The Healthcare Hub

Digital Transformation: What's Next For Healthcare Supply Chains?

Kara L. Nadeau, Healthcare Industry Contributor

Thursday, June 22, 2023

Digital transformation is changing the landscape of healthcare supply chains, delivering efficiency gains and improvements that translate into better patient care. Providers are increasingly embracing cloud-based Enterprise Resource Planning (ERP) systems and automation, strategies that overcome traditional roadblocks and streamline operations.

With generative artificial intelligence (AI) now exploding in availability and usage across countless industries and applications, the pace at which we operate will continue to accelerate rapidly.

Leaders in healthcare supply chains, pressured to perform with greater precision, speed and impact on their healthcare organizations’ goals, are increasingly embracing digital transformation. This article explores how transformations in digital technologies positively impact healthcare supply chains, leading to significant efficiency improvements and better patient care.

Table of contents

Understanding digital transformation in supply chains
The benefits of digital transformation
Technologies driving supply chain transformation
Case studies of successful digital transformation
Tips for implementing, optimizing healthcare supply chains

Understanding digital healthcare transformation

Digital transformation is a broad term. From a healthcare consumer perspective, it encompasses everything from virtual health interactions between physicians and patients (e.g., e-health, telemedicine) to the ever-growing array of remote monitoring devices that transmit patient data to providers on health status.

While these applications are more visible, digital health transformation behind the scenes is just as significant to the state of care delivery. In order to lower costs, deliver value, and improve the financial resilience of healthcare organizations, health systems need to be able to:

integrate systems and data
automate and streamline business processes
generate actionable insights to drive meaningful and impactful decisions

Benefits of the digital transformation

While many health systems and hospitals have only scratched the surface of digital health transformation in healthcare supply chain management, the results to date have been impactful on many levels. Efficiency with fewer manual processes.

Automation of manual processes, data capture and analytics has been a tremendous driver of supply chain efficiency in healthcare, as compared to manual intervention in these areas. Imagine touchless, end-to-end supply chain processes for both providers and suppliers where everything flows seamlessly with no manual intervention. Manual processes that are ready for digital transformation in your supply chain include:keying in orders

calling/emailing to check on order status
comparing POs and invoices and making corrections
printing paper checks and mailing them to suppliers
clinicians keying product data into multiple systems at the point of use
manual inventory counts

Cost-effectiveness and financial resilience

The healthcare digital revolution drives cost-effectiveness in many ways. It eliminates the expense and time consumed by unnecessary human intervention and reduces the risk for costly errors. Labor previously allocated to non-value-added tasks can then be redirected to activities aimed at reducing expenses and generating savings.

Perhaps most importantly, digital health transformation in the supply chain generates immediate, accurate insights that healthcare supply chain management leaders can leverage for operational and financial improvements.

For example, strategic sourcing is gaining momentum in healthcare supply chain today. However, the ability to look at the bigger picture of supplier relationships and what they bring to the table beyond product quality and costs – supply chain resiliency, reliability, efficiency, and cost effectiveness in operations, etc. – requires actionable data to inform decisions, which the healthcare digital revolution delivers.

Better patient care

Understanding the impact of supplies on patient care costs and outcomes has long been an imperative for healthcare organizations. The value analysis process, with its multidisciplinary review of clinical products, attempts to answer the question – what value will this item bring to our organization?

To achieve the goal of a clinically integrated supply chain that delivers high quality, best outcomes, and minimal waste at the lowest cost of care, healthcare decision-makers need to convert fragmented data points into actionable insights.

By integrating and digitizing data sources, and leveraging advanced healthcare analytics, healthcare organizations can see the complete picture they need to make impactful decisions for improved patient care without unnecessary costs (e.g., identifying a product that reduces the risk for non-reimbursable complications and readmissions).

💡 Find out more about GHX’s clinical integration solutions.

Technologies driving transformation

Digital health transformation is being driven by the transition from on-premise legacy IT systems with data in silos and manual, paper-based processes to cloud applications, system integration, automation, digitized data sources, and AI-enabled analytics.

Here is an example of integrated digitalization in healthcare supply chains that automates end-to-end healthcare supply chain management and facilitate real-time tracking in healthcare:

A health system implements an organization-wide cloud enterprise resource planning (ERP) system, which standardizes processes and seamlessly integrates with its electronic health record (EHR) and financial systems, enabling data sharing among these solutions.
At the point of care, the health system’s EHR system captures product usage data in the patient’s record (e.g., via barcode or RFID scanning).
Through EHR system integration with the hospital’s ERP and financial systems, relevant product data is transmitted to automate supply chain (e.g., inventory management) and financial processes (e.g., patient billing).
With real-time visibility into product usage data, the supply chain team can make informed purchasing decisions to maintain adequate supply levels for patient care.
Suppliers have also deployed cloud ERP systems, facilitating digitization of supply chain processes among all parties.
With cloud ERP, both the health system and its suppliers can leverage collaborative tools to automate the synchronization of supply chain data (e.g., product descriptions, contracts, pricing, etc.) and the procure-to-pay (P2P) process.
P2P transactions (POs, POAs, ASNs, invoices) flow seamlessly back and forth between the parties’ cloud ERP systems because product, contract, pricing data accuracy is always accurate and complete on both sides.
The health system and its suppliers have complete visibility into the P2P process so they can immediately identify and address any challenges that arise (e.g., discrepancies, backorders), ensuring clinicians have the right products, in the right quantities, at the right times.

