Health system leaders continue to face enormous operational and financial challenges, and to help alleviate these pressures, they need more contribution from the supply chain. However, the traditional healthcare supply chain players continue to offer the same outdated, ineffective models despite lots of talk about transformation.
To gain a greater perspective on what is needed to transform the healthcare supply chain, Becker's Hospital Review spoke with Bill Kopitke, General Manager and Head of Healthcare at Amazon Business. Mr. Kopitke shared his perspective on pain points in health system supply chains and gaps in today's solutions, and elaborated on what Amazon Business customers are requesting and how they are helping tens of thousands of providers improve their procurement processes and reduce their spend.
Despite emphasis on supply chain innovation & cost reduction, little progress has been made
"The pain points for Health Systems are common and well known," Mr. Kopitke said. "Historic margin pressure from the inflationary environment, workforce shortages and dissatisfaction, consistent rotation of supply backorders and allocations, the need to unify the health system bridging acute and non-acute, etc. All while working to evolve care to be more convenient and consumer oriented with digital interfaces and home care," he said. "Yet it's unclear how the supply chain is transforming at all to significantly aid these provider priorities."
The COVID-19 pandemic sent a shockwave throughout the entire healthcare industry, especially with its supply chain that visibly underperformed putting lives at risk. The executive exposure to supply chain failures led to the belief that lessons from 2020 and 2021 would result in meaningful changes for 2022 and 2023. "There was a lot of good talk that now is the time to do things differently," Mr. Kopitke said.
But based on extensive conversations with health system and supply chain leaders, Mr. Kopitke has heard a theme. "It's mostly the same structure — nothing is fundamentally changing," he said. Everyone said we have to learn from what we experienced in the pandemic," Mr. Kopitke said. "For all of the priority initiatives I mentioned earlier, we've got to do better . . . but it's pretty evident from our customer interactions that they look at who is traditionally involved in the healthcare supply chain and they say, 'You're just doing the same thing.' It's insane to expect a different outcome."
Not only do providers need costs lowered, they need to reduce risks and improve the workforce experience. They need better transparency about availability, prices, ordering, and quality outcomes. "The ongoing opaqueness that exists within the supply chain today is frustrating," Mr. Kopitke said.
Healthcare supply chain leaders are seeking simplification, new models & digital solutions
These pain points and the lack of change is driving health system supply chain leaders to look for new approaches and models. Mr. Kopitke identified three types of changes he sees health system and supply chain leaders pursuing:
- Simplification. The healthcare supply chain has been unnecessarily complex, with administratively burdensome Requests for Proposals and numerous intermediaries involved. Supply chain leaders are questioning whether all RFPs and intermediaries add value, looking for greater simplification.
- New models, approaches, and partners. Today's suppliers often say they've squeezed every dollar out of the supply chain. But procurement and supply chain leaders know this isn't true. Mr. Kopitke sees supply chain leaders using this moment to challenge everything — long-time suppliers, procurement methods, expensive brands. "Everything is on the table," he said. Out of necessity, this includes an openness to looking at new, untraditional sources. "This is where we come into play," Mr. Kopitke said. "There's a lot of interest around what Amazon is doing in healthcare. . . and so we have access to executives, health systems, and leaders who are interested in learning and partnering with Amazon to make real transformation."
- Digital solutions. Supply chain leaders recognize that "efficiencies and quality improvements will be found through technology," Mr. Kopitke said. While healthcare is a people-first operational business, there is a desire to use technology to make people more efficient and processes more Organizations are looking into digital tools that can automate administrative tasks and bring information in the supply chain process to solve the opaqueness problems.
Amazon Business is focusing on bringing innovation to healthcare
Amazon's culture is characterized as creative, innovative, and customer-obsessed, especially with consumer supply chain. Amazon is bringing this culture and tech-forward innovations to healthcare. Mr. Kopitke pointed out that for all of the talk about consumerism in healthcare, the spirit of consumerism has been lacking in the healthcare supply chain. Amazon intends to change that.
