Supply chain issues costly for healthcare, Cardinal Health survey finds

Supply chain is the second largest expense for healthcare providers, accounting for $5 billion in annual waste.
By Bernie Monegain
08:29 PM
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Supply chain costs ranks second only to reimbursement problems as the issue top of mind for hospital executives today, according to a new national survey commissioned by healthcare services company Cardinal Health.

The supply chain is the second largest expense for healthcare providers, according to Cardinal Health, which also estimates $5 billion of annual waste in high-value medical devices alone.

[See also: 4 ways to high performing supply chain.]

The survey, conducted by healthcare data provider SERMO Intelligence, queried 150 hospital decision makers on supply chain issues. The majority of respondents indicated they were taking action to improve their supply chain with the goal of reducing costs.

Financial issues, drug shortages and efficiency of the organization were also listed by survey respondents as major concerns.

"This is an exciting time for healthcare supply chain management," Tony Vahedian, senior vice president and general manager of medical services and solutions at Cardinal Health, said in a statement. "We're seeing executives take action to improve and demand more value from their supply chain. They recognize that maintaining status quo in their systems is no longer enough due to the ever-increasing cost pressures in the industry."

[See also: Amazon model for supply chain service.]

However, the survey also showed that few hospital decision makers are confident in their supply chains' overall effectiveness today.

Only a third of respondents rated the management of their hospital's supply chain as "very effective." Yet, two-thirds said they strongly agree that improving the effectiveness of their supply chain would cut overall costs, increase revenue and lead to better quality of care.

At the same time, 85 percent of respondents surveyed said their health systems are working to identify or implement new ways to reduce supply chain waste and related costs.

[See also: Premier puts supply chain in the cloud.]

The survey claims that primary obstacles to improving supply chain management include the lack of a full, end-to-end view of the supply chain from manufacturer to patient, and low awareness of existing technology, such as automated solutions that use high-frequency RFID tags.

"Data and analytics can transform the healthcare supply chain into a strategic business asset, but solutions need to connect technology to everyday processes and make data visible," said Vahedian. "These solutions exist today, but they are not being adopted at a large scale in healthcare."

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