LUGPA Policy Brief: Strengthening Healthcare Supply Chains for Independent Providers

Oct. 2024

In the wake of the COVID-19 pandemic, healthcare supply chains have been exposed to unprecedented challenges, including inflation, geopolitical tensions, and natural disasters. For independent medical providers, such as urology practices, maintaining a resilient and reliable supply chain ensures patient care continuity and effectively manages operational costs.

Supply chains are pivotal in ensuring medical providers have timely access to the necessary drugs, devices, and supplies to provide high-quality care. For independent providers, the efficiency and reliability of supply chains can impact everything from patient outcomes to financial sustainability. Disruptions in the availability of critical medical supplies can lead to costly workarounds, increased prices for alternative products, or even delays in patient care.

Independent practices often lack the negotiating power of large health systems and are vulnerable to price fluctuations and shortages. Addressing these vulnerabilities is essential for sustaining high-quality, cost-effective care.

The pandemic has starkly revealed many weaknesses in healthcare supply chains, pushing providers to rethink their supply management strategies urgently. Before COVID-19, just-in-time inventory practices were common, allowing providers to minimize costs by maintaining minimal stock. However, the pandemic exposed the risks of this model, with shortages of essential supplies like personal protective equipment (PPE) and drugs becoming widespread.

In response to the pandemic, supply chain strategies have significantly shifted. Providers are now focusing on de-risking supply chains by diversifying suppliers, increasing inventory levels, and enhancing coordination between supply chain managers and clinical staff. The emphasis is no longer solely on cost-cutting but also on resilience and adaptability to future disruptions.

Current Issues Facing Providers

1. Drug Shortages: Persistent drug shortages have forced providers to seek more expensive alternatives or stockpile inventory, increasing costs.
2. Overnight Shipping Costs: Managing emergency inventory often requires costly overnight shipping, placing additional financial strain on practices.
3. Data Shortages: Limited access to real-time supply chain performance data hinders decision-making for efficient procurement and risk mitigation.
4. Lack of Integration: Disjointed supply chain systems across healthcare organizations lead to inefficiencies, wasted products, and higher costs.
5. Physician Preferences: Expensive physician-preferred products reduce profits and may affect the cost-effectiveness of care.
6. Poor Workflow Design: Disconnects between procurement and clinical functions create inefficiencies in supply chain management.
7. Hidden Costs: Fluctuating prices and quality downgrades contribute to unexpected expenses for providers.

Proposed Reforms and Policy Solutions

Efforts are underway to address the vulnerabilities in healthcare supply chains, including legislative actions to reduce reliance on foreign suppliers and increase domestic production capabilities. Key reforms include:

1. The Medical Supply Chain Resilience Act: This bipartisan legislation aims to establish a modern medical supply chain that supports U.S. healthcare needs. It empowers the U.S. Trade Representative to negotiate trade agreements that reduce reliance on foreign suppliers and promote trusted trade partnerships.
2. White House Executive Order on Supply Chain Resilience: This order calls for a comprehensive review of critical industries every four years and outlines strategies to strengthen domestic manufacturing, critical infrastructure, and workforce capabilities to reduce supply chain vulnerabilities.
3. Private Sector Initiatives: Health systems and manufacturers are investing in technologies like data analytics, supply chain management software, and improved communication networks to enhance supply chain visibility and responsiveness.

Recommendations for Providers

To mitigate risks and improve supply chain resilience, independent medical providers should:

1. Develop Risk Management Strategies: Use multi-tiered supplier analyses to better understand your supply chain and identify weaknesses.
2. Enhance Supplier Relationships:  Move to build strong relationships with suppliers to ensure you always have essential products and manage risk well.
3. Leverage Technology: Invest in data analytics and real-time reporting tools to boost supply chain performance and guide decisions.
4. Collaborate Across Functions: Involve clinical and operational teams in supply chain choices to meet organizational goals and streamline workflows.
5. Advocate for Policy Reforms: Support laws that improve supply chain transparency, reduce regulations, and promote domestic manufacturing.

A strong healthcare supply chain is crucial for independent providers to thrive. Ongoing reforms and better risk management can help prevent disruptions and ensure consistent, high-quality care. Independent practices need to stay proactive in their supply chain planning and support policies that boost stability and efficiency.