Local production, living stockpiles part of effort to secure hospital supply chain

• The supply chain for PPE is getting a makeover as a result of the pandemic
• Providers are being creative in how to ensure a supply of PPE when needed
• The effort is unlikely to attempt to bring a large amount of the supply chain onshore

The pandemic-induced movement to pull the healthcare supply chain closer to the U.S. rolls on, experts say, mainly in the sourcing of personal protective equipment.

Hospitals and health systems, with assistance from purchasing organizations, distributors and governmental units, are making progress in creating private PPE stockpiles and seeking production of PPE closer to their facilities, as well as continuing to support increased production of generic pharmaceuticals in the U.S.

Efforts to ensure the flow of PPE in a time of crisis or a disaster has gotten a lot of attention and positive results, experts say.

“This is a problem we’re actually solving in a good way,” said Dan DeLay, system senior vice president, supplies and services resource management for CommonSpirit Health.

That’s an encouraging development given the news that the federal Strategic National Stockpile reportedly has less than 7% of targeted levels, according to Politico.

Moving even a small amount of the massive hospital supply chain onshore will require significant changes to purchasing procedures and approaches. The Association for Health Care Resource & Materials Management estimates that $106.8 billion was spent on supplies in 2019, and $62.3 billion was spent on pharmacy supplies, based on data from 3,300 hospitals surveyed by parent American Hospital Association.

Multiple approaches

A variety of tactics are being employed by providers.

“People are relooking at inventory levels that they had, where they’re sourcing them from and the inventory levels that are held there,” said Todd Nelson, FHFMA, director, professional practice & partner relationships and chief partnership executive with HFMA. “They’re looking at creative ways to partner with distribution and manufacturing to make sure that there is a backup plan for supply acquisition.”

A major focus at Ohio State University Wexner Medical Center, Columbus, is working to ensure its supply chain is resilient enough to withstand a COVID-19 pandemic-like crisis. Hal Mueller, chief supply chain officer for the medical center, said OSU Wexner has been working closely with its group purchasing organization and distributor to boost its supply of PPE through various means. Among them, the medical center is piloting an effort to acquire gowns that are washable and masks that can be used longer, which has the side benefit of being more sustainable, Mueller said.  

At the same time OSU Wexner looked at improving the efficiency of its internal purchasing processes.

“We have put in improved inventory management systems, and we put in improved distribution mechanisms for tracking within our organization as far as what was delivered to whom and if it’s an extremely hot commodity,” Mueller said. “We even had processes by which we knew to the person who was receiving what.”

Emergency stockpiles, a problem area in meeting volume or quality needs in many regions during the pandemic, have gotten attention in the meantime. Karen Conway, vice president of healthcare value for GHX, said the improvement in in the management of stockpiles revolves around converting them to shared or living stockpiles. Generally working with a distributor, systems share the stockpile so not everybody has to invest in separate warehouse space. In addition, the stockpile is designed to be actively used to keep the supplies fresh.

“What we can do is make sure that we’re rotating stock, because what we saw with the national stockpile was there was product that had been sitting on the shelf and it expired,” Conway said.

A side benefit to the localization of PPE supplies is job creation, and state and local governments are working to encourage that, experts said. But there are limits to how much of the massive supply chain can be brought back to the United States. As CommonSpirit Health’s DeLay noted, bringing all that production onshore couldn’t be supported by the current manufacturing infrastructure, and even if it could, the production would likely run into environmental problems.

But DeLay also said CommonSpirit received an unexpected bonus from its diversity program suppliers, which had access to different channels from its standard suppliers. “It actually diversifies your supply chain by having diverse suppliers,” he said. Spending through its diversity suppliers climbed 258% as a result of the pandemic.

Generic drugs

The work on boosting the PPE supply chain complements existing efforts by providers to produce generic drugs onshore. Organizations like the provider-driven Civica Rx, which recently signed on Anthem as a partner, and Premier ramped up their work to limit drug shortages in response to pandemic-related disruptions.

“The public health emergency shined a spotlight on the need to diversify the supply chain for the various generic drugs that are vital to the core services hospitals provide,” wrote Joseph J. Fifer, FHFMA, CPA, president and CEO of HFMA, in a recent column. “Leaders should take action now to identify strategies and solutions for their organizations.”