Supply chain reactions: MGMA BestPrice on the right purchasing moves to make to minimize medical supply costs

Healthcare, like all industries, is subject to supply chain issues. Medical practices not only feel the impacts from raw material cost and availability, manufacturing capacity, and increasing shipping costs and delays for all product or raw material originating outside the United States — healthcare providers also face pandemic-specific requirements for personal protective equipment (PPE) and COVID-19 testing. 
 
In most cases, these issues impact independent providers disproportionately. An MGMA BestPrice broad analysis of 2021 Q3 data found independent providers spent 37% more on average for exam gloves over the prior quarter, continuing a long string of quarterly price increases that topped 100% year over year.* The Delta-variant-driven COVID-19 peak during the period drove utilization up by 9%, putting additional strain on inventory and raw materials. Even as COVID-19 cases subside, providers should not expect much relief for exam gloves, as deferred elective surgical procedures resume and glove utilization increases.
 
MGMA members should expect price increases to be relatively stable across vendors within a category based upon raw material and shipping costs and local COVID-19 outbreaks. For example, most exam gloves are manufactured in Malaysia, and most wound care products and PPE are made in China’s Wuhan province.
 
Providers should prepare for disruption of product availability from pharmaceutical manufacturers and price increases for the 2022-23 influenza season. Global drug manufacturers and their supply chains are focusing on COVID-19 vaccine production; other products are put on rolling production delays while vaccine production is impacted by capacity constraints.
 
The breadth of supply chain issues leaves no major manufacturer untouched. They are already buying production time at a size and scale to overcome any simple issues.
 
Of course, these product price and availability issues are secondary to MGMA member staffing challenges for 2022: Staffing and the increasing spend in a