While retaining Amazon's familiarity, intuitiveness, and ease of use, Amazon Business has added features that apply to businesses and that are valuable for healthcare buyers. These features include:
- Transparency and Flexibility. Just like the consumer experience, Amazon Business is bringing workplace supplies to a storefront with transparency on price, attributes, satisfaction, and availability. Our business pricing or ability to toggle between offers allows for the cost reduction that organizations are pursuing.
- Workflow and Guided Buying*. Amazon Business knows organizations need to efficiently control or guide purchasing. With integrated workflow features that can "prefer," "restrict," or "block" specific or general categories, these tools save buyers time, steer them to the right products, and control spend behaviors. Buyers can easily see what is available to buy; administrative staff can turn organization-wide procurement rules into easy-to-follow visual signposts.
- Request for quote. A customer can find a supply they want to purchase and can input tailored information about their request, such as the specific volume, pricing, and delivery specifications. This specific information goes directly to a supplier, who can then quickly reply with a focused response. Amazon Business' request for quote process is a far better, faster, more focused process than the antiquated RFI and RFP process that has long been common in healthcare. The traditional process, which might be for multiple products needed by an entire department, could take a series of slow, labor-intensive steps of gathering information, sending to multiple suppliers, waiting for responses, and then evaluating the response. This could take up to a year and require many administrative hours. Amazon Business provides a focused request for quote that enables quickly procuring even one item.
- Analytics. Amazon Business provides real-time data on spending, seller stock-outs, and deliveries. This enables smarter purchasing decisions and creation of custom reports.
"How providers are adopting our online stores and the transformation that is organically occurring is almost under-appreciated," Mr. Kopitke said. "The technology bringing options, transparency, and data has just not existed on the B2B side or in the healthcare space." What is under-appreciated is how many types and sizes of providers and their various staff that now have real-time, transparent data about availability, price, and supply options. "It's the democratization of the supply chain in healthcare."
Amazon Business' healthcare solutions have constantly evolved — and more change is coming
Initially, healthcare organizations leveraged Amazon Business for "tail" spend, which is buying outside of negotiated agreements. For a product needed in a health system, a team member might have considered finding it on Amazon. Supply chain leaders were unaware that hundreds of users within their health system were possibly using Amazon Business already. This realization is leading health systems to be more intentional about their Amazon Business corporate account to ensure the right configurations and use are happening.
Then, the pandemic changed things. Within one year, over 100,000 healthcare organizations were purchasing all types of products, including medical supplies, through Amazon Business. Quickly, healthcare organizations began to buy entire categories of products through Amazon Business, such as office supplies, IT peripherals, and maintenance, repair, and operations. "We began winning that business and becoming the primary supplier," Mr. Kopitke said.
Health systems are now approaching Amazon Business with their bulk buying needs to see how we can be an alternative source from traditional players to aid with resiliency, cost savings, and delivery enhancements. "While we are still growing our medical supply storefront, it's clear that both buyers and sellers prefer a new forum and are ready to diversify."
Among further changes, Mr. Kopitke envisions "death of the RFP" and greater pricing transparency. RFP processes are static and inflexible. Amazon Business allows organizations to change what they need to buy as their needs change. "Yes, you're going to go through RFPs in certain categories, but in commodity categories, you don't need a whole item master and don't need a negotiated contract," he said. "This reduces the administrative burden, and is a game changer, resulting in greater speed and flexibility."
Conclusion
Because of the cost pressure and supply disruptions in healthcare, supply chain and procurement leaders are desperately searching for better models. To date, existing industry supply chain players have not delivered the meaningful changes that health systems need.
Amazon Business has a long history of innovating and disrupting purchasing processes on behalf of customers. In healthcare, the digital tools and features that Amazon Business provides will produce operational, financial, and clinical benefits. Operationally, improved purchasing tools and processes will drive transparency, efficiency, and greater spend control. Financially, Amazon Business will help health systems reduce the total cost of care. Clinically, Amazon Business will help improve patient care by reducing staff time on manual administrative tasks and options. This innovation for healthcare supply chains is one part of Amazon's broader industry contributions to improve healthcare and lower costs. "There will be many exciting innovations ahead for the healthcare industry; that, we all want," Mr. Kopitke said.