3 winter disruptions hospital leaders should brace for

As hospital supply chains endure inflationary pressures, the surge of multiple viruses and typical "end-of-the-year chaos," medical supply experts told Becker's their top concerns heading into 2022's winter.

Inflation

A second wave of inflation could be building for healthcare systems, according to supply experts. So far, hospitals have seen increased prices for general healthcare commodities and low clinical products while most medical device suppliers have absorbed inflationary pressures. A potential new wave for costlier devices is growing, though. 

"In the coming months — probably six to 12 to 18 months — there's going to be increased cost pressure," David Dobrzykowski, PhD, director of the supply chain master's program and associate professor at University of Arkansas' Walton College of Business, said. "That's going to come from somewhere, [and it will] probably mean increased material costs on hospitals." 

Tom Harvieux, the vice president and chief supply chain officer of St. Louis-based BJC HealthCare, said prices for commodity and clinical items have been "substantial," with increases between 7 and 15 percent. 

"Everyone is really feeling the pains of inflation," Mr. Harvieux said. "It's eating up substantially the raw materials and the labor and transportation costs." 

Along with higher costs for low margin products, the first wave of inflation also slammed into labor markets. Dr. Dobrzykowski expects a "double whammy," and Mr. Harvieux said he has already pushed back on aggressive requests for higher labor costs. 

Mr. Harvieux said he has battled labor contracts where the hospital hires outside services outside its system, such as landscaping and storing, that have risen as high as 30 percent more because of inflation.

Geopolitical frictions

Between the war in Ukraine and China moving to reclaim Taiwan under "reunification," the healthcare industry is inching toward more domestic solutions for supplies. 

Hospital leaders can't control the global supply chain, but they can influence it to achieve a more balanced portfolio, according to Johns Hopkins University's Tinglong Dai, PhD.

Dr. Dai, who's a professor of operations management and business analytics, said medical supply chain executives are focused on nearshoring and friend-shoring, a practice of sourcing from the nation's allies. Supply chain experts agreed that healthcare requires a delicate mix of nearshoring, friend-shoring and offshoring strategies. 

"In the beginning of the pandemic, we were talking about 35 days, 45 days [for products] to get here," Régine Villain, the chief supply chain officer of New Orleans-based Ochsner Health System, said. "Now, that number has almost doubled with all the issues we know are going on with container availability, with ships, with the ports and what have you."

Ms. Villain said Taiwan is rich in semiconductors and Ukraine has lots of materials needed for medsurg devices, meaning any disruptions will cause a "domino effect."

"This is not a pandemic, it's actually a war," Dr. Dai said of the situation in Ukraine. "The consequences can be even more damaging. That's why friend-shoring is one of the top agenda items in global supply chain transition and is particularly relevant to the healthcare industry."

Normal "End-of-the-year chaos"

Besides longer trends snaking through the U.S. market, such as inflation rates and geopolitical tensions, the last few months are usually the time that medical manufacturers halt production to "clean house," according to Ms. Villain. 

It's common for suppliers to close down for about two weeks to check on their machines, recalibrate and work on annual maintenance practices. These temporary shutdowns then become a monthlog effect as these companies work to fill backlogged orders. 

"The last thing we need is to think we can rely on a partner, a manufacturing partner, only to find out the plant is on lockdown for maintenance," she said. When prompted, medical devicemakers usually share when their operations will restart, but "regardless of what's said, there's always, always, always an issue with that." 

Hospitals should bulk up in preparation, Ms. Villain said. 

"We're looking at potentially having another wave of COVID but there's also conversations going on about ebola out in Africa. Who knows what else is coming? There's no shortage of things for us to keep an eye on and worry about," she said. "If I had to think about the winter, it's the end-of-the-year chaos that comes with some of those closures in addition to everything we're already experiencing."

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