Top 10 Healthcare Supply Chain Trends to Watch in 2024
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Kara L. Nadeau, Healthcare Industry Contributor
Healthcare delivery is rapidly evolving, and the supply chain operations integral to this sector are transforming at an equally dynamic pace. The complexities of modern healthcare, compounded by unprecedented global challenges, have brought supply chain management to the forefront of industry priorities.
In this critical juncture, the insights of experts are invaluable. Members of the Global Healthcare Exchange (GHX) leadership team, share their predictions on the top 10 trends expected to significantly impact healthcare supply chain management in 2024.
Table of Contents
- Digital transformation
- Cybersecurity
- Artificial intelligence
- Mergers and acquisitions
- Non-acute care expansion
- Clinical integration
- Business model changes
- Health equity
- Strengthening the workforce
- Advanced automation
1. Digital transformation
A 2023 GHX survey of more than 100 healthcare leaders found nearly 70% of all hospitals and health systems are likely to have adopted a cloud-based approach to supply chain management by 2026, helping them to enhance decision-making, improve efficiency and agility, reduce costs, improve data security and privacy and streamline processes. GHX Senior Vice President of Strategy Chris Luoma shed light on the digital transformation trend reshaping healthcare supply chain.
“Digital transformation, including cloud ERP adoption, ERP and EMR integration, is critical to healthcare supply chain advancement in 2024 and beyond because it sets the foundation for all other areas of optimization the industry needs to achieve,” said Luoma.
“It drives greater process automation and efficiency, which impacts workforce management, and it strengthens supply chain resiliency through improved accuracy and less waste. It also means that every single digital transaction becomes a data point, which builds the foundation for analytics that are layered throughout all the other trends we are seeing.”
Luoma noted how moving to the cloud allows providers to not only extend supply chain capabilities to support the growing non-acute care footprint (another top 2024 trend), but also exchange information with trading partners in ways current systems can’t facilitate.
“Through digital transformation, and the alignment of manufacturer, distributor and provider data, healthcare supply chain stakeholders can more easily, efficiently, and accurately perform advanced analytics, including demand planning and forecasting to align inventory to case demand,” Luoma stated.
He noted how this level of digital data sharing means trading partners must extend their cybersecurity boundaries as healthcare has become a prime target for cyberattacks.
2. Cybersecurity
Cyberattacks on U.S. health systems and hospitals are growing in both volume and degree of impact. Just in the past month, a ransomware attack disrupted emergency services in hospitals across four states. This was quickly followed by another cybersecurity incident that forced a different health system’s hospitals to reschedule elective surgeries and procedures.
Healthcare supplier organizations face growing threats as well, with one leading medical supplier hit twice by the same ransomware attacker over the course of two months, forcing the company to take its ecommerce platform offline.
According to GHX Chief information security officer (CISO) Thien La, threats against the healthcare industry are increasing as cybercriminals become more sophisticated in their attacks.
“While some attackers case a wide net, spearfishing attacks are on the rise where the attackers target specific people, doing their homework and making their attacks personalized so the target will fall for it,” said La. “Deep fakes are happening all the time where attackers use AI to impersonate individuals so they can access confidential information.”
“AI is quickly becoming a tool in attackers’ arsenals to make it easier for them to act, but the technology is also becoming a defense tool for the healthcare industry to identify threats more quickly,” La added. (more on the AI trend next).
As La points out, some healthcare chief supply chain officers (CSCO) might question why they should be involved in cybersecurity when they are in the business of supply chain. La’s response:
“No matter the industry, if you are in the middle of a transformational project, for example, moving from data centers to the cloud, the one thing that can torpedo the entire effort is a poor cybersecurity. You can do every else right but if you do cybersecurity wrong, you will be graded an ‘F.’”
3. Artificial intelligence and machine learning
GHX Chief Product Officer (CPO) Archie Mayani described how accelerated adoption of cloud-based ERP systems over the past few years has resulted in the establishment of centralized, unified data repositories where technologies like AI and machine learning (ML) can flourish in healthcare supply chain.
“Supply chain leaders can leverage intelligent and dynamic inventory management analytics for backwards agility – predicting true supply chain disruptions and navigating through them,” she stated. “At the same time, they can facilitate upstream, value-based care by identifying clinically equivalent products to replace those on backorder.”
While there is growing talk around leveraging AI and ML in healthcare, Mayani stressed how GHX doesn’t “do technology just for the sake of doing it.” Instead, the company is thoughtfully integrating this intelligence into its solutions and rich data portfolio all in the service of building a resilient and optimized supply chain for its customers. Taking this approach, GHX is delivering truly meaningful insights and predictive, intelligent analytics for clinically relevant and supportive decision making.
