Healthcare Supply Chain Challenges in the Post-COVID World

As the world begins to recover from the COVID pandemic, new challenges are emerging for the healthcare supply chain. Each day brings news of choked ports, out-of-place shipping containers, record freight rates, shutdowns, and other problems that cause disruption and defy easy answers. Hospitals are quickly running out of critical medical supplies and manufacturers are struggling to keep up with the rise in pent-up demand due to ongoing supply chain issues caused by the disruptions in the macroeconomic environment and the China shutdown. To ensure that hospitals have the supplies they need, we must devise a plan for managing the healthcare supply chain in a post-COVID world. Below we highlight the current challenges and potential solutions in more detail.

1. Supply chain is now a key focus of the C-suite across the buyer and the supplier organizations in healthcare

According to the KaufmanHal survey of the 2021 State of Healthcare Performance Improvement, a staggering 99% of hospitals reported having shortages across critical medical supplies. Additionally, eighty percent or more of respondents in the survey experienced supply shortages, saw significant price increases, and built up inventories of key items. 

Indeed, across major industries, including healthcare, McKinsey also reported that for the first time most CEOs have identified supply chain turmoil as the greatest threat to growth for both their companies and their countries’ economies – greater than the pandemic, labor shortages, geopolitical instability, war and domestic conflict.

It has become highly critical for hospitals and healthcare systems across the globe to identify historically challenging supplies and develop acceptable substitutes, if possible. Additionally, hospitals are looking to diversify and partner with several alternative suppliers to ensure that critical needs are met. 

The importance of good supply chain data and overall supply chain visibility is becoming a recurring theme in buyer and supplier contexts. Buyers across the healthcare industry are starting to spend more time in vendor management with a renewed focus on bilateral information sharing and data exchanges to understand the availability and overall stability across the supply chain. 

Moreover, within the EU, ensuring access for all Europeans to affordable, quality, preventative and curative healthcare is an objective set out in the European Pillar of Social Rights to be met by 2030. The EU has dedicated 37 billion euros of its Recovery and Resilience Facility to healthcare reforms. It will provide opportunities to improve primary care infrastructure, make the overdue investments in the renewal of medical technology and drive reforms towards the digital transformation of healthcare systems.

2. Procedure volumes are slowly ramping up, but the uptake in revenues is below expectations as suppliers are unable to fulfill the demand

According to the European Observatory on Health System and Policies, health systems in almost all countries are facing backlogs of care due to the postponement of non-emergency procedures during the COVID-19 pandemic. Delays in diagnosis and treatment now represent a significant barrier to access for many services. Clearing backlogs as quickly as possible will be critical for maintaining health gains achieved before the pandemic and avoiding increasing excess mortality. Barriers to access are, in many European Countries, among the major drawbacks towards Universal Health Coverage.

Once the pandemic receded and entered into a more endemic state, there was a strong expectation that procedure volumes would quickly ramp-up, leading to the overall recovery of the revenues across major segments. However, volumes remain suppressed across many of their service lines compared with pre-pandemic levels. Cardiology, cardiovascular, and orthopedic services have had the strongest recovery to full pre-pandemic volumes, which is attributed to delayed care. In many instances, patients are sicker than they would have been if they had sought care earlier in the pandemic, leading to increased length of stay (LOS) and costing hospitals more money to treat these patients. 

Indeed, discussions among the boardrooms of large hospital groups and a recent press release of a huge hospital system highlight that there will be significant CapEx layouts in the next few quarters. In Western Europe and the United States, especially, there has been a significant impact on the revenues of most suppliers due to a slow ramp-up in procedure volumes and the inability of suppliers to meet that demand. However, we believe there is a significant demand for elective procedures worldwide, which will slowly ramp up once supply chains get untangled. Moreover, hospitals are keen to expand ambulatory surgical centers, upgrade remote patient monitoring and management systems, and optimize workflows to reduce labor costs. Many hospitals are very much focused on improving staff productivity because of staff burnout, issues around retention and staff costs have risen so much that the business case to leverage technology to improve staff productivity has become very high.

3. Renewed focus on performance improvement and adapting to the new post-COVID world will require strategic realignment

Most hospitals and health systems likely feel that the COVID-19 pandemic has significantly eroded their performance improvement efforts. Expenses are up, waiting lists are long, supplies are short, and the end is not clearly in sight. 

We believe it is time for the senior leadership of these hospitals and health systems to rethink their approach to performance improvement. This will require rethinking the premise of cost reduction while maintaining control over all aspects of their operations. Indeed, organizations will have to risk giving up some control and find partners who can perform some of their functions more effectively and efficiently.

Resilience is more important than ever for hospital and health system leaders. They must be innovative and assertive in taking on costs in this incredibly challenging environment. They should calculate the full cost-reduction opportunity available to them if they pursued all available strategies to their maximum effect. With a complete understanding of what the health system could do, it will be much easier to quantify the impact of decisions not to pursue a specific opportunity and manage the degree of change required for the organization to achieve its goals. Resilience will help leaders navigate these challenges and emerge stronger on the other side.

At Vamstar, we are committed to partnering with hospitals and health systems across 100+ countries to ensure that with the help of real-time supply chain data and fully interconnected AI-based Exchange services, our hospitals never run out of supplies to ensure timely care delivery. To join our network, please reach out to me directly at praful@vamstar.io or our talented and experienced sourcing and procurement team at buyers@vamstar.io

COVID-19 | Healthcare Supply Chain | Hospital Backlog | Cardiovascular | Cardiac care | Healthcare Data | Artificial Intelligence | Value-Based Procurement | Medical Technology | Procurement Softwares | Machine Learning | Mitigate Supplier Risk | Medical Equipment | Forecasting Models