US hospitals 'waste $26bn on supply chain management'

18 November 2019

Unnecessary spending on supply chain operations and products cost US hospitals almost $26bn in 2018, it has been claimed.

Analysis carried out by consultancy Navigant on US hospitals found “wasteful spending” on supplies rose by almost 12% last year, an increase of around $2.7bn since 2017.

On average, hospitals had an opportunity to cut their supply expenses by up to 17.4%, around $12.1m in savings. This is equivalent to the average annual salaries of 165 registered nurses or 50 primary care physicians.

Navigant explored total supply costs from 2,127 hospitals including medical and implantable devices, medical, surgical and pharmaceutical supplies charged to patient care departments, and costs of supplies related to buildings and maintenance operations.

Rob Austin, director at Guidehouse, the parent company of Navigant, said: “Our analysis does not point to aggregate improvement in hospital supply chain performance, with high-performing supply chains widening the gap as others tread water or lose ground.

“It’s incumbent upon providers and suppliers, including pharmaceutical and device manufacturers and distributors, to attack these continually rising expenses to improve supply chain efficiency for all stakeholders, including patients.”

Navigant said hospitals should not lower quality of care to lower spending, but should leverage cost and quality data to reduce unwarranted variation.

It urged hospitals to increase standardisation of the products they buy or decrease the variety, to reduce costs. Integrating clinicians with supply chain, finance, and IT departments would also help standardisation efforts, as many clinicians still see conversations about cost as a potential threat to how they deliver care, it said.

“High-performing supply chains are establishing strategic partnerships with key suppliers to more openly share cost information and conduct joint product development. Such collaboration allows entities to move away from what has often been an adversarial relationship between procurement personnel and their health system’s suppliers,” Navigant said. 

Guidehouse MD Chuck Peck said: “Physicians and other clinicians understand the significant savings to be had in decreasing variation, and they’re as frustrated as any stakeholder by the lack of progress. Realising these opportunities requires supply chain leadership.”

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