Healthcare Provider and Supplier Collaboration: Unlocking Better Care

• Kara L. Nadeau, Healthcare Industry Contributor

Collaboration between healthcare providers and suppliers can unlock untapped opportunities to increase supply chain efficiency and lower the cost of doing business while supporting the overall goal of patient care. Keep reading to find out how an aligned vision, collaborative decision-making and shared best practices can benefit all parties involved, and discover real-world success stories of provider-supplier collaboration in action.

Table of contents

1. The importance of collaboration in healthcare
2. The benefits of strong provider-supplier partnerships
3. Overcoming challenges in healthcare collaboration
4. Strategies for building and enhancing collaborative relationships
5. Provider-supplier collaboration case studies

The Importance of Collaboration in Healthcare

In the healthcare industry, collaborative relationships between providers and suppliers is essential to ensuring that the right supplies get to where they are needed in an efficient, accurate and cost effective manner.

Historically, the relationship between providers and their suppliers was largely transactional and conversations based on product price. As Jimmy Chung, M.D., CMO of Advantus Health Partners, stated recently in Healthcare Purchasing News:

"Centered around group purchasing organizations (GPOs), the practice of keeping many suppliers on contract, with pricing tiers only revisited every two to three years, creates unstable environments that do not support the challenges today’s healthcare organizations face, nor do they align with the goals of value-based care."

Collaborative relationship-building between a healthcare system and their suppliers requires changing mindsets and breaking down traditional barriers that prevent stakeholders from working toward common goals. It supports the parties in engaging in mutually beneficial activities, including strategic planning to match supply with demand and eliminating waste in the supply chain.

A supportive environment, where hospitals and suppliers promote collaboration, results in efficiency gains and savings, especially when stakeholders share knowledge and systems to address challenges and opportunities.

For instance, a shared vision and understanding that manual handling of consignment or “bill-only implant orders" increases complexity, errors and costs on both sides of the trading partner relationship, has prompted healthcare partnership models aimed at addressing the issue.

The Benefits of Strong Provider-Supplier Partnerships

Strong relationships between providers and suppliers are essential for leaders seeking to drive supply chain efficiencies and streamline healthcare operations.

1. Timely Access to Supplies: Closer partnerships can ensure that healthcare providers have timely access to the necessary medical supplies and equipment, reducing the risk of treatment delays or interruptions for patients.
2. Cost Efficiency: Efficient supply chain management and collaborative partnerships can help reduce costs associated with procurement and inventory management, allowing healthcare providers to allocate resources more effectively toward patient care.
3. Mitigate the impact of supply disruptions: When a health system has close ties with its suppliers, it can better anticipate and manage potential disruptions in the supply chain, by working together to develop contingency plans, secure alternative sources of supply, or collaborate with suppliers to address challenges swiftly, ensuring that patient care remains uninterrupted.
4. Innovative Solutions: By fostering innovation and collaboration, provider-supplier relationships and the sharing of medical knowledge can support the development and continuous improvement of technology, treatments, practices and solutions that ultimately benefit patients.

Overcoming Challenges in Healthcare Collaboration

Healthcare trading partners have made tremendous progress in the development of collaborative relationships and effective communication channels to tackle mutual challenges, but the work isn't over. Let's look at some of the obstacles hospitals and suppliers face in their ability to work collaboratively.

According to a 2024 roundtable facilitated by the Healthcare Distribution Alliance (HDA), in partnership with the U.S. Chamber of Commerce Foundation, here are some of the key issues facing these relationships today.

Raw materials and prioritization challenges

There have been significant disruptions to global supply chains amid rising international conflicts and geopolitical tensions, the Red Sea shipping crisis, drought affecting the Panama Canal and concerns over an economic slowdown in China. This is of particular concern due to the globalization of US medical product supply chain, which is reliant on distant nations countries such as China and India.

In addition, information sharing on the status of raw materials used in medical/surgical supplies among trading partners can help them develop strategies for mitigating the impacts of shortages. Looking beyond product pricing and conducting a thorough analysis of the components and other aspects that influence the availability of medical supplies may provide an effective strategy to understand risks facing healthcare services.

Access to data, data and information sharing

Research conducted by Deloitte found more than two-thirds of healthcare supply chain leaders interviewed experienced data-related challenges such as data availability, data quality and data integration.

As AHRMM points out, "Supply chain plays a central role when it comes to leveraging data to advance health care excellence. In today's data-driven and analytics environment, it is imperative that supply chain professionals understand data management, flow, and utilization."

Uneven adoption of blockchain, machine learning and AI

A 2023 study described several barriers to adoption of these advanced technologies in healthcare as "ethical, technological, liability and regulatory, workforce, social, and patient safety".

However, when it comes to AI, there are some important benefits for supply chain partners in an uncertain global climate. For example, generative AI has the ability to model supply and demand scenarios, and see how sudden and extreme events (e.g., natural disasters) could affect the supply chain.

