During the days of the American Civil War, some commodities were hard to come by, such as material to make hundreds of thousands of military uniforms. To keep expenses low, Northern quartermasters ordered a material known as “shoddy.” It was a mishmash of discarded woolen rags mixed with new wool fibers, with the result being a low-quality material that often came apart after little wear. Our modern adjective, “shoddy,” comes from this 19th-century material.

There are times when whole sectors of American society face a shortage in supplies that are critical to the successful operation of that enterprise or industry. The hospital industry, in particular, is facing this kind of challenge today. After nearly three years of a global pandemic and the resultant slowdown or shutdown of multiple manufacturers, certain items critical to the hospital supply chain are still in short supply.

State of the Crisis

According to medical industry observers, patients who had put off their elective surgeries during the height of the COVID pandemic, are now clamoring to get those surgeries scheduled. However, medical-device makers that produce the parts required for procedures such as knee and hip replacements are struggling to meet the surge in demand.

Part of the problem is inflation. For example, the Wall Street Journal (WSJ) recently reported that “Costlier electronic components have forced Stryker Corp., maker of surgical equipment and joint-replacement parts, to raise prices and slow purchases and production as it searches for better prices.” But another problem is just the simple unavailability of basic or critical items. “Across the industry, specialized plastics, metals and resins needed to make devices are all in short supply, according to the companies,” the WSJ continued.

Not all the news is bad, however. There are some positive indications to which we can point. For example, consulting and research firm Frost & Sullivan has estimated that medical device industry revenues will rise 7.8 percent this year to $498.7 billion worldwide, compared with 8.1 percent last year, representing a two-year rebound from the 5.7 percent decline in 2020 due to the pandemic. In addition, many hospitals are presently experiencing normal operations, and some device makers are reporting an uptick in procedures for the latest quarter. So, it’s a mixed bag to be sure.

In its own review of the medical supply chain situation, financial and accounting giant BDO has made the following observations:

Operating margins are likely to decline, especially if we continue to see high compound annual growth rates (CAGR) for drugs and labor costs and vendor contracts tied to the Consumer Price Index (CPI), forcing providers to adopt more aggressive procurement policies. Supply shortages are likely to continue and become more severe, which could impact clinical outcomes. Operational technology shortages are expected to continue, making it difficult for providers to access practical tech solutions. Certain vendors may go out of business, particularly niche vendors, further exacerbating supply difficulties across the industry.

Towards A Solution

Though the above assessment runs from pessimistic to dire, the analysts at BDO do provide recommendations on how hospital decision-makers can mitigate some of these negative projections. They include the following strategies:

1. Explore how electronic medical record (EMR) optimization can reduce operating costs. You may be able to simplify workflows, reduce the amount of duplicative work that’s required by both clinicians and support staff, and reduce the need for other software solutions, leading to an overall reduction in operating costs.
   
   
2. Consider working with a group purchasing organization (GPO). Working with these organizations can support your supply chain management and help expand access to hard-to-find supplies.
   
   
3. Explore lower-cost supplies. This may entail moving away from physician preferred supplies. Work with physicians to standardize supply, device and implant choices and optimize volume pricing.

In addition to the above suggestions, the National Institute of Health (NIH) has proposed that hospitals establish a supply-chain integration framework of minimal bureaucracy, with an emphasis on establishing direct connections between buyers and suppliers. One advocate for this approach points out that there are American companies that act as a clearinghouse for discounted hospital supplies. It will be up to each hospital to perform the requisite research in identifying these companies, as well as determining what they can provide, what they charge, their level of reliability, etc. Hospitals will need to be proactive in this regard if they want to be positioned for success in the months ahead.