“Automation of non-value added, administrative tasks and access to dynamic industry data and intelligent analytics powered by AI and ML frees up supply chain leaders and teams to focus on the most strategic and creative work to support organizational goals (e.g., value-based care, supply chain resiliency),” said Mayani. “It sets the foundation for the next stage of healthcare supply chain digital transformation and the benefits it brings from a cost, quality and outcomes perspective.”
4. Mergers and acquisitions
Merger and acquisition (M&A) activity among U.S. healthcare organizations is returning to pre-pandemic levels, with KaufmanHall reporting financial distress as a key M&A transaction driver. At the same time, M&A transactions among life science manufacturers have held steady, with KPMG expecting this activity to “pick up” in 2024.
Luoma noted how extracting the value of these transactions is top of mind for executives and supply chain can play a big role in that in terms of consolidating and maximizing resources and scaling operations. But the barriers to realizing this value are great as mergers on the provider side and mergers and divestitures on the supplier side can cause major disruptions to supply chain operations.
“When M&A activity occurs among healthcare organizations, supply chain leaders are tasked with reconciling disparate systems, processes, and data among the merged entities,” Luoma explained. “As organizations get larger, it becomes even harder to drive supply chain policy and decisions throughout the enterprise. The transition to cloud-based ERP systems and digital transformation of processes and data is helping alleviate this burden by making it easier for supply chain leaders achieve integration and drive standardization across the board.”
With industry consolidation expected to continue – or even increase – in 2024, healthcare supply chain leaders will be tasked with speeding the time to value according to Luoma. He stated:
“The pressures will increase as new entrants join the healthcare market – Amazon, Walgreens/Village MD, CVS/Aetna - with capabilities to deliver care more efficiently and cost-effectively all the way through to the patient’s home. Supply chain leaders will require additional solutions that enable them to integrate the operations of merged entities quickly and effectively. Digital transformation and automation are key to this transition.”
Luoma pointed to GHX Marketplace as a solution healthcare supply chain leaders can use to direct individual buyers to procure products on contract.
“So, when a supply chain leader of a major, multi-state IDN establishes a contract to standardize and drive savings, that decision is operationalized all the way through to the point of procurement to achieve the intended value,” he said in closing.
5. Non-acute care expansion
Care delivery continues to transition outside of the acute care hospital setting to less costly locations, including ambulatory surgery centers (ASCs), community clinics, down through to the patient’s home. M&A activity in healthcare is often focused on expanding care into non-acute settings, such as a health system acquiring a local hospital that has ASCs or an extensive network of clinics in its market.
At the same time, healthcare provider organizations and other stakeholders are engaged in efforts to improve health equity (another top 2024 trend) and provide preventative care for chronic conditions to keep patients healthy and out of costly and clinical labor restrained emergency rooms (ER) and intensive care units (ICU). This requires making it more convenient for individuals in underserved areas to access the preventative care they need, including supplies, drugs and nutrition.
While care is moving to these areas for all the right reasons, it makes the healthcare supply chain much more complex, as Luoma explained:
“For supply chain leaders under significant cost pressures with shrinking workforces (another top 2024 trend), how do they manage this new level of complexity from the contracting and procurement of goods to inventory management and replenishment and through to supplier invoicing and payment?”
According to Luoma, digital transformation is key to successful non-acute care expansion as it provides the ability for supply chain leaders to extend their systems and capabilities outside of the hospital. Not only that, real-time visibility and advanced analytics capabilities are critical to matching supply with demand to maintain needed inventory levels and avoid stockouts that disrupt care delivery.
For example, because ASCs typically do not have the storage space to accommodate a large volume of supplies, supply chain teams must be able to closely coordinate supply procurement and delivery to case demand.
Looking ahead, Luoma said that while models like hospital at home is still early in its evolution, supply chain leaders must start developing strategies and implementing technology solutions today to support this care model.
“To provide hospital level care to a patient in their own home, a healthcare organization needs to quickly get nursing care, equipment and supplies to that location,” he explained. “This requires a whole new skill and solution set among supply chain teams.”
Given the demands facing healthcare supply chain teams today when it comes to operations within a hospital’s walls, Luoma believes supply chain leaders will increasingly leverage resources in their ecosystem to facilitate the support of non-acute care delivery.
