How is covid-19 changing provider–supplier relationships?

The current pandemic continues to affect the healthcare supply chain continuum, such as by disrupting the flow of critical supplies and equipment such as PPE, ventilators, and masks. Due to the increased demand for critical supplies, providers are incurring additional costs as they work to meet the needs of patients and staff. COVID-19 has also changed the existing hospital–supplier dynamic by prompting changes to the vendor marketplace and raising questions about emergency stock management methodologies.

Global supply chain shortages along with the evolving supplier marketplace have caused healthcare providers to forge relationships with new vendors in the short term. COVID-19’s impact is also intersecting with other industry trends—system consolidation, shifting patient volumes, and changing expectations for vendors—and together these factors will encourage providers to look for additional support from vendors in the long term.

This post explores how some providers adapted themselves to changing supplier relationships and supplier management strategies providers need to consider for the future.

Providers navigating supplier management during COVID-19

In order to brace for the impact of COVID-19, many provider organizations both localized and diversified their supply management strategies. Mentioned below are a few strategies healthcare organizations in the U.S. adopted during COVID-19 to overcome supplier issues

  • Collaboration with new vendors: The pandemic has nudged organizations to look beyond traditional suppliers and partner with new vendors and suppliers. Shortages among conventional suppliers, an increase in demand for PPE and other critical supplies, the emergence of gray markets, and the FDA issuing Emergency Use Authorizations are some of the drivers that have prompted healthcare organizations to seek new vendors. In a case study published by HBI in July 2020, the assistant director of supply chain services at the Community Hospital of the Monterey Peninsula discussed how the organization managed new product sources during COVID-19. The organization followed a stringent process of vetting non-traditional suppliers by requiring them to submit for FDA approval and requesting supplies in advance of payment. The organization also brought in the expertise of stakeholders from infection prevention and clinical departments in order to validate the quality of supplies.
  • Adoption of self-reliant models: Hospital supply and drug shortages and CDC guidance on optimization of PPE and supplies encouraged healthcare organizations to implement self-reliant models. In a discussion with HBI, the senior vice president and chief pharmacy officer at University Health System mentioned drug shortage strategies adopted by the organization. The healthcare organization partnered directly with drug manufacturers and also installed a robotic system for manufacturing high-demand drugs. Another case study by HBI featured how Banner Health addressed PPE shortages during COVID-19. The organization established a task force for tracking the PPE supply chain and started reprocessing PPE using in-house sterilization processes. By implementing these strategies, the organization was better able to match utilization to inventory.

The future of provider–supplier relationships

With the current pandemic presenting new challenges in managing vendors, the provider community is looking for more long-term support from business partners. Healthcare systems need to consider the following supplier management strategies in the future:

  • Rigorous supplier selection: Providers need to implement a standardized protocol for supplier selection in order to provide seamless patient care. For this, organizations need to have strong category management practices in place. Along with category management, preparedness entails documenting critical services and a list of alternative suppliers. Leaders can pave the way for success by analyzing services and building contingency plans at the category level. 
  • Supplier transparency and communication: For continued streamlined business, supply chain leaders need to work with supplier stakeholders to achieve greater levels of transparency and deeper partnerships. In order to maintain emergency stock and advocate for changes to the national stockpile, hospital leaders may benefit by establishing open communication channels with suppliers to inform their efforts. Leaders also need to look for suppliers who can share their inventory and stock updates on a regular basis—increasing the importance of automation and predictive analytics. 
  • Future business aid: Supply chain leaders need to build a diversified sourcing portfolio including global and local suppliers. For this reason, the provider community will increasingly be looking for ways to collaborate with suppliers in identifying alternative sources of supplies, tracking metrics like burn rate, and having visibility into suppliers’ inventory.

HBI’s research team is working on a report on evolving supplier relations amid COVID-19. The report is aimed at helping supply chain leaders seeking best practices implemented by healthcare organizations to optimize supplier relationships, even during the ongoing pandemic. Stay in touch with HBI for more updates!