Procurement Industries

Healthcare Procurement Strategy for Cost Savings

Reading time:

10 min

Written by

Max Hoffenheins

Reducing Healthcare Operational Costs Through Procurement Management Software

The healthcare industry is the world’s largest industry in terms of budget, customers, and employees. In 1980, healthcare sector expenditure in the United States stood at about $250 billion. 

By 2010, about 30 years later, healthcare expenditures in the country reached $2.6 trillion. That’s up to 10 times the initial figures! Clinical service and hospital care costs made up roughly half of this amount. 

Results from one research revealed that supply chain costs account for up to 40% of the healthcare costs in some hospitals. By implication, plugging gaps in the supply chain and improving inventory can bring about significant improvement in healthcare costs. 

How to reduce healthcare costs with a procurement software

This post explains some of the challenges that drive up costs in the procurement process and how using procurement management software can help you navigate them better. 

Here’s an overview of what we’ll cover in this article:

  1. Common challenges that affect healthcare procurement management
  2. How procurement management software can help solve healthcare procurement challenges
  3. Leveraging Innovative Technology

Common challenges that affect healthcare procurement management

Procurement Software

Procurement management is arguably one of the most important aspects of supply chain management that can affect an organization’s performance in various ways. The challenges of managing the procurement process are even more pronounced in the healthcare sector compared to other industries. 

Here are a few of the common challenges that affect healthcare procurement management in several hospitals: 

  1. Overspending 

Wasteful spending is one of the biggest procurement problems in the healthcare supply chain. Growing inflation, scarcity of supplies, and inefficiencies in the supply chain can lead to a direct increase in costs. 

Consequently, businesses in the healthcare sector spend more than they should get the supplies they need. The absence of a streamlined system for managing suppliers further contributes to chaotic spending on healthcare supplies. 

  1. Costly logistics

Managing logistics for healthcare supplies can be difficult especially when there’s no centralized distribution management system. This not only leads to delivery delays but also increases logistic costs that may affect health service delivery and the bottom line. 

In addition to the direct factors that drive costs up, other indirect logistics-related factors that lead to wastage in the inventory process include transportation & storage. Even the cost of paper for managing procurement is a seemingly minute but very vital contributor to the high cost of the entire process. 

  1. Inefficient inventory management 

When the process of ordering, receiving, and distributing inventory is based on manual workflows, delays and bottlenecks are inevitable. This leads to inefficiencies in healthcare delivery and also drives costs up. 

Procurement Software

How procurement management software can help solve healthcare procurement challenges

Procurement Software

One would agree that adopting procurement software that automates many of the manual processes involved in managing tasks in the healthcare supply chain can solve many of the problems identified above. 

The following are some of the practical ways you can cut costs and improve healthcare procurement management by using an e-procurement software solution: 

  1. Greater visibility of the procurement process 

One of the ultimate benefits of adopting an automated system for managing procurement is that you get greater visibility into your procurement process. 

Procurement management software gives you a clearer picture of inventory availability, what’s being ordered, who you’re ordering from, and delivery timelines among other metrics. 

Maintaining a transparent supply chain this way also helps to keep all stakeholders in the loop regarding your procurement process. 

  1. Data and analytics 

Not only does procurement management software automate vital processes along the procurement supply chain, but it also tracks valuable data and can help report them. This helps you to get a better picture of where your inventory might be failing. 

Organizations that invest in smart procurement solutions like this can plan better, establish realistic budgets and make data-based decisions. 

  1. Healthy inventory levels

Every hospital has different needs in terms of the supplies or equipment they need. Inventory needs may also vary from one department to the other within the same facility. 

Using procurement software helps you to maintain healthy inventory levels across all departments in your health facility. With procurement software, you can set thresholds to determine when you need to reorder supplies and set optimal purchase quantities so you’re not ordering too much at once.

A healthcare procurement platform also allows you to unify inventory across different departments and combine orders for different orders to reduce order frequency. Keeping your inventory at an optimal level can also help reduce supply chain wastage and make your operations more efficient in the long run. 

  1. Better use of employee time

An inefficient inventory and procurement process creates bottlenecks in service delivery. Nurses often spend long periods searching for equipment and the supplies they need. This stands in the way of effective service delivery as healthcare workers end up wasting time on non-essential activities like this. 

Supercharging your procurement process with automated software ensures that every department or unit within your hospital has all the products they need at any given time and these products are fully accessible to them. 

Another effective way to increase staff productivity is to implement healthcare management software like Electronic Health Records (EHR), Medical Diagnosis Software and Hospital Management Systems (HMS), to name a few. 

  1. Avoid risks associated with supply shortages

According to a Cardinal Health supply chain survey, up to 40 percent of respondents said they have had to cancel a procedure due to a lack of supplies. This shows just how dangerous supply shortages can be in the healthcare delivery process. 

  1. Manage suppliers seamlessly

For many organizations facing high costs and other challenges in their procurement process, suppliers represent one of the most common weak links that jeopardize their procurement process. Your procurement software can also serve as a supplier management tool. 

This helps you to maintain a list of your most important suppliers and what you get from them. The supplier management tool also helps to evaluate the different suppliers based on how well they meet your expectations. 

Final thoughts 

The supply chain and procurement problems have even gotten worse in recent times, no thanks to the recent COVID-19 pandemic. Prior to this time, many hospitals and healthcare facilities did not have a fool-proof procurement strategy. The increased pressure on the healthcare sector and skyrocketing prices due to inflation further drove operational costs to staggering heights. 

However, by leveraging innovative technology such as e-procurement software, players in the healthcare sector can save costs significantly and close gaps in their supply chain. Consequently, smarter procurements will play a vital role in improving healthcare service delivery. 

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