By applying advanced healthcare analytics to this data from supply chain, clinical use, financial, and patient outcomes, the health system has actionable information for value analysis and other initiatives to improve clinical and financial performance.For the health system, digital integration of systems and processes in the cloud facilitates access to data to drive value-based care delivery.

Cybersecurity challenges and potential risks

A significant concern raised by healthcare organizations is cybersecurity. The shift from data contained within legacy IT systems behind a health system’s firewall to digitized data collected and shared the cloud raises concerns around data privacy and the risk for cyberattacks.

These risks are not unfounded: Becker’s Healthcare IT reported that since the start of 2023, 15 healthcare systems operating 29 hospitals have been targeted by a ransomware incident. To help safeguard operations and patient data, cybersecurity should be a priority when evaluating and selecting systems and solutions providers for healthcare tech transformation.

For more information, check out the U.S. Department of Commerce National Institute of Standards and Technology (NIST) 2022 cybersecurity guidance for the health care industry.

Case studies on healthcare digital transformation

Here are three real-world examples of successful digital transformations in healthcare supply chain management.

Prisma Health integrated a cloud-based data management solution with GHX that reduced costs for manual interventions on item data by approximately 80% and won them the ECRI annual healthcare supply chain achievement award.
The University of Kansas Health System implemented a clinically integrated supply chain, establishing a Clinical Supply Optimization team that delivered over $8M in savings and won a 2022 GHXcellence Award.
Froedtert Health, Mount Sinai Health System and Stanford Health Care worked with GHX to automate implant orders, a process that is commonly managed manually and on a case-by-case basis. See how they did in this webinar.

Tips for implementing and optimizing healthcare supply chains

Boosting supply chain efficiency in healthcare may seem daunting when considering implementation challenges. Fortunately, the transition of processes and data to the cloud is far easier than technology implementations of the past.

Providers of cloud ERP systems and digital supply chain solutions for healthcare, like GHX, understand the sector’s unique challenges and have designed their offerings and implementation paths to overcome common roadblocks for a seamless transition.

1. Digitalization is the first step

Digitalization allows healthcare providers to enhance care, streamline processes and cut costs. Two effective approaches for this are the automation of the purchase-to-pay procedure and transition to cloud-based ERP systems.

2. Automate purchase-to-pay processes

Automation of purchase-to-pay procedures offers cost reduction, supports remote work, and generates data points. To facilitate a digital shift, suppliers must digitalize their interactions with providers, as manual processes are slow and prone to errors. For instance, immediate order fulfillment and supply delivery confirmations are now expected, a demand manual methods can't fulfill.

3. Transition to healthcare cloud ERP

Transitioning to cloud-based ERP is a key digital transformation strategy. This infrastructure enhances collaboration and breaks down information silos, preventing outdated data from disrupting supply chains. Such disruptions, detrimental to procurement, provider relationships and patient care, can be mitigated by providers leveraging cloud technology for business process improvements.

4. Apply predictive analytics

Predictive analytics can enhance healthcare supply chains by aiding key business decisions for improved patient care and prevention of supply issues. It can identify effective, cost-efficient supplies for specific patient groups, leading to better patient outcomes and operational efficiency.

FAQs about healthcare supply chain digital transformation

Q. What is digital health transformation in healthcare supply chains?

A. The transition from disjointed legacy IT systems, manual, paper-based processes, and silos of data to a cloud-based model with seamless system and data integration, automated and digitized processes, and the application of advanced analytics for real-time, accurate and actionable insights.

Q. What are the benefits of digital transformation in healthcare supply chains?

A. End to end process efficiency, enterprise-wide visibility, lower costs, and information on which to make impactful clinical and financial decisions.

Q. What technologies are driving the transformation of healthcare supply chains?

A. Cloud ERPs, EHRs, EDI, AI, RFID, digital supply chain management (SCM) solutions.

Q. What are the challenges and potential risks of digital health transformation?

A. Resistance to change in healthcare organizations, competing priorities for limited funds, fears of cybersecurity threats.

Can you provide examples of successful digital health transformations in healthcare supply chains?

A. Prisma Health’s cloud ERP system implementation helped reduce costs on item data by approx. 80% and the University of Kansas Health System’s (TUKHS) use of evidence-based analytics delivered over $8M in savings.

Q. What are some tips for implementing digital health transformation in healthcare supply chains?

A. Transition to cloud-based systems for seamless integration and data sharing; leverage supply chain management tools to automate processes internally and with external suppliers and other business partners; establish a single source of accurate, timely and complete supply chain, clinical and financial data; leverage advanced analytics to generate actionable insights.

Disclaimer: The third-party contributor of this piece is solely responsible for its content and accuracy, and the views expressed do not necessarily reflect the opinion of GHX.