Transforming Healthcare Supply Chains with Cloud-Based Solutions

• Kara L. Nadeau, Healthcare Industry Contributor

70% of health systems are likely to have adopted a cloud-based approach to supply chain management by 2026. Why the rapid pace of cloud integration? What steps must supply chain teams take to prepare for SCM cloud computing? What are some common cloud integration challenges? And what benefits can they derive from cloud integration solution deployment? We explore the answers to these questions and offer real-world cloud integration success stories from U.S. health systems and hospitals in this post.

Table of contents

1. Overview: Cloud-based supply chain management for healthcare
2. Advantages of cloud-based supply chain operations
3. Cloud transition recommendations for healthcare
4. Cybersecurity and compliance in the Cloud
5. Case studies on healthcare cloud adoption

Defining Cloud-Based Supply Chain Management

With the goal to operate more efficiently and effectively and reduce costs and waste, the healthcare industry has steadily evolved its supply chain management (SCM) technology over the past three decades from materials management information systems (MMIS) for order processing and inventory management to on-premise (“on-prem”) enterprise resource planning (ERP) systems that automate both materials management and financial operations.

The next phase of this information technology evolution is cloud-based healthcare supply chain management, with hospitals rapidly transitioning to cloud-based ERP systems as evidenced by this 2023 GHX Cloud Survey. The move comes alongside the shift to cloud-based technologies for electronic health record (EHR) management, data management and cybersecurity.

Unlike on-prem systems that require the healthcare organization to spend time and money into ongoing hosting, maintenance, upgrades and other IT team support, the cloud ERP system provider assumes this responsibility by hosting the software in the cloud. That way, the healthcare organization always has the latest software version available, with immediate updates and security protection, without the need for heavy IT involvement or investments.

A significant benefit of transitioning to cloud computing is the ability of cloud-based solutions (ERP, EHR, SCM) to seamlessly integrate and share data with one another. This is sharply opposed to on-prem systems that are typically designed to be “closed systems,” meaning they are incapable of connecting and communicating with each other. Cloud integration enables greater process automation and less manual intervention resulting in greater efficiency and accuracy.

In an industry where big data and analytics have increasingly become a critical component of decision-making, the transition to cloud is enabling the healthcare supply chain teams to establish clean, comprehensive data foundations on which to perform advanced analytics.

Given these benefits, cloud integration solutions are quickly becoming a new standard across the healthcare industry, impacting nearly every domain, including SCM.

Advantages of Shifting to Cloud-Based Systems

When asked about the benefits of transitioning to the Cloud for SCM, health system and hospital leaders whose organizations have adopted cloud computing reported a number of clear advantages:

1. Streamlined supply chain operations

2. Reduced costs

3. Improved data analytics and reporting

4. Better supply chain decision-making

5. Enhanced security

6. Fewer manual supply chain tasks

Source: Modernizing the Healthcare Supply Chain Through the Cloud, GHX Survey (2023)

Enhanced Efficiency and Flexibility

Cloud computing in healthcare system SCM operations supports enhanced efficiency by automating and standardizing processes as well as data capture and integration, thereby reducing manual intervention and the risk of errors (and related rework).

Because cloud SCM SaaS applications are limitless in their scope, compared with on-premise systems with a specified number of designated users, they are flexible to accommodate healthcare organization growth. Furthermore, cloud services can be accessed anywhere, including from smartphones and tablets, offering teams unprecedented flexibility and access.

While SCM teams with on-premises systems are challenged to perform their tasks when working remotely, those with cloud computing solutions can maintain operational continuity, including supply procurement and management, to support patient care.

Commenting on the visibility and flexibility provided through the transition to cloud ERP, Jack Koczela, Director of Supply Chain Services at Froedtert Health stated:

“The fact that I can now check the status of a PO anytime, anywhere is pretty exciting. It’s interesting to have that kind of power from the Cloud. Would we do it again in supply chain? Yes, absolutely in a heartbeat. We still have some things to work out, but the system we have now is an order of magnitude more powerful than what we had before.”

Improved Data Management and Analytics

“Cloud providers help companies address supply chain disruptions and sustainability goals by releasing the power of data and putting this data in the hands of a digitally skilled supply chain workforce. To be more resilient, a supply chain must improve both supply and demand side visibility.”

How the Cloud boosts supply chain innovation, Accenture, 2022

In a cloud-based SCM environment, where the healthcare organization’s cloud ERP, medical records and financial systems are integrated, data transmission happens in real-time, and the data is continuously updated and synched between systems. This enables supply chain teams to perform advanced analytics and make data-driven decisions.

