AI is Minimising the Effects of Inflation on the Healthcare Industry

Healthcare providers are likely to face a challenging few years ahead, as inflation across the globe continues to increase with serious impact on every aspect of the industry. PWC is estimating that costs are going up by 6.5%. Although this currently below the inflation rate that most countries are seeing, it signifies potentially challenging times ahead. It is very common that the pricing within healthcare increases at a slightly lower rate than other sectors, due to the way that purchases are made with longer term contracts that last multiple years. What this has meant historically, is that when inflation is rising rapidly in other sectors, it may take 12-18 months for its true impact to be seen in healthcare. This means that healthcare providers are having to change and evolve to minimize the impact. In the UK, the NHS were not given any additional funding in the spring statement to help them manage inflation, which means that they are going to need to find cost-cutting solutions, so they can get maximum value out of their spending.

Healthcare providers are not seeing their budgets increase to help minimize the effect of inflation. So, now more than ever, it’s important to eliminate wasteful spending. In the US alone, it is calculated that between 20-30% of healthcare expenditure is wasted. Forbes calculated this to be between $760 billion and $935 billion lost, due to administrative inefficiencies of the commerce between the industry’s stakeholders.

AI comes to rescue

One way to minimize the impact of inflation and improve procurement is to embrace AI and technology, and integrate data across the supply chain to bring visibility into the fast changing market dynamics. The use of AI in the healthcare industry has been growing at 40% annually since 2016 and early adopters of the technology are seeing massive savings. Despite the advancements in technology, many tasks today are still done manually, with procurement teams having to spend huge amounts of time running paper-based processes with little to no data available for making good decisions. This can be time consuming and unnecessarily expensive. It is estimated that 25-30% of all hospital/clinic/GPO expenditure goes on administrative costs. With such a large amount of spending going on administrative costs, healthcare providers are now having to look at ways to reduce the amount of time and money spent. AI is able to automate some of the manual processes so that resources can be used more efficiently and savings can be made. Additionally, AI can also help with organising the core data for sourcing and procurement teams to make smart decisions and with facts-on-the-ground being developed in real-time. Thus, although AI adoption in healthcare has previosuly lagged behind other industries, with the current volatile financial landscape, more and more organisations are pushing it to the forefront of their strategies. 

Healthcare providers have found that implementing a more centralised procurement process can improve efficiency, which results in an overall reduction in costs. However, this strategy can only deliver increasing value if there is a diversified mix of suppliers, such as through the use of localised sourcing. Since the pandemic, it has been the priority of healthcare organisations to improve the resiliency of their supply chain. This is so that they can try and prevent shortages like those brought about by COVID, with some even causing factories to close. Governments and organisations globally are now looking to use local suppliers, or introduce a diversified mix in their sourcing strategy. Centralised procurement teams, however, may not have the necessary data, contacts, and experience to be able to get the best deals; competitively priced and good quality, locally or across a wider supply-base. AI procurement platforms can support centralised teams, by showing them a variety of different suppliers in countries all across the world and using the data that they gather to match buyer requirements to the best available suppliers across the market. In this way, AI can be used to ensure that buyers are getting the best value for their money, while managing the supply risks in real-time. 

Send an email to simon.farrow@vamstar.io if you would like to learn about how Vamstar is helping to minimize the effects of inflation by providing an end-to-end platform for the industry. 

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