosystem. Healthcare providers have made strong investments in electronic health record (EHR) technology and other data-rich systems, but many still lack the information essential to drive operational cohesion and efficiency. As such, supply chain teams are hard-pressed to navigate ongoing product shortages, streamline workflows and enable significant cost reduction.

In our work with providers across the country, we’ve uncovered six key problems with healthcare IT that are adding fuel to the fire, all of which are intensified by today’s inflationary pressure, workforce issues and other global-economic factors.

Simply put, providers don’t want another dashboard: they need actionable data and insights.

Healthcare’s disruptive landscape highlights the lack of supply chain transparency and reinforces the urgent need to better understand product availability and risk that can ultimately jeopardize the quality of care and patient outcomes.

Here’s how providers can leverage technology and meaningful data insights to help increase visibility, mitigate product shortages and build long-term supply chain resiliency amid continuing global instability.

The ERP System as a Foundation

A unified technology platform can drive decision-making, standardization, savings and price parity across a health system. The ERP system is foundational to overall decision support solutions that provide valuable insights into supply utilization and variation – enabling cost control, clinical standardization and improved outcomes.

We see six opportunities for providers to tap existing ERPs to drive resiliency and counter the supply, workforce and other challenges affecting their bottom lines:

A strong ERP system can set the foundation to move from reactive to proactive – allowing providers to accurately measure performance, rationalize inventory and utilization, and align master data at the facility, vendor, distribution and item-levels.

Data and Insights for Longitudinal Visibility Across the Supply Chain

Data is only as valuable as the insight it provides, and technology alone cannot transform raw data into true business intelligence. For healthcare leaders and supply chain teams, extracting, standardizing and visualizing the right data to support accurate, real-time decisions is paramount.

Longitudinal visibility across the supply chain, where a provider can see demand point-of-use information and resiliency metrics across key performance indicators (KPIs) is critical to the ability to accurately manage forecasting and predict supply shortages. The problem we’ve found is that the data doesn’t flow well from the point-of-use/procedural level back to the suppliers.

Predictive analytics can help provide this much-needed longitudinal visibility, enabling healthcare leaders to anticipate and preempt problems rather than continuing to react to them. Predictive models driven by ERP, organization-specific data and combined with machine learning (ML) can calculate the probability of a future outcome. When applied to predict supply shortages, decision-makers are better able to plan and allocate resources to get a head start on any future shortages they might encounter.

This is where the new PINC AI™ Supply Disruption Manager tool comes in.

Inspired by and developed in concert with Premier members, the PINC AI™ Supply Disruption Manager utilizes machine-learning models to identify when critical products and supplies are anticipated to become unavailable. This advanced notification enables health systems to identify and source clinically appropriate alternatives to avoid delays in patient care.

The tool can afford supply chain and clinical staff:

  • Reduced time to manage supply stock issues.
  • Reduced cost due to changing alternatives.
  • Reduced canceled procedures due to inadequate supplies.

Premier member Renown Health, an early adopter of the PINC AI™ Supply Disruption Manager technology, used the tool to get a better handle on PPE supply needs after the health system realized it had ordered far more PPE than needed at the onset of the COVID-19 pandemic.

Renown partnered with PINC AI™ Margin Improvement to build an ML-powered model driven by their own data. The model reliably predicts which of the health system’s supplies will be constrained (e.g., placed on supplier allocation) three to six weeks into the future.

The result? According to Mary Shipley, Director of Supply Chain Management at Renown Health, the system has been able to look at their item master and establish a substitute for about 80 percent of items. With PINC AI™ Supply Disruption Manager, Renown can better understand their ordering behavior and address potential shortages before patient care is impacted.

It’s clear that both in and out of a pandemic, providers must become increasingly proactive and prepared when it comes to supply chain risk and resiliency.

With supply chain leaders and teams facing constantly changing unknowns, having a strong ERP data set coupled with innovative solutions such as PINC AI™ Supply Disruption Manager can give providers the insights needed to quantify risk and mitigate future disruptions, more accurately manage contracts, streamline operations and manage supply chain costs – all in one place.

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Data is collected from participating Premier member and non-member client health systems, cleansed, de-identified and aggregated to form a collection of hospital ERP data that represents small, medium, and large health systems across 48 of the 50 US states.

Premier clinical SMEs review each category / sub-category of supply and determine whether it is critical to maintaining hospital operations. Supplies that require significant practice change to do without and/or lack suitable alternatives are deemed critical.

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