“Perhaps that is partnering with a distributor that can handle the logistics of supply delivery through to the patient’s home or contracting with local medical/surgical suppliers who can more quickly and efficiently supply items where they are needed in the community as opposed to one manufacturing its products on the other side of the globe,” said Luoma.
“Given our vast network of provider and supplier members and digital tools to connect these stakeholders and facilitate meaningful collaboration, GHX is prepared to support supply chain leaders as they transition to emerging care models,” he concluded.
6. Clinical integration
Fitch Ratings predicts U.S. health systems and hospitals will continue to struggle financially in 2024 because of “labor shortages and salary/wage/benefit pressure that is still compressing margins for a sizable portion of the sector.” Supply chain costs are rising as well, with Vizient forecasting a 2.9% estimated supply chain rate increase for January to December 2024.
Looking to the coming year, Kristin Motter, a strategic sourcing and value analysis consultant at GHX Lumere, sees greater integration of clinical data into supply decisions to help bolster more efficient and effective decision making for clinicians and their patients and greater efficiency and cost effectiveness in supply chain.
“Hospitals are bleeding money right now and need additional ways to increase efficiency and cost savings,” said Motter. “The big theme I have been hearing is the need for deeper technology integration that brings more evidence-based data into clinical workflows, and we have been working with our customers to help them achieve this. For example, through our physician level analytics (PLA), we analyze data from hundreds of procedures to evaluate differences in physicians’ outcomes and device cost per case for a given procedure.”
Motter also sees AI as a growing trend for clinical integration, especially for those healthcare organizations that have system connectedness and are establishing data lakes for clinical, supply chain and cost data.
“I don’t believe AI will replace clinical decision making, but I do believe it will help decision makers identify utilization trends and opportunities,” she commented. “I equate it to the baggage screening tools used in airport security. They highlight items that the TSA agents might want to examine for risks. The TSA agent then applies their own experience and expertise to how they use the information.”
“In healthcare, AI can quickly analyze vast volumes of data to surface insights, but it will be the human expert (e.g., clinician, supply chain professional) who decides how to act on the information,” Motter concluded.
7. Business model changes
Today’s supply chain leaders are challenged to navigate the new business model of value-based healthcare while still having to address the cost savings element that will always be part of their work. The C-suite is looking to supply chain leaders to support healthcare’s mission to serve patients with greater value (high-quality and low cost) at the same time they are struggling with inflation, cost pressures, workforce challenges and demands for greater resiliency.
“To support a healthcare organization’s broader clinical and financial goals, supply chain needs to become more of a real-time enterprise,” said Luoma. “Digital transformation and automation will continue to drive the real-time visibility and control supply chain leaders need to pivot quickly in the face of change and deliver information to clinical and financial stakeholders on demand.”
“For example, the financial impacts of COVID have forced many health system and hospital CFOs to transition from annual or quarterly forecasting to almost daily cash forecasting,” he added. “The ability for supply chain leaders to report on their operations to CFOs in real-time supports this new normal and can foster great collaboration between the two parties. The same is true of value analysis teams who increasingly look to supply chain for evidence-based and clinically relevant insights to inform their decisions.”
While there are many tools out there today that help supply chain leaders identify areas for savings, in this dual challenge environment, they need to understand the broader continuum of value-based care and the impacts of supply chain on cost, quality and outcomes according to Luoma.
“GHX provides insights into the levers supply chain leaders can pull to take costs out of their business while supporting today’s clinically integrated supply chain world - from logistics, contracting and inventory management to stock supplies for resiliency without excess costs and waste, all the way through to working capital management and driving efficiency in supplier invoice and payment processing,” he stated.
“We are uniquely positioned with advanced analytics to not only identify opportunities, but also guide supply chain leaders through the steps they can take to achieve their goals – changes in contracting, data management, inventory management, etc. - measure the impact of those changes and offer data-driven insight to support continuous improvement,” Luoma concluded.
8. Health equity
According to Deloitte, health inequity currently costs the U.S. $320B annually and is expected to balloon to $1 trillion in 2040 if the issue is not addressed. Healthcare supply chain can play a pivotal role in improving equity and reducing costs when health system and hospital supply chain leaders have access to actionable data and analytics on suppliers and their products.
Opportunities span a broad continuum - from a hospital sourcing supplies from a local supplier to support socioeconomic growth in their community, to leveraging outcomes data to direct value analysis teams to products that promote better outcomes with fewer costly readmissions.
