Annual Supply Chain Savings Missed by Hospitals Total $25.4 Billion

Rob Austin in HealthLeaders

Healthcare Supply Chain Analysis

Health systems across the country spent $25 billion more on supply chain operations than they needed to, representing a 10.2% increase compared to last year, according to a Navigant study.

The Healthcare supply chain analysis suggested proper supply chain spending would result in a 17.7% average expense reduction, totaling $11 million per hospital annually. That amount equals the annual salaries of 160 registered nurses or 42 primary care physicians.

In an era of shrinking operating margins and challenging revenue streams, supply chain costs are another aspect of the financial enterprise that hospital executives must address to ensure a stable outlook for the organization.

Healthcare Supply Chain Cost Reductions

Rob Austin, director at Navigant, told HealthLeaders hospital financial executives have a heightened awareness of the potential to save significant costs, but health systems aren't making a big enough impact due to underinvestment.

Through healthcare supply chain analysis, we know: "There's a huge opportunity to reduce supply costs, the second-largest costs for a health system behind labor, but [executives] need to do a few specific things," Austin said. "[Executives] have to engage clinicians, focus on data, and have more people professionally trained in the supply chain. For a CFO to invest in supply chain, [they need] a supply chain leader who has a vision and skills, sometimes [from] outside of the industry, that they can apply to healthcare."

Austin added that the systems he has analyzed with the most effective and efficient supply chain operations have implemented strategic initiatives to hire educated employees from outside of healthcare to get new ideas on how to streamline the process for the system.

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