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For much of modern healthcare history, supply chain operations were treated as a necessary background function, focused on purchasing, inventory management and keeping clinical shelves stocked. Today, that model is no longer viable. Hospitals are operating in an environment defined by razor-thin margins, ongoing supply disruptions and growing scrutiny over costs.
Given that fact, supply chain systems in the modern world of healthcare are now seen as a mission-critical lever, directly influencing financial stability, clinical operations and organizational resilience.
“With the current environment we’re living in, we must review every single product, piece of equipment and service that comes through our organization,” says Chad Fleischer, VP of supply chain for University Hospitals.
What’s driving that shift isn’t simply the pursuit of lower prices. It’s the realization that supply chain operations drive nearly every part of a health system, from operating rooms and pharmacies to capital planning and executive-level decision-making.
The strongest hospital supply chains today are the ones that have developed enterprise-level governance structures, where “expense cabinets” are used to identify, prioritize and execute cost-saving initiatives across a system’s budget. This shift reflects a recognition that supply chain decisions are inseparable from the broader day-to-day operations of a hospital. Product choices influence clinical workflows, inventory practices affect waste and availability, and contracting decisions can have any number of long-term impacts.
“That level of visibility drives changes in practice or culture,” says Fleischer. “Nothing’s left off the table.”
When supply chain performance is regularly reviewed alongside labor and revenue metrics at the executive level, it fundamentally changes how decisions are made. Cost-saving opportunities that might once have been fragmented or siloed become visible across the organization. And more importantly, accountability increases, both for identifying opportunities and for ensuring that savings are actually realized and sustained.
Ultimately, the idea is to tackle an issue endemic to health systems, where many are able to identify opportunities for savings, but fewer can prove when and where those savings actually occur, and the difference increasingly lies in data validation and transparency. Systems that treat their supply chains as a top priority invest heavily in analytics that track compliance and performance after decisions are made, not just before.
Monthly dashboards, service-line reporting and spend analytics allow leaders to monitor whether contracted products are actually being used, and whether utilization has shifted as intended. That data doesn’t just stay at the corporate level —it’s pushed down to site and service-line leaders, creating a stronger sense of shared ownership for all involved.
Balancing Costs With Physician Preference
Few areas are as sensitive or consequential as physician preference categories. Devices, implants and surgical supplies often involve deeply ingrained habits, training histories and clinical judgment, and attempts to manage these categories purely through the lens of cost-saving can often be met with skepticism.
Health systems that succeed in this space rely on objective data and collaborative governance rather than mandates. Service-line analytics help identify variation, such as when one clinician’s utilization pattern differs significantly from peers performing similar procedures.
Transparency is critical as well. When physicians can see comparative data across their service line, the discussion shifts from the abstract idea of cost containment to more practical, concrete questions, related to why a particular device is used in the first place, what specific outcomes it improves, and whether there are areas of patient care where it truly provides value.
In many cases, the result isn’t wholesale elimination but refinement, to align product use more closely with clinical needs and cost constraints. That can generate meaningful savings while ensuring the best outcomes and preserving a sense of professional autonomy for healthcare professionals across departments.
Adopting a ‘Zero-Waste’ Mindset
Traditional benchmarking has long guided hospital performance, but many organizations are now adopting a more aggressive mindset, which revolves primarily around what Fleischer describes “zero-waste.”
“Since we’ve adapted to so many supply disruptions, we’ve actually learned how to eliminate waste in certain scenarios,” he says. “When you don’t have an item, you need to adapt and find ways to resolve that shortage.”
This philosophy recognizes that waste isn’t limited to expired inventory or unused stock. Rather, it means eliminating unnecessary product openings, redundant testing, and default practices that exist simply because “that’s how it’s always been done.”
Supply disruptions over the past several years accelerated this mode of thought. When items have become scarce, clinicians have been forced to adapt, often discovering that certain products or practices aren’t as essential as they once assumed.
Managing Drug Shortages
Drug shortages and escalating pharmaceutical costs have added another layer of complexity to supply chain management. While a pharmacy often serves a distinct function, leading health systems increasingly integrate devoted pharmacy strategies into broader expense governance structures.
Regular cross-functional meetings, shared data platforms and standardized substitution protocols can help maintain formulary discipline, all while ensuring uninterrupted access to medications. When shortages persist, systems prepare clinical practice changes in advance, and embed them directly into ordering systems, reducing confusion at the point of care.
This level of coordination underscores how a truly effective supply chain strategy depends less on individual tools than on governance, communication and shared accountability. However, central oversight alone isn’t enough — mission-critical supply chains push data and accountability closer to the foreground, too.
Advanced Technology as a Tool
Looking ahead, many hospital leaders see advanced analytics and artificial intelligence (AI) as the next frontier, while acknowledging that automation shouldn’t be implemented for its own sake, but for practical, actionable and measurable purposes.
With the help of AI, tasks that once took hours — from analyzing spend tiers to responding to compliance — can now be completed in seconds. More importantly, predictive tools may soon help organizations anticipate shortages, monitor inventory health in real time, and proactively adjust purchasing and distribution strategies to account for potential disruptions down the line.
“It’s these tools that we’re waiting for that can help speed up things and make it more efficient for a lot of our supply chain teams,” says Fleischer.
But technology isn’t enough on its own. Organizations that benefit most from these advancements are those that have already built out their critical foundational structures: Data discipline, cross-functional governance and a culture open to change. With those pieces in place, AI can then be used to augment that strong foundation.
More and more, it’s becoming clear that robust supply chain systems are a necessity for any healthcare facility. In a world of constant disruptions and fluctuating costs, financial sustainability, clinical excellence and operational resilience can no longer be managed in silos. Rather, they intersect daily, often at the point where products, people and processes meet.
Resource Link: https://premierinc.com/providers/supply-chain-optimization
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