Procurement in healthcare

In this blog, we’ll explore common challenges that are impacting the healthcare sector and how procurement solutions can be integral in helping companies – from hospitals to medical equipment manufacturers – to overcome them.

Regulation for a reason

If you work in the healthcare sector, you know that regulation is everything. It’s there to help protect patient safety and improve public health. It also means that any of your organisation’s goals, such as efficiency, adding value, driving innovation, or building more sustainability into your supply chain, have to fit with regulatory frameworks first and foremost.

This can be a challenge – one that EU regulations have risen to meet in recent years with the introduction of updated legislation. We rely on medical devices and products every single day – from the humble plaster to in-vitro diagnostic devices. They need to be safe and incorporate the latest technology to ensure the best outcomes. These new rules tighten controls around medical device safety and effectiveness while fostering innovation and improving competitiveness in the medical device sector.

Luckily, procurement can play a major role in helping the sector overcome these challenges and unlock its full potential. First, let’s take a closer look at the issues healthcare organisations are facing…

Doctor using AR in a hospital — New EU regulations enhance medical device safety and effectiveness while simultaneously fostering innovation and boosting competitiveness in the sector.

What other challenges does the healthcare sector face?

The health sector is facing a number of unique challenges around global shortages, demographic change, and technological evolution. Let’s examine these in detail.

Persistent underinvestment

Across Europe, health spending is largely determined by political decisions, meaning coverage, services offered, and cost-sharing varies from country to country. While the average expenditure as a share of GDP was 10.9 percent in 2020, in Germany it was higher (12.8 percent) and in Luxembourg significantly lower (5.8 percent). A persistent underinvestment across the board, particularly in public hospitals, underscores the urgent need for efficiency and access to cost-effective procurement platforms.

Empowering digital healthcare

Most people have experienced the convergence of healthcare delivery and digital transformation on some level – from virtual doctors’ appointments to the use of robotics in surgical procedures. Elsewhere, the sector is relying more heavily on advanced technologies, like cloud computing, AI, and data and analytics to improve operations and streamline spending. Challenges remain around data protection, technology adoption and change management across organisations.

Fast pace of healthcare innovation

Scientific advances are seeing rapid change in health products – from vaccine developments and digital medicine delivery to personalised medicine and new hardware – transforming the way diseases are diagnosed and treated. These advancements raise questions around cost vs impact as well as regulation. As the EU’s rules regarding the safety of medical devices show, it’s important to have parameters in place that don’t impede future progress. In the EU regulations, a new device identification system has been included to help boost innovation in the sector. This will make big data sets available throughout the EU to support further research.

Demographic change

An ageing population means the pressures on health systems will continue to grow, but what about the people staffing them? Most European countries are facing a shortage of healthcare professionals (HCPs), a situation made worse during the pandemic. This is placing increasing strain across health systems, and not just on HCPs.
There’s a shortage of skilled staff in procurement too, impacting budgets and the ability to take a strategic approach. The future of work across the board needs to change – in terms of embracing automation, redefining roles and embracing flexible working where possible.

Building supply chain resilience

The Covid-19 pandemic laid bare the existing vulnerability and complexity of our public health systems, with supply shortages being a significant problem. The lack of personal protective equipment (PPE) was well publicised. Health systems were desperate to get their hands on whatever they could, which meant bypassing their standard procurement practices, dealing with unvetted suppliers, and paying significantly higher prices.
In the wake of the pandemic, health systems are still facing shortages. Supply-side dynamics, including inflation, logistical disruptions to supply, geopolitical impacts to raw materials, and disruptive weather events can all contribute to health systems struggling to get the supplies they need – both for business as usual and to plan for future large-scale or catastrophic events.

Decarbonising healthcare

The need (and legal requirement) for hygiene determines the reusability of many products in the healthcare industry. This, together with round-the-clock care, the use of air conditioning and refrigeration, and specialist medical equipment, mean the healthcare industry is responsible for around 4.4 of total CO2 emissions. That’s more than aviation or shipping, and the vast majority of these emissions (70 percent) are generated within the supply chain.
Taking a more sustainable approach should be seen as an opportunity to develop better products that meet high hygiene and functional standards, with cooperation between users and manufacturers key for this to happen. A reliable supply of more sustainable, clearly labelled alternatives also needs to be established.

