The Impact of Digital Transformation on the Healthcare Supply Chain

Even before the COVID-19 pandemic, the healthcare industry was undergoing significant changes. Patient care was moving beyond the hospital to new locations, staffing challenges were leading to operational cost pressures, and a complex supply chain was adding pressure to an already strained system. As many in the healthcare industry have noted, the pandemic didn’t necessarily create new issues as much as it shed light on existing issues that can no longer wait to be addressed.

Meanwhile, consumer expectations set by today’s experience economy have been seeping into healthcare. Patients are also consumers, accustomed to a subscription-based, life-on-demand lifestyle with services delivered whenever and wherever they are needed. Consumers expect a similar experience from their healthcare provider—from first contact through billing and reimbursement.

The confluence of these mega-trends is driving providers to think differently about the patient journey, specifically how to move to a digital experience. As providers establish a digital front door for their patients, they are carrying the same transformational approach to their supply chain and supplier relationships.

Leading suppliers understand the need to distinguish themselves by making it easy for providers to conduct business with them, looking at the full customer experience and clearly articulating their value every step of the way. Suppliers can seize the opportunities presented by providers’ needs by embracing a digital transformation strategy. Done right, this approach will result in a more resilient supply chain, contain operating costs, and meet new digital patient experience demands.

Digitization: A Critical First Step

Digital transformation enables providers to deliver care, improve processes, and reduce costs. In addition, a digital enterprise can be much nimbler to address changing market dynamics. But an organization must digitally transform its entire operation to reach this state. There are two strategies currently helping providers make this move that also greatly benefit suppliers: automating the procure-to-pay process and moving to a cloud-based ERP.

Automating procure-to-pay provides many benefits. It can reduce costs by eliminating manual processes, support a remote workforce, and create data points. Suppliers who seek to support providers’ shift to a digital patient experience must deliver the same approach to their relationship with their provider customers. Slow, error-prone manual processes are an obstacle to this approach. As an example, customers need to understand order fulfillment and supply delivery. The expectation is that acknowledgement will no longer occur in hours or days, but in minutes. Manual processes simply cannot meet this demand.

The pandemic changed work habits forever. To retain the best talent, remote workforce support has become a reality for suppliers and providers. Automation tools support this as they can be leveraged from anywhere and free up scarce staff to do things only humans can do. For example, accounts payable staff may no longer be in a location to receive and process paper-based invoicing. Suppliers establishing a digital customer experience must realize this and move to electronic invoicing and payments. This move also allows providers and suppliers to take advantage of early payment opportunities and maximize working capital.

Finally, a nimble enterprise that responds to rapid change must make data-driven decisions. Each automated supply chain transaction generates a data point that when aggregated, can support decisions across the entire supply chain.

New care models and new care locations are driving the second digital transformation strategy, moving to a cloud-based ERP. This technology infrastructure fosters collaboration between providers and suppliers. As information silos are dismantled and processes are extended closer to the point of care, outdated and erroneous information can generate negative impacts throughout the supply chain. These impacts are a leading cause of disruption in the acquisition and procurement of supplies, which strains relationships with providers and can also have an impact on patient care. Providers are leveraging these expanded technological capabilities to drive business process change and avoid these impacts.

As suppliers think about delivering a digital experience, they must understand their role in their customers’ digital transformation journey. They must lean in to support greater automation, but a digital experience requires automation and data. Suppliers must consider what data and information exists in their organization that can improve customers’ experience. Suppliers further down the journey of delivering a digital experience are providing catalog data with rich attributes like images and real-time contract information to help ensure their customers are getting the right product at the right price at the right time.

Catalog and contract data aligned between provider and supplier ERP systems coupled with automated procure-to-pay creates a foundation that gives suppliers greater visibility across the healthcare supply chain and into their customers. This results in more strategic and value-based financial decisions that also help improve a supplier’s operational performance. For example, it allows suppliers to reallocate product to areas with the highest demand.

That same foundation allows the relationship to further extend to clinical systems and the point of care. A digital experience from suppliers that reaches the patient at the point of care is the ideal state. It is here where the digital patient experience and digital supply chain meet. 

Making Sense of the Mountains of Data

Digitization is the critical first step in this journey because it creates the data foundation. However, a digital customer experience goes well beyond automation. It leverages data in order to change behavior and results. As the volume of data continues to grow exponentially daily, it is driving suppliers to further evolve their approaches to customer engagement.

The next critical step in building a digital customer experience is to transform the right data into actionable insights. When predictive analytics are applied to healthcare supply chain data, it can help support critical business decisions that improve patient care, and avoid potential supply shortages, stockouts, and delays.

Predictive analytics will continue to play an increasingly important role in the healthcare supply chain, enabling suppliers to gain a competitive advantage by making sense of the mountains of data. For example, it can help pinpoint which supplies are most effective for a particular patient cohort and how to deliver them in the most cost-effective way. This can result in better patient outcomes and improved operational efficiencies. It also helps build stronger relationships between providers and suppliers, and, in turn, between providers and patients.

A digital customer experience, extended to the point of care, aligns suppliers with customer needs. Coupling this with predictive analytics transforms the experience from efficient to engaged.

Setting a Foundation for the Future

The third critical step is to establish a foundation that will support their needs today and in the future. This requires supporting value-based care and preparing for the continued rise in healthcare delivery outside the hospital.

Suppliers can play a critical role as providers strive to deliver value-based care, which requires a full understanding of the true cost of care delivery. This includes product costs, knowing which products deliver the best outcome, and which products work best for patients. As today’s supply chain professionals shift to digital experiences, increasing automation and standardization of supply chain processes, they have visibility into the true cost of providing patient care, including how variation can affect quality.

Delivering a digital customer experience in the healthcare supply chain is no longer an option, it’s imperative. The urgency around it will only increase as patients and providers seek healthcare outside the hospital. Patients, in fact, have come to expect it. Telehealth went mainstream during the pandemic and today, around 40 percent of surveyed consumers expect to continue using telehealth—up from 11 percent of telehealth users before COVID-19, according to McKinsey.

As more healthcare is delivered outside of traditional hospital settings, hospital at home (HaH) is also poised to take off in 2022. Along with COVID-19 being a key accelerator, the heightened focus on supply chain management, major advances in remote monitoring technology, and increased government and payor interests make this model more accessible. According to Forrester analysts, the number of hospitals that deliver care at home will triple this year. This makes sense, given that HaH has shown to improve medical outcomes, lower costs, and help alleviate hospital systems’ rising financial pressures.

However, as HaH is offered by more healthcare providers, the supply chain complexity around products and people will increase. Suppliers will need to work closely with providers to help ensure the effective logistical coordination of materials and supplies to patient homes. It will no longer be about getting supply to a storeroom, but rather packaging and delivering all supplies necessary for a care pathway. Suppliers who understand and complement this process will be those with the greatest customer alignment. Leveraging automation, data and insights, and new technology capabilities can allow suppliers to create new services and products that are specifically designed to support the HaH movement.

The ultimate digital customer experience will become one that connects from the patient through the digital front door and into a resilient, responsive supply chain. To deliver on this vision, suppliers must keep pace with today’s digital transformation initiatives and the change they are accelerating in the healthcare supply chain. By taking the first steps now, suppliers can lead instead of react to the sweeping changes that are currently reshaping the industry. 

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Chris Luoma is responsible for the complete end-to-end product lifecycle process and overall portfolio strategies at GHX. With more than 20 years of experience in the health information technology industry, Luoma’s responsibilities have spanned customer service, consulting, sales, strategy, product marketing and product management. Luoma is a graduate of Duke University with a bachelor’s degree in biomedical engineering.