The Clinical and Financial Risks of Sidelining Supply Chain
Every health system scrutinizes labor and pharmacy at the board level, yet supply chain rarely gets the same attention. Too often, supply chain is treated as a back-office function, judged only by whether supplies arrived. The cost of that mindset is steep: avoidable case delays, stockouts, missed charge capture and nurses pulled away from patient care to chase supplies. The pandemic made this exposure visible, but once availability normalized the urgency quickly receded. That retreat is dangerous. If supply chain is the second-largest expense in the enterprise, it demands sustained executive attention and disciplined investment.
What does that discipline look like in practice? For many executives, the conversation begins and ends with distributor and GPO performance, but that covers only a slice of total spend. The larger levers live in physician preference items, implants (think orthopedic implants and cardiovascular supplies), med-surg and the internal logistics that determine whether products are where they need to be, in the quantity and presentation clinicians require. When leadership only chases unit price, it misses the upstream contracting choices and downstream preference card accuracy and inventory design that drive the total cost of care. Best-run programs trace the chain end-to-end: contracting rules tied to clinical evidence, item master hygiene, preference card accuracy, case cart readiness, inventory accuracy, PAR design, and last-mile delivery to the unit in low-unit-of-measure (LUM) where it matters most.
Clinician integration is the hinge. Value analysis cannot be a paper committee that meets to rubber-stamp new part numbers. It has to be a forum where surgeons, nurses and supply chain leaders align around outcomes and use patterns with decision rights for substitution pre-approval rules, utilization-variance thresholds and trial-to-standard timelines. Executives who sponsor this model insist that clinical and business teams share the same data, language and accountability for results. That alignment lowers costs without limiting physician choice, because the focus shifts to concrete measures like on-time starts, accepted substitutions, contract negotiation and consistent utilization.
The hidden costs of distribution
Distribution is the other blind spot. Too many systems judge success by how rarely they hear about it. “No news” feels like excellence until you quantify the waste hidden in motion, touches and rework. Internal logistics is clinical enablement work. Low-unit-of-measure to the point of use reduces nurse scavenging minutes per shift. Accurate case carts prevent last-minute scrambles that delay wheels-in. Well-designed supply areas keep nursing units and procedural areas from hoarding, leading to fewer canceled or delayed cases. The payback is measured in fewer canceled cases, fewer stockouts, better charge capture and a calmer floor.
Technology can enable these improvements, but only when it’s aimed at the right problems. Many organizations have tolerated stagnant tools and underpowered data for years, then wondered why value never materialized. Modernizing the stack should begin with a clear inventory of use cases: Can we see item-level demand at the service line and location level? Do we trust our preference data enough to build a case cart that matches reality? Can we model supplier risk and alternatives for our top categories of spend? Are substitution rules codified and actionable? Invest where the answers are “no,” and insist on adoption plans that cross supply chain, perioperative services and finance. Tech that lives in a silo becomes another sunk cost.
Leadership posture is the real limiter
A common objection is size: “We’re not big enough to run advanced models or a consolidated service center.” Size helps in some cases, but progress comes from behavior change. Smaller systems can still rationalize vendors in targeted categories or pilot low-unit-of-measure in high-impact areas — for example, reducing wound-care vendors from 12 to three or converting the top 20 med-surg SKUs to LUM on two units. The real limiting factor is leadership posture: a willingness to revisit long-standing relationships, test alternative sourcing when the data supports it, and reset expectations with clinical leaders. That takes executive cover and patience, but it is teachable and repeatable.
Governance is where posture turns into practice. A senior-level steering group should span perioperative, pharmacy, finance and nursing leadership, with a monthly calendar, clear decision rights and a shared dashboard. Item master and preference cards stay on the agenda as do other KPIs. Any major supply contracts should show clinical utilization assumptions and handling costs. The dashboard tracks fill rate, substitutions, case delays and price variance, with leader incentives tied to those shared metrics. When the scorecard is shared, the habits stick.
The payoff is visible on the floor and on the P&L. Fewer line changes, higher on-time starts, cleaner charge capture and lower stockout rates across all supply areas. Systems that elevate supply chain negotiate terms informed by their own data, not list discounts. They weather disruptions with substitution playbooks already agreed to operations and clinicians. And when they build a consolidated service center, it is to solve specific problems — space, labor efficiency, standardization, supplier leverage — not because it looks strategic on a slide and is fun to talk about at conference.