Striking when the bubble pops: How Kaiser's supply chain unit manages a market in flux

As health systems and hospitals crawl back to positive finances after 2022 swept many into the red, Kaiser Permanente's supply chain unit is focused on managing inflation through better understanding and tracking. 

Steven Chyung, senior vice president and chief supply chain and procurement officer at the Oakland, Calif.-based system, told Becker's his team's processes to track and reduce inflationary pressures have "helped tremendously."

"We're going to be in an inflationary environment for the foreseeable future," said Mr. Chyung, who predicted this future will last two to three years. "We really enhanced our ability on how we measure it. We'll develop market baskets across everything that we buy; and on all the supplies, we'll look at what we are buying now versus what we bought a year ago and measure what sort of inflation we're experiencing. Then, [we] measure that against whatever industry benchmarks we can find."

The same process is copied for services, Mr. Chyung said, as the supply department will track and focus on fixed contracts — instead of time and material contracts — types of inflators, and which contracts will soon be up for renewal. 

"That's just helped tremendously in terms of how we communicate to our finance organization [and] how we do financial planning," he said, because the outlook helps provide stronger forecasts.

A "huge bubble" created during the COVID-19 pandemic has shrunk in some areas, meaning some inflated product prices are falling, and Mr. Chyung said these openings need to be capitalized on.

For goods and services not leaving that bubble, Mr. Chyung said that despite Kaiser Permanente's size, "we are not in a situation where we can always drive down the unit price of things. We have to really look at how we're using things, our demand management and how we utilize things in more standard ways."


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