How can procurement play a strategic role in tackling these challenges?

The procurement function has a central role to play in helping healthcare businesses to face these challenges. There’s even the opportunity to drive innovation too. Taking a more strategic approach is the first step, but why?

Healthcare organisations need the right products and items to ensure they have everything needed to provide care or manufacture vital medical devices. From those goods and services directly related to patient care to those associated with the everyday running of the business (like office supplies and IT services), what’s included depends on the organisation’s specific needs and goals. That’s its strategy.

Two doctors look at medical scans and analyse them — Healthcare is already highly technologised in many areas in order to provide patients with the best possible treatment - its potential is more about organisation.

An effective strategy can improve efficiency, avoid delays and ensure quality standards are met. It helps to maximise budgets and other resources, saves time and effort, and frees up staff to focus on higher-value work. It’s also future-proofed and resilient, helping to minimise the risk of market volatility and catastrophic events.

How can we make healthcare supply chains more resilient?

Firstly, healthcare organisations need to develop a clearly defined procurement strategy. While it’s not possible to prevent all impacts to your supply chain – geopolitical events, for example, cannot always be predicted – having processes in place that minimise risk and prepare for uncertainty can make a big difference. A holistic strategy that includes multiple suppliers offering the items you need can ensure you have easier access to products in times of scarcity.

For example, when it comes to supply chains for medical devices, optimising the supply chain should include:

Current supply chain analysis to properly understand the operations involved and identify areas for improvement
A strategic plan to manage disruptions, including inventory management and contingencies
Supply chain planning to understand the impact of any changes
Investment in visibility and analytics tools that can help businesses gain insights
Automated supply chain management systems to streamline efforts

Strategic sourcing should not be underestimated. Being more intentional in sourcing, with the organisation’s wider goals in mind is where procurement professionals can add real value. These decisions can impact operations, care delivery, patient populations and more, on top of financial outcomes.

A sourcing strategy takes into account supplier risk management, supply chain process optimisation, suppliers’ willingness to be transparent, their commitment to innovation and improvement, and what purchasing policies and contractual obligations are in place.

We’ve already touched on the importance of transparency. With greater visibility both internally and externally you can develop a much clearer idea of upcoming supply chain blocks and shocks, and what’s in your inventory. Internally, RFID2 bar-coding for critical and high-cost supplies and consolidating data across locations could help businesses better understand inventory levels.

Doctor collects important materials from the warehouse. — Having essential medicines and supplies in stock is crucial for the healthcare sector.

Tools that analyse this data can ensure procurement functions have the visibility they need to make decisions. Externally, having visibility over your suppliers’ stock levels and the length of any supply chain disruptions can help prevent shortages impacting your business.

This level of efficiency and transparency demands that healthcare organisations embrace digital procurement solutions. These tools can help procurement professionals and employees make better, more informed decisions that are aligned with business strategy.

Many healthcare companies buy high-quality single-use items and medical equipment through group purchasing organisations (GPOs), but procurement software helps them to take back control. It can automate processes, making it much easier to purchase from vetted suppliers directly, while reducing costs.

With Unite, for example, you can filter suppliers based on price or delivery time – or only pick those products that meet your sustainability criteria. It also provides the data-based insights and reporting features larger organisations need to understand purchasing trends and adjust strategy accordingly.

Revive with procurement

As one of the most highly regulated sectors, healthcare has more considerations than most when it comes to shouldering the challenges facing industries right now – from ageing populations, complex financing models and the cost of innovation to the scarcity of skilled personnel and the impact of climate change. Which is why it needs data-driven insights and strategic thinking to minimise risk and continue to provide high levels of care to patients.

Procurement is one area ripe for reinvigoration. By adopting a more strategic approach, healthcare businesses can better plan for disruption and lean on new technologies to increase efficiency, build resilience and keep costs down.