Cost Reduction

Unnecessary costs abound in manual supply chain operations, including the cost of human intervention in procure-to-pay (P2P) transactions, inventory management and strategic planning activities (e.g., demand planning and forecasting). Cloud computing supports process automation, minimizing human intervention, which can lower labor costs.

For example, inventory management software that integrates with ERP and EHR systems can greatly enhance visibility, reduce spend and help prevent waste. When hospital supply chain teams can seamlessly track and manage items through automated inventory management, and capture and store data in the ERP system, they also have the power to generate actionable insights that can optimize operations.

Strengthening Supply Chain Resilience

Enterprise-wide visibility into and control over supply chain processes is critical to strengthening resilience in healthcare services. In manual, on-premises environments, disparate systems and data silos prevent SCM leaders from gaining real-time visibility into the order process and inventory management, which in turn limits their control, including the ability to identify and address issues that arise (e.g., back orders, shortages, etc.).

In a cloud-based SCM environment with system integration and data sharing (supply and patient records), SCM leaders have immediate visibility into P2P processes and supply inventories throughout their organizations, as well as access to advanced analytics on which to make proactive, data-driven decisions.

For example, if the supply chain team knows a primary supplier’s items are on backorder and one of its hospitals is running low on these items, with visibility to inventory across all the other hospitals in the health system’s network, the team can determine whether it can shift items from one hospital to another to balance supply with demand and mitigate a shortage–benefitting healthcare providers and their patients.

Cloud Transition Recommendations for Healthcare

Selecting the right cloud partner can help hospitals and health systems achieve maximum benefits from the move, including enhanced data integrity, advanced data analytics and reporting, reduced costs, improved efficiencies and stronger data security.

Organizations that are preparing for the transition should look for a cloud partner with supply chain expertise and solutions that support a broad range of supply chain management capabilities. Some key capabilities to consider include:

• Process automation
• Analytics and reporting
• Supplier/supply chain risk analytics tools
• Demand forecasting tools
• Value analysis and strategic sourcing tools
• Integrated business planning

6 Steps for Successful Cloud Implementation

Based on its collaborative work with Infor, Oracle and Workday to help ensure smooth transitions to cloud ERP, GHX has developed this short list of 6 steps to help prepare for the move:

1. Start planning early and create a cloud computing strategy that identifies reliable data sources, automates data management and includes good data governance.

2. Restructure existing processes to match the new technology and eliminate as many manual tasks as possible.

3. Secure a reliable item data foundation for cloud computing: A source of truth for every item and its attributes.

4. Drive collaboration by bringing together the right people and processes—choose vendors that will be good strategic partners.

5. Prioritize change management for smoother adoption and to get users on board and ready for go-live.

6. Set metrics and KPIS to measure success and identify ways to capture deeper process and cost savings upfront.

Cybersecurity and Compliance in the Cloud

Cybersecurity is front of mind for healthcare leaders, with a 93% increase in large breaches and a 278% increase in breaches involving ransomware. Fraud is another major concern, especially in the age of AI.

Digital cloud services for SCM with security measures can help safeguard operations, data and patients by automating procure-to-pay (P2P) transactions, eliminating paper payments, and validating vendor compliance with local, state and national policies and requirements.

For example, 73% of the GHX Survey respondents who have transitioned to cloud-based SCM said the move has improved data security and privacy, which is essential to compliance with the Health Insurance Portability and Accountability Act (HIPAA) and patient privacy.

Here are some ways cloud-based supply chain systems can help and what to look out for when assessing vendors for this service.

Reducing fraud risk: Automated, digital payments from healthcare organizations to their suppliers made within a cloud-based SCM ecosystem can eliminate the need for paper checks and associated fraud risks.

Adhering to regulatory standards: Automatic flagging of companies that fail sanction screening at the purchase order (PO) transaction level within a cloud-based SCM P2P environment can help organizations avoid fines, penalties, and reimbursement denials, as well as the business risks of being associated with disreputable vendors.

Robust encryption methods ensure that sensitive information remains confidential, even if intercepted during transmission or in the event of unauthorized access to storage.

Regular compliance audits of the IT system help identify vulnerabilities, assess compliance with security standards and regulations, detect unauthorized access, and ensure proper data encryption and protection, thus mitigating potential threats, and safeguarding sensitive patient information from cyberattacks.

Case Studies: Successful Cloud Adoption in Healthcare

Want real-world examples of U.S. healthcare systems and hospitals that have made the cloud ERP transition with support from their cloud service providers and GHX? Gain best practices and lessons learned from these six cloud integration project success stories featuring multiple cloud providers.

