Administrative Simplification for Healthcare Supply Chain Management

• Denise Odenkirk, Vice President, Supplier Sales

Learn how healthcare administrative simplification can help providers work more efficiently, reduce costs and improve patient care using strategies and technologies that minimize paperwork, turn data into actionable insights and improve collaboration.

Healthcare supply chains are complex systems that involve the flow of goods, services, and information between providers and suppliers. However, the administrative processes involved can be time-consuming and error-prone, especially when they rely on manual and paper-based methods with many inter-departmental hand-offs.

Administrative simplification aims to streamline healthcare supply chain management by leveraging the power of data, automation and standardization to reduce complexity, make data-informed decisions and build resilience. It is all about making it easier to do business.

Table of contents

• What is administrative simplification?
• Why is simplification important?
• The benefits of administrative simplification
• 4 strategies to reduce administrative burden
• The future of simplification for supply chains

What is healthcare administrative simplification in supply chains?

The processes required to procure an item upstream from a manufacturer and deliver it downstream into the hands of a clinician can be lengthy, complex and costly. Because stakeholders still manually intervene at many points in the healthcare supply chain, the administrative burden remains heavy.

However, healthcare organizations can no longer afford such inefficiencies in the current macroeconomic environment. In response, providers and suppliers are increasingly turning to digital supply chain solutions that can help to reduce costs and support patient care by simplifying and streamlining administrative processes.

💡Read more: Future of Healthcare Supply Chains: an In-Depth Analysis

Why is Simplification Important for Healthcare Supply Chains?

Healthcare administrative simplification offers many benefits for supply chains, providing opportunities for cost savings by reducing administrative overhead, eliminating redundant processes, and minimizing errors. Success would be having the end-to-end process be 100% touchless for the provider and manufacturer/distributor. It can also improve inventory visibility and traceability, preventing disruptions in the supply chain, and strengthen communication and collaboration among stakeholders for faster decision-making and response times.

Labor costs and chronic staffing shortages in healthcare

Hospitals and health systems continue to struggle with staffing shortages across the board and are increasingly turning to contract labor to fill the gaps, which comes at a significant cost. Research for the American Hospital Association (AHA) finds contract labor expenses are nearly 500% higher than pre-pandemic levels. Administrative simplification provides healthcare organizations with the technologies and tools to reduce and automate manual work managed by care providers, freeing up more time for patient care.

Mitigating supply chain disruptions and reducing costs

At the same time, healthcare organizations and medical supply manufacturers continue to battle supply chain disruptions, rising supply costs and shortages of materials and components.

"Because many medtech companies currently lack the ability to rapidly respond to sudden shocks to their supply chains, they’re often enduring higher operating costs. These supply disruptions may continue through at least 2023, so it’s critical to strengthen the resiliency and agility of the entire supply chain."

Supply chain fixes help medtech manage global headwind, PwC (Feb 2023)

Streamlining healthcare administration for supply chain processes can help healthcare organizations address both areas of shortages (staffing and supplies) and inform efforts to reduce costs for all trading partners.

The benefits of administrative simplification in healthcare

Simplifying the administrative burden in healthcare can also yield benefits for patients via their provider, freeing up more time to spend on care rather than paperwork, and ensuring the services and supplies are available.

Reduced administrative burdens: By reducing the manual processes and inter-departmental handoffs involved in procurement, inventory management, and documentation, healthcare providers can free up time and resources to focus on delivering quality care and support better patient outcomes.

Faster access to supplies and services : Automation and digitalization can enable faster and more efficient access to necessary supplies and services, such as medical equipment, medications, and other critical resources. This can help prevent stockouts, delays, or disruptions in the supply chain, ensuring providers have the right supplies at hand to deliver timely and effective care to patients.

Improved patient safety: Technologies that enhance supply chain visibility and traceability can reduce the risk of recalled or expired products making their way into patient care, and can also help tackle supply chain disruptions that could impact patient care.

Enhanced coordination among stakeholders : Improving communication and collaboration among providers, manufacturers, distributors, and regulators can support smoother supply chain operations, by enabling faster decision-making and more efficient communication of critical information, such as product recalls or changes in supply availability.

💡Read more: 4 Best Practices for Healthcare Supply Chain Optimization

Key supply chain strategies to reduce the administrative burden

Supply chain data, including inventory availability and product usage, is a critical aspect of healthcare administration and digital transformation has become a priority for many health systems and hospitals in the U.S. However, turning the vast amounts of data associated with healthcare supply chains into actionable insights requires reliable analytics. Central to any efforts around streamlining healthcare administration are:

• Integrated healthcare technology systems (e.g., enterprise resource planning [ERP], electronic health records [EHR], medical billing and coding).
• A centralized, digitized source of clean and enriched item and contract data that is continuously updated.
• Access to product substitution lists when there is a supply disruption.
• Robust analytics capabilities to drive change in today’s environment of value-based payments and healthcare reform.

With these in mind, here are four key strategies for healthcare administrative simplification to help drive supply chain optimization, lower healthcare costs and support better patient care.

1. Establish a source of truth for supply chain item data

Digitizing supply chain processes has been shown to reduce costs and boost revenue. But it also generates far more data than manual, paper-based processes, and the data itself is of limited value. What supply chain teams need are actionable analytics based on that inventory availability and product usage data.

