ECRI Blog

ECRI’s Top 10 Health Technology Hazards for 2022 ranks supply chain shortages among the top three risks facing healthcare organizations. The ranking is for good reason: patient lives may be at risk if essential medical supplies and equipment are unavailable. This risk increases as global supply chain disruption continues to impact healthcare organizations. According to an October 2021 report on healthcare performance, at least 80 percent of hospitals reported supply shortages.

Shortages can stem from the impact of the pandemic, which has sometimes brought manufacturing to a halt. Others are the result of vulnerabilities in traditional supply chain planning, such as keeping limited amounts of products in storage and relying on fast delivery. Weather events and other force majeure incidents also play a role. Together, these create a cascade effect that causes many healthcare organizations to struggle to locate, purchase, and obtain supplies:  

• Raw material shortages increase prices and reduce output. For example, shortages of resin impact the availability of plastic and magnesium shortages affect the availability of aluminum – causing issues for manufacturers.
• Suppliers who rely heavily on offshore manufacturers that have been disrupted by the pandemic or global weather events need to find supplies elsewhere.
• Supply chain practices and other pressures reduced organizations’ stockpiles of critical supplies. “Just-in-time’ supply chain models, designed to reduce the need for physical inventory, are upended when products can’t be sourced or delivered on time.  
• Logistical challenges, such as ongoing trucking, shipping, and delivery issues brought on by the pandemic, delay delivery of critical supplies.  

We’ve all heard the idiom that one should “compare apples to apples; not apples to oranges. But what if you are not calling all of your apples by the name apple, or oranges by the name orange?

Or, here’s another way to think about it: Having mismatched data is like having an unorganized closet—you can’t find anything when you need it, you waste time searching, lose money in new purchases, and the closet gets messier as time goes on.

During the past year, we were reminded of the critical role that supply chain plays in clinical care and overall operations. While our industry has adapted and grown to weather the COVID crisis, now is no time to return to business as usual. The roller coaster ride has slowed, but not stopped; supply chain still faces tremendous challenges such as product shortages, geo-political implications, increased costs, longer delivery times, worker shortages, lack of transparency, and other inventory challenges. Consider the following:

The shortest distance between two points is a straight line—but when it comes to navigating your hospital’s value analysis process, has it ever been that simple? This is especially true when relying on a manual process to manage complex value analysis decisions, where the sheer volume of information, number of projects and need for collaboration can pull you in several directions at once.

Moving to an automated process can definitely save time; but streamlining information access and providing evidence-based data enables teams to make decisions more quickly. This can increase cost savings as well as the delivery of quality patient care. Here are three reasons to consider making the switch:

When Washington Adventist Hospital of Maryland hired ECRI Institute to provide equipment planning services for their new 170-bed hospital, they were in a financial bind. Their Certificate of Need (CON) budget for patient care equipment was only $33 million. But, after we completed detailed user group meetings, it was clear that the actual cost for medical equipment would be closer to $65 million.

Our client was not alone in getting caught in the CON budget squeeze. Currently, 35 U.S. states maintain some form of CON program—including all states east of the Mississippi, except Pennsylvania and New Hampshire. CON programs give the state government the power to determine whether there is a need for a new hospital or nursing home before it is approved for construction.

Purchased services are seen as the next great savings frontier in healthcare—and with good reason. Spend on purchased services accounts for approximately 30 to 35 percent of a hospital’s non-labor expenditures. Tapping into even a small portion of that spend can lead to significant financial savings. However, purchased services contracts are complex and the legal language can be difficult to understand. What seems like a competitively low price may actually result in unexpected charges and poor performance outcomes.

Over the past few years, I’ve worked with many hospitals and health systems on purchased services contracts and have seen my share of “the good, the bad, and the ugly.” What are some of the recurring themes? Some vendors bury language that is advantageous to their business. They omit key information and make performance management difficult for the hospital. While every purchased services contract is unique and every circumstance is different, it is possible to mitigate common traps and omissions that can lead to unexpected costs, poor performance, and no remedy when things go south.

Looking for service contract pitfalls to avoid? Check out my top three purchased services contract problem areas to gain the insight you need to improve the quality of services and drive savings across your organization.