If you're involved in supply chain management or responsible for sourcing products for your operations, you're likely familiar with the striking image of 100 container ships anchored off the port of Los Angeles. While the surge in consumer demand that initially caused these backlogs has eased, it would be a mistake to assume that supply chain challenges have disappeared. In fact, according to Premier's latest 2023 Supply Chain Resiliency Guide, over 75% of healthcare and supply chain leaders anticipate that supply chain difficulties will either worsen or remain unchanged in the coming year.

These challenges encompass a range of issues, from shortages of critical products and the pressures of inflation to concerns about the availability and cost of labor. With supply chain challenges expected to persist well into 2024 it will take continued attention and proactive strategies to minimize the impact.

What is Causing Healthcare Supply Chain Problems?

Although the roots of today's supply chain issues trace back to COVID, the challenges healthcare organizations face today go beyond product shortages. In addition to supply limitations in certain product categories, issues including:

• Labor costs
• Labor shortages
• Supply costs

Create additional hurdles that impact care delivery. 

Labor Costs

Labor costs are continuing their upward trend. The increases, up 37% from pre-pandemic levels, are driven by a combination of the competitive labor market, as well as hospitals' reliance on more expensive contract labor to meet staffing demands. Although contract labor helped to fill some of the gaps created by staffing shortages, it had a bigger impact on costs, increasing by 258% over the last three years, with nursing the area that saw the greatest increase. 

Labor Shortages

COVID-19 worsened an already tenuous healthcare labor market. Since February 2020, hospital employment has decreased by nearly 94,000, with the average nurse turnover rate jumping to nearly 26% in 2022. In addition, the number of full-time equivalent (FTE) staff per adjusted occupied bed has gone down nearly 3% from pre-pandemic levels. This has occurred while the length of patient stay has increased by nearly 6% since pre-pandemic levels. These two trends mean fewer staff available to treat sicker patients.

Supply Costs

Supply costs, which according to McKinsey, account for 30% to 40% of a typical health system’s cost base, exceeded inflation growth by nearly 30%. Based on data from the American Hospital Association, supply expenses per patient rose by 18.5% and expenses for emergency services supplies, including ventilators, respirators, and other critical equipment, increased by almost 33%. 

Product Shortages

Since the pandemic, supply chain shortages worsened and continue to persist. For example, in the first quarter of 2023, there were 301 active drug shortages. In addition, there were critical shortages of other medical devices and supplies, including ligatures and oxygenators to stop bleeding, catheters for heart surgery and urology, and custom procedure trays and surgical packs. Further, inadequate supplies of essential raw materials, such as resins, precious metals, and gasses, are contributing to certain product shortages.

Steps to Minimize Supply Chain Challenges

While some supply chain challenges in healthcare also affect other industries, variations exist that require unique mitigation strategies. For example, Mike Rip, Director of the Master of Science in Healthcare Management at Michigan State University stated, “Healthcare is not based on supply and demand. It can’t be ‘stocked’ like it’s a traditional product. So, a hospital’s supply chain is very different from a business or company’s supply chain.”

In fact, healthcare systems comprise numerous interconnected points of care. Changes in one area can affect the need for supplies in other parts. Yet the complexities of these interdependent areas exceed those in other industries. An increase in the number of patients in Labor and Delivery create supply chain challenges different than an e-commerce company faces when promoting a new product. For example, when there are more patients in Labor and Delivery, it also affects pediatrics and neonatal care. The demand for patient wristbands extends beyond the maternity area, incorporating both pediatrics and neonatal. In addition, the type of product is different because adult wristbands won’t work for infants and preemies. Ultimately, ensuring the proper amount of supplies requires forecasting these interconnected events. 

Pool and Coordinate Resources

When fewer locations hold inventory, the amount of inventory necessary to meet demand decreases. This is true for multi-location health systems and even departments within a hospital which can significantly exacerbate shortages. Centralizing pools inventory and evens out the higher and lower demand locations.

Be Careful with Product Substitutions

Standardization efforts can lower costs and mitigate inflation's effects on hospital supplies, but they can fail if done without input from clinicians. If the care team uses unfamiliar or suboptimal products, it may raise error risks or negative outcomes. Such concerns might cause resistance or rejection of substitute items, limiting cost savings and straining relationships that affect future opportunities for cost savings. 

Alternatively, health systems that make no attempt to manage clinicians’ supply choices will perpetuate a cycle of highly variable, costly care. Striking the balance between costs and quality outcomes is key.

Further, if you are looking at a new product to mitigate costs, test before converting to a new item. Even products that seem like viable substitutes don’t always perform as necessary. For example, thermal labels enable numerous workflows within healthcare settings including admissions, labs, pharmacy and more. And like many supplies, label costs have increased with some materials in short supply. Unfortunately, alternative products billed as compatible may provide a lower unit cost but not perform as necessary. For example, labels are often applied in hot and cold temperatures. A label material without the proper application temperature will likely detach from the specimen or medication vials they are applied to, impacting processes in the lab and pharmacy. Also, a key element for accurate barcode scanning is label material opacity. A label without the proper opacity can cause a barcode to misread or not read at all. 

Both issues can cause a myriad of problems including extra steps for the clinical staff and patient safety challenges, so it’s important to do your research before switching from a proven product. 

The Impact of Process Improvements

In a tight labor market with wages trending upwards, standardizing certain product categories can result in process enhancements that boost productivity, maximizing the value of the patient care team. For example, consider the IV line and medication labels used throughout a hospital. These often have varying input formats leading nurses to interpret them differently. A common problem area is how to note date and time inputs. By standardizing these elements throughout the system, nurses’ tasks become smoother while compliance improves and patient safety is elevated. 

United Ad Label

Healthcare labels, though often overlooked, play a pivotal role in smooth operations. However, shortages and disruptions in label supplies can hinder care delivery. United Ad Label specializes in providing a reliable source for a diverse range of labels critical to healthcare facilities. Partnering with United Ad Label can prevent the possibility of label shortages that could disrupt patient care.