The right digital tools for healthcare simplification can help establish a source of truth for the data points generated by digitized, automated processes. Healthcare organizations will benefit from technologies that are designed to continuously update and cleanse item data, maintaining its timeliness, accuracy and completeness while also knowing which items can be substitutes in case of supply disruption.

Using well-maintained item data as their source, supply chain leaders can generate actionable insights to guide their efforts aimed at reducing healthcare costs and improving patient care.

2. Automate the procure to pay (P2P) process

Many healthcare providers and suppliers prioritize the digitization of P2P processes because it presents significant opportunities for boosting efficiency and driving down healthcare costs through both hard and soft dollar savings.

A “touchless” P2P process enables purchase orders (PO), purchase order acknowledgements (POA), advance shipping notices (ASN), invoices and payments flow seamlessly via electronic data interchange (EDI) between providers’ and suppliers’ enterprise resource planning (ERP) systems. The benefits of touchless P2P orders include:

• Reduced manual labor, discrepancies, errors and rework.
• Improved accuracy in products and contract pricing.
• Lower the risk for backorders and supply shortages.
• Fewer non-value-added activities and reduced spend for providers and manufacturers/distributors.

3. Consolidate and standardize EDI orders

In an environment conducive to mergers and acquisitions, health systems that consolidate legacy EDI connections into a single connection within ERP systems can clear up the confusion of supplier duplicates, normalize and cleanse item master data and achieve greater P2P process automation.

An electronic price management tool can give supply chain teams access to real-time price validation, detailed purchasing reports and contract updates to help with more accurate contract pricing. With standardized order and contract management in place, the organization can onboard manufacturers with greater ease and efficiency.

4. Standardize and automate consignment and implant orders

Consignment and implant orders (e.g., bill only, bill & replace, waste only, requisition/replenish only orders) have typically fallen outside of standard supply chain processes for medical/surgical supply EDI transactions.

Today, health systems and hospitals are simplifying the procurement process around consignment and bill-only implant orders by standardizing the data elements being sent and sending them electronically via EDI via their ERP systems.

When standardized and automated these order types can be routed within 48 hours to sales representatives and to the manufacturer with additional data elements such as the sales order number and lot/serial numbers so that manufacturers can easily process the order.

💡Read more: Eye-opening Facts Increase Urgency to Automate Bill-only Implant Orders

The future of administrative simplification in healthcare supply chains

Financial pressures, outpatient care and clinical-supply chain integration are the top trends leading the drive for administrative simplification in healthcare supply chains in 2023.

Financial pressures driving change

With hospitals experiencing “razor-thin margins as the new normal” and experts predicting continued elevated labor and supply costs, healthcare executives are seeking creative ways to address margin pressures.

“Because the supply chain function oversees most of a health system’s external spend, which accounts for up to 40% of total costs, it is a clear choice for investment aimed at optimizing performance.”

McKinsey, Optimizing Health System Supply Chain Performance (Aug 2022)

In addition to traditional cost-saving methods such as negotiating contract pricing with suppliers, healthcare providers and manufacturers are increasingly turning to healthcare administrative simplification in the supply chain. This approach focuses on reducing inefficiencies and inaccuracies in the P2P process, which can free up labor, eliminate waste, and support more cost-effective patient care delivery.

Prioritizing clinical/supply chain integration

Healthcare organizations are under increasing pressure to deliver high-quality care at a lower cost, leading to a greater level of engagement between supply chain teams and clinical teams.

“The greater level of engagement is borne of financial necessity, in that clinicians understand the role they play in their organization’s financial performance.”

Chris Luoma, Healthcare Supply Chain 2023:

Collaboration and Innovation Will Be Key to Transformation (Jan 2023)

Simplifying healthcare processes through automation and digitization can enable organizations to access, merge, and analyze supply chain, clinical outcomes, and financial data to support these conversations.

Care continues shift to outpatient settings

Healthcare supply chain leaders are increasingly assuming responsibility for supply procurement and inventory management in non-acute settings, and streamlining healthcare administration in the supply chain is crucial to support a centralized approach to procurement and inventory management.

“The onset of the COVID-19 pandemic kickstarted a shift in patient behavior that continues today. Patients continue to seek more of their care away from inpatient settings.”

KaufmanHall, National Hospital Flash Report (Mar 2023)

Automating and digitizing processes through supply chain solution and ERP system integration with electronic health records and medical billing and coding systems can help healthcare leaders determine the total cost of care both inside and outside of the hospital, supporting more efficient and accurate supply chain management in non-acute care settings.

Key takeaways on administrative simplification

Healthcare administrative simplification provides a significant source of potential for supply chain management. By leveraging strategies and technologies that minimize paperwork, turn data into actionable insights, and improve collaboration, administrative simplification can help providers work more efficiently, reduce costs, and ultimately improve patient care.

Automation and digitalization of supply chain processes, along with robust analytics capabilities, are essential components of this approach and with the right technologies and tools in place, healthcare organizations are well-positioned to strengthen supply chain performance.

1.Healthcare administrative simplification can help providers work more efficiently, reduce costs, and improve patient care.

2. Simplifying administrative processes through data, automation, and standardization can reduce complexity, improve decision-making, and build resilience.

It truly is all about making it easier to do business. Key strategies include establishing a source of truth for supply chain inventory availability and product usage data, automating the P2P process, leveraging analytics for data-driven decision-making, prioritizing clinical/supply chain integration and building integrated healthcare technology systems, in lock step with your manufacturers and distributors.

Denise Odenkirk

Vice President, Supplier Sales