GHX Senior Vice President of Communications & Corporate Sustainability Laura Dunbar noted that while some U.S. health systems and hospitals have prioritized health equity, many others struggle to make the case for investments in this area as they attempt to recover from negative margins.
“Looking ahead, I believe it will be regulations, reimbursements, and the growth of ‘payvider’ models that will bridge the gaps between the cost of health equity investments and the value that comes from making affordable, high-quality care available to all,” said Dunbar.
Evidence for progress on this front can be seen in the CMS calendar year (CY) 2024 Medicare Physician Fee Schedule (PFS) final rule, which finalizes separate coding and payment for several new services to help underserved communities, and The Joint Commission’s Sustainable Healthcare Certification Program, effective January 1, 2024.
Dunbar explained how health equity is a fundamental part of GHX’s vision to create a future where affordable, quality healthcare is possible – for all.
“From a product and services perspective, we are taking the lead from our customers and delivering solutions that make it easier for them to align their supply chains with ESG goals,” she stated. “As healthcare’s leading cloud-based supply chain network, we have an unmatched repository of supplier and product data that health systems and hospitals can use to make more sustainable, socially responsible, and financially responsible choices.”
9. Strengthening the supply chain workforce
While some progress has been made with rates of healthcare staff satisfaction and less burnout and turnover since the lows of COVID, Luoma noted how workforce issues are still top of mind when GHX speaks with its customers – not just frontline clinicians but also the supply chain workforce.
“When we look across demographics of the healthcare supply chain workforce there is a retirement wave coming,” he stated. “In many cases, supply chain leaders are not on backfilling tactical positions but rather engaging in digital transformation and greater process automation so their core teams can focus on meaningful operational, financial, and clinical improvements. As with the clinical side of healthcare delivery, they are seeking ways for their staff members to work at their top of their licenses – taking strategic, impactful actions instead of performing low-value manual tasks.”
Mayani noted how accelerated rate of innovation, including the application of AI and ML, is poised to change the healthcare supply chain workforce, stating:
“The VP of supply chain’s role doesn’t look the same as it did five years ago and won’t look the same in another five years. While strategic sourcing and securing the right supplies were the core components of the job back in the day, now it’s about leveraging intelligence to drive high quality outcomes at a lower cost.”
The GHX core platform is focused on supporting these efforts through process automation and the generation of actionable analytics. It alleviates supply chain teams from time and labor-intensive manual work – punching buttons, pushing paper, fixing errors - and deliver to them the insights they need to make strategic decisions.
One area opportunity to unburden supply chain teams from non-value-added tasks exists in pricing alignment, with Luoma explaining how it remains a significant challenge among healthcare trading partners today. He noted how approximately 18% of transactions across the GHX network have price exceptions that are very expensive and time consuming to fix – at a cost of anywhere from $20-$30 per exception.
“In response to our customers’ needs, we are investing in solutions to automate pricing alignment,” he stated. “It’s about catching a discrepancy, identifying the root cause, and addressing it before it becomes an exception as opposed to an army of supply chain staff members correcting hundreds of errors on the back end.”
10. Advanced automation
As the healthcare supply chain leaders face the challenge of deploying their limited working capital, Luoma predicts they will expand process automation into new areas of their operations.
“Whether because of resiliency needs or digital transformation, leaders are looking at next tier of opportunity to drive automation into the healthcare supply chain,” he stated. “This will continue as a trend because there are still many areas of highly people driven inefficiency today.
According to Luoma, consignment (implant) order and inventory management, which represents anywhere from 40-60% of a health system’s supply spend, is a target area for automation in the coming year. It is not just cost that is driving automation in this supply category but also the clinical labor and patient safety implications.
These items are typically managed manually by clinical staff outside of the ERP system. Selecting the wrong implantable device for a procedure or implanting an expired or recalled item can result in poor outcomes, adverse events, the need for revision surgery, and long-term complications.
Luoma said another early trend going into 2024 is collaboration among trading partners to extend automation from front end procurement through to back-end invoicing and payment, explaining the challenges faced by healthcare providers and suppliers today:
“There is still a great deal of human capital deployed for invoicing and payments in healthcare today and the technology exists to solve that. As we work with our customers to reimagine invoice and payment processes for all areas of supply spend, the adoption curve for automated solutions grows – and we believe it will continue to grow.”
Kara L. Nadeau
Healthcare Industry Contributor
Kara L. Nadeau has more than 20 years of experience as a writer for the healthcare industry, working for clients in fields including medical device/supply manufacturers and distributors; software, solution and service providers; hospitals and health systems; and industry associations.