El Camino Health: Seamless Integration Between GHX and Workday

El Camino Health shifted from a legacy PeopleSoft ERP system to Workday cloud ERP system in eight months, trained the entire end-user population and seamlessly and successfully integrated to GHX. Hear how they achieved an error rate of less than 1% and stabilized all EDI integrations within the first few days of production in this short interview.

Lurie Children’s Hospital: EDI-ERP Cloud Integration to Mitigate Supply Chain Risks

Lurie Children’s Hospital improved supply chain resiliency by building cloud integration between GHX and Workday, maintaining data integrity, utilizing report data and launching value analysis support for clinicians. Hear how incorporating technology helps make operations more agile, unlock greater visibility in Workday with EDI advance shipping notifications and ways to improve managing substitutions here.

UChicago and UW Health: Oracle Cloud Implementation Lessons Learned

University of Wisconsin (UW Health) was a very early adopter of Oracle’s cloud ERP system (fall 2019), and UChicago Medical Center implemented the system in 2022. In this on-demand GHX Summit presentation, leaders from both organizations share best practices and lessons learned for transitioning to cloud ERP. Access it here.

Froedtert Health: A Fast and Effective Cloud ERP Go-live

Find out what steps Froedtert Health took with its healthcare business and data automation solutions provider GHX to make its cloud ERP transition “smooth as butter” in the words of the health system’s Director of Supply Chain Services Jack Koczela. Read the case study.

Wider Adoption: The Path to Cloud Optimization 

With mounting pressure to reduce costs and improve efficiencies, adopting cloud-based technologies for supply chain management can provide significant benefits. While the shift entails an upfront investment in both costs and resources, hospitals and health systems that have made the move report positive outcomes.

As more organizations implement cloud technologies or supply chain management over the next two years, industry attention will shift from the cloud transition to cloud optimization. More hospitals and health systems will begin to explore advanced supply chain management capabilities—including AI, machine learning, value analyses, and demand forecasting—to maximize the impact of cloud adoption.

In the future, supply chain leaders in healthcare expect more benefits to come from cloud optimization as more health systems adopt cloud-based SCM, including

Better and more timely insights into supply chain optimization opportunities across the enterprise driven by enhanced data integrity, analytics and accessibility.Enhanced supply chain resiliency supported by better substitution processes and a more diverse supplier base.Improved strategic sourcing powered by access to more reliable data that reveals the best products and partners for the organization. Greater clinical standardization delivers better visibility into product efficacy in support of better patient outcomes

FAQs on Cloud Solutions for Healthcare Supply Chains

Q: How are cloud-based solutions transforming healthcare supply chains?

A: Cloud computing is revolutionizing healthcare SCM operations, seamlessly integrating systems, automating processes, driving staff efficiency and productivity, supporting scalable growth, and providing SCM leaders with immediate visibility and advanced analytics for proactive, data-driven decision-making.

Q: What benefits do cloud-based systems offer to healthcare providers and patients?

A: With visibility to enterprise-wide SCM processes and inventory, and access to actionable analytics, a cloud-based SCM environment helps SCM leaders make informed decisions to support patient care continuity and safety in healthcare services. This supports the healthcare industry's goal to deliver higher quality, more cost-effective care.

Q: What steps should healthcare organizations take to transition to the Cloud?

A: Healthcare organizations transitioning to cloud ERP should start by planning early, and establishing a digital health data quality strategy that prioritizes reliable data sources, automates data management, and enforces good data governance. They should restructure existing processes to align with new technology and foster collaboration with strategic vendor partnerships. Additionally, prioritizing change management, setting clear metrics, and identifying opportunities for upfront process and cost savings are crucial steps to ensure smoother adoption and readiness for go-live.

Q: How do cloud-based solutions enhance data security and compliance?

A: Cloud integration enhances digital health data security and compliance by offering advanced cybersecurity measures to counteract the increasing frequency of cyber threats by eliminating paper payments, flagging non-compliant vendors, regular audits of the cloud computing technology and more.

Q: Can small healthcare facilities also leverage cloud-based supply chain management?

A: Healthcare organizations of all sizes, from large IDNs to small community hospitals can leverage cloud-based SCM and digital health data analytics, as evidenced by the case studies in this post.

Q: What future innovations can we expect in cloud-based healthcare supply chain solutions?

A: Healthcare systems and hospitals with automated workflows and cloud-integrated data sources are well-positioned to harness cutting-edge digital technologies like AI, machine learning (ML), and natural language processing (NLP) for digital health data analysis. 

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.