The healthcare supply chain continues to contend with the challenges of a post-COVID-19 world that include everything from supply disruptions to inflationary pressures.
According to a Gartner® article, “the triple squeeze” three compounding pressures that executives are experiencing are:
- Rising Inflation – 90% of CEOs expect a significant rise in inflation within the next 12 months.
- Scare Expensive Talent – 50% of HR leaders except increased talent competition over the next 6 months.
- Global Supply Constraints – 48% of CFOs believe supply chain volatility and shortages will last beyond 2022. *
A year ago, in the outlook for 2022, Prodigo’s VP, Data Analytics & Product Strategy, Marlin Doner wrote, “As we saw in 2020, where supply was restricted and demand was elevated, prices increased dramatically – that’s basic economic theory being lived out in our current healthcare experience. Although product shortages we’re experiencing now may be for different reasons, the impact is going to be upward pressure on our costs that will require us to reevaluate how we source, purchase, and deliver the goods we need.”
Supply chain costs attributed to patient care – everything from labor costs and services to the amount spent getting goods from the point of supply to the point of demand – have in recent years risen more than 15%. As a result, the top 100 IDNs in healthcare had an average operating margin of -0.6%, often leading to consolidation among healthcare organizations to ensure their survival.
The verdict is still out on whether inflationary pressures are easing and hiring, according to some reports, appears to be up in 2023. A Wall Street Journal report found that while the tech sector is undergoing massive cuts, other areas – including hospitals – are seeing job growth.
Regardless, experts have pointed out that companies – including those in healthcare and its supply chain – can take steps to successfully navigate these challenges in the year to come.
Helping the Company
In a report, Gartner has outlined nine actions for winning during a recession. Three actions relate to managing spend: “Proactively create a prioritized list of the trade-offs you will make in your budget with a story about why; accelerate movement to the cloud while paying attention to shifting pricing strategies from software providers as prices rise; radically change workflows and processes to make them faster, simpler, and more agile for the long-term. Three other actions involve securing talent: Fundamentally rethink the way your company leverages humans (locations, hours, part vs. full time, in-house vs. outsource); commit to human-centric work models, which boost employee performance, increase intent to stay and reduce fatigue; aggressively source key digital talent that will shake loose and help accelerate your digital plans.
The final three actions relate to accelerating digital: Develop a future vision of the customer and employee to accelerate the right digital investments for 2025; invest in AI and autonomous digital projects that will make the organization faster and leaner; narrow the metrics you use to measure and manage digital initiatives to the few that align to outcomes.” **
An Investopedia report on industries that typically fare best during economic downturns provides some good news for the healthcare industry and its supply chain. The report ranked healthcare first among industries that tend to be less impacted by recessions because people need such services to live and, therefore, “are much less likely to skimp on it even when your income declines.”
Helping the Consumer
In November, however, Deloitte noted that the healthcare industry could expect to see a period of unrest due to ongoing problems stemming from inflation. If many healthcare organizations are struggling with their bottom line, one reason could be that 28% of consumers – or roughly 72 million American adults – feel less prepared to pay for medical costs.
Deloitte wrote that gaining consumers’ trust was an important focus in healthcare amid inflation woes that affect both healthcare organizations and their patients.
Among its suggestions for healthcare organizations to combat inflation were assisting consumers as they navigate the system by helping them find information and providers, collaborating with community partners such as health centers and pharmacies, and providing better cost transparency tools. These suggestions will become more prominent as the move toward home care continues to evolve.
Providing consumers with assistance as they contend with an economic downturn could, therefore, ultimately help healthcare organizations and their supply chains.
Achieving Outcomes and Improving ROI
The healthcare industry is facing great challenges as inflation raises costs and creates obstacles for operating margins. Achieving better patient outcomes while improving ROI might be a challenge amid inflation and supply disruptions – but Prodigo ensures that its healthcare organization clients are able to reach both of these goals.
Prodigo’s Solution Suite helps to combat these challenges with its cloud-based solutions that drive supply chain standardization, contract utilization, and price compliance at the front end of the Procure-to-Pay process.
Prodigo adheres to the tenets of high reliability and helps healthcare organizations with their digital supply chain modernization journeys. Prodigo helps clients to build scalable operating models and, in the process, save money by obtaining the perfect order – the right item, from the right source, at the right price – every time.
* Gartner, “3 Unique Talent Dilemmas Leaders Face – And What To Do About Them,” Sept. 13, 2022. https://www.gartner.com/en/articles/3-unique-talent-dilemmas-hr-leaders-face-and-what-to-do-about-them
** Gartner, “Driving Growth, Profits and Resilience in a Downturn,” 2023, https://www.gartner.com/en/supply-chain/trends/recession-playbook-for-supply-chain-leaders
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