Communication barriers among healthcare supply chain stakeholders

A 2021 study investigating the buyer-supplier relationships in healthcare described four themes underpinning distrust trust between both parties: "lack of information sharing, opportunistic pricing behavior, changing regulations, and physician-supplier alliances."

To learn more about strategies to build trust, communication and common goals, scroll to the next section.

Inequitable hoarding of healthcare supplies...

... And anticipation of global crises. A clinician's main priority is their patient; therefore, it comes as no surprise that healthcare professionals turn to supply hoarding in times of supply chain uncertainty to ensure they have what they need for patient care. But the problems of hoarding are numerous - excessive inventories, items outside of the vision or control of supply chain teams, items expiring on shelves, expired items being used on patients, etc.

In addition to educating physicians and clinicians on the dangers of hoarding and training them on responsible inventory practices, cloud solutions that facilitate real-time communication among hospital and supplier supply chain team members can both strengthen resiliency and help clinicians trust that supplies will be available when needed.

Strategies for Building and Enhancing Collaborative Relationships

"Supply chain collaboration is often deemed as a critical strategy for ensuring that all independent firms work cooperatively to create a cohesive, singularly competitive supply network capable of improving overall performance."

Palgrave Handbook of Supply Chain Management, Springer (2022)

Here are key strategies for building collaborative relationships among healthcare supply chain stakeholders. From building trust between partners to invoicing and payment automation and order automation to streamline supply chain operations for providers and suppliers alike.

Establishing Trust and Transparency Between Partners

"Before health care stakeholders can become more transparent about their operations, they must first build trust with one another."

Cost, Quality and Outcomes White Paper, AHRMM (2020)

Trust and transparency between partners are vital for effective collaborative relationships in healthcare. Trust facilitates open communication and mutual respect, while transparency provides clarity on expectations and processes.

In healthcare, where patient care is paramount, these qualities create a strong foundation for collaboration. They enable providers and suppliers to work seamlessly, make informed decisions, and deliver optimal care. Here are six steps to successful supply chain collaboration according to McKinsey:

1. Collaborate in areas where you are successful.
2. Find the right benefit-sharing model.
3. Choose partners according to capability, strategic goals and value potential.
4. Invest in the right infrastructure and people.
5. Establish a joint performance-management system.
6. Collaborate for the long term.

Using Technology and Data to Improve Communication

The digital transformation of healthcare supply chain management (SCM) among providers and suppliers alike is breaking down communication barriers, facilitating secure data sharing and enabling the use of advanced analytics empowered by AI.

Cloud ERP, EHR and SCM solutions play a key role in system integration, shared tools and capabilities, and the capture and sharing of real-time, complete and accurate digital data. According to a July 2023 Cloud Market Survey from GHX, nearly half (45%) of hospitals and health systems have already transitioned to cloud technologies for supply chain management, and many more will do so over the next 24 months.

The integration of data and application of AI driven analytics is helping trading partners work collaboratively and more proactively to address issues as they arise - or in the case of predictive analytics, predict and address potential problems before they even happen.

"GenAI can be queried to produce risk assessments, scenario simulations and mitigation strategies on demand — in response to shortages or widespread calamities, such as another pandemic — to help planners manage and mitigate the risks proactively," stated EY analysts in a recent article on GenAi in healthcare supply chain optimization.

Extending P2P Process Automation in the Healthcare Supply Chain

"When orders go out and invoices come in, they match and go straight through processing to greatly reduce end-to-end transaction time through to payments.”

Amy Platis, Northwestern Medicine Program Director of Finance for Accounts Payable

From order to invoice, automation streamlines processes, removes cumbersome manual touchpoints, increases data accuracy, provides greater visibility and improves overall supply chain performance.

Automating procure-to-pay (P2P) processes generates value for providers and suppliers alike. Trading partners on the GHX Exchange can transact and collaborate on a single platform where they have access to the same information (e.g., PO status, discrepancies holding up orders, backorders, etc.) and can work in partnership to overcome issues in real time.

While most trading partners have made progress in automating POs, POAs, ASNs, invoice and payment automation has historically lagged behind. Healthcare supply chain leaders are focusing on automating processes to enhance efficiency and optimize limited working capital. A key trend is collaboration between trading partners to extend automation from procurement to invoicing and payments.

Provider-Supplier Collaboration Case Studies

From the Provider's Perspective

Northwestern Medicine recently turned its AP department from a cost center to a profit center by automating these processes with GHX ePay. The results were substantial:

• 98% of payments made through a digital workstream
• 133% increase in annual payment program rebates
• Strengthened supplier relationships and communication

Program Director of Finance for Accounts Payable (AP), Amy Platis, commented on the mutual benefits her organization and its suppliers have achieved through payment automation:

“A big selling point for GHX ePay was that it would deliver value to not just Northwestern Medicine but our suppliers as well. GHX was a huge help in achieving alignment. They worked with us and our suppliers to make sure data was ‘apples to apples’ on both sides in terms of contracts, pricing, unit of measure, quantities and minimum orders."

Read the case study.

From the Supplier's Perspective

Axogen, a supplier and leading developer of surgical solutions, implemented GHX ePay and GHX Exchange to tackle inefficient and manual order and payment processes and achieved significant benefits:

• Double-digit business growth without adding any new FTEs
• 50% reduction in administrative work
• 90% reduction in fees
• 12-15% average decrease in DSO

“Managing transactions via EDI is far less time-consuming than before. Our Customer Care unit can focus on reviewing orders as they’re being placed instead of placing the orders themselves. A process that took half a day now takes a quarter of the day or less,” said Axogen Manager, Treasury & Financial Services Ralph Engle.

Read the case study.

Q: Why is collaboration between healthcare providers and suppliers important?

A: Collaboration between healthcare providers and suppliers is crucial because it ensures that both sides are aligned in efficiently delivering necessary supplies for patient care. This optimizes the supply chain, matching demand with supply and reducing resource waste, ultimately benefiting patient outcomes.

Q: What benefits can be achieved through effective collaboration?

A: Effective collaboration between healthcare providers and suppliers leads to streamlined operations and reduced costs by aligning procurement processes, ensuring accurate transactions, and minimizing administrative expenses through automation.

Q: What are some common challenges in establishing these partnerships and how can they be overcome?

A: Common challenges in establishing partnerships between healthcare providers and suppliers include difficulties with data access and sharing, uneven adoption of advanced technologies like blockchain and AI, and communication barriers among supply chain stakeholders.

Q: How is the landscape of healthcare collaboration expected to evolve in the coming years?

A: The landscape of healthcare collaboration is expected to evolve as providers and suppliers increasingly utilize advanced analytics, including AI-driven predictive analytics, to strengthen resilience against potential disruptions in the supply chain.

Sources

Building Toward Healthcare Supply Chain Resilience, U.S. Chamber of Commerce Foundation, January 2024, https://chamber-foundation.files.svdcdn.com/production/documents/23-12438_USCCF_2023_HDA-Report_Digital.pdf?dm=1705601598

Where is Supply Chain Transformation Headed? 3 Insights, Healthcare Purchasing News, October 2023, https://www.hpnonline.com/sourcing-logistics/article/53076717/where-is-supply-chain-transformation-headed-3-insights

Operating Room Efficiency 2023 Research Report, Owens & Minor, https://www.owens-minor.com/wp-content/uploads/2023/03/20230324_OM-Research-Report.pdf

A Step-by-Step Guide for Consignment Implant Order Automation with GHX and Infor, GHX, https://gateway.on24.com/wcc/eh/2552798/lp/4206329/a-step-by-step-guide-for-consignment-implant-order-automation-with-ghx-and-infor

AHRMM Recommended Initiatives for the Health Care Supply Chain, AHRMM, https://www.ahrmm.org/ahrmm-recommended-initiatives-health-care-supply-chain

5 Supply Chain Insights From Innovative Healthcare Leaders, Workday, November 9, 2023, https://blog.workday.com/en-us/2023/5-supply-chain-insights-innovative-healthcare-leaders.html#weigh-supply-chain-resiliency-and-supplier-transparency-alongside-price

Three Healthcare Supply Chain Benchmarking Lessons for 2024, Gartner, April 9, 2024, https://www.gartner.com/en/supply-chain/insights/power-of-the-profession-blog/three-healthcare-supply-chain-benchmarking-lessons-for-2024

The gold standard for new product evaluation, GHX, https://www.ghx.com/value-analysis-providers/product-introduction-management/

Key determinants for resilient health care supply chains, Deloitte, April 25, 2022, https://www2.deloitte.com/us/en/insights/industry/health-care/healthcare-supply-chain.html

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Osei, V., Asante-Darko, D. (2023). Collaboration Within the Supply Chain. In: Sarkis, J. (eds) The Palgrave Handbook of Supply Chain Management. Palgrave Macmillan, Cham. https://link.springer.com/referenceworkentry/10.1007/978-3-030-89822-9_56-1

AHRMM20+ Cost, Quality and Outcomes Summit White Paper: CQO: Building a More Resilient Health Care Supply Chain, AHRMM, https://www.ahrmm.org/ahrmm20-cqo-summit-white-paper

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Northwestern Medicine’s Procure-to-Pay Workstream Goes Digital With Big Payoff, GHX, https://www.ghx.com/resources/customer-stories/northwestern-medicine-s-procure-to-pay-workstream-goes-digital-with-big-payoff/

Axogen Boosts Financial Health and Customer Relationships, GHX, https://www.ghx.com/resources/customer-stories/axogen-implements-payment-and-order-automation/

Kara L. Nadeau

Healthcare Industry Contributor

Kara L. Nadeau has more than 20 years of experience as a writer for the healthcare industry, working for clients in fields including medical device/supply manufacturers and distributors; software, solution and service providers; hospitals and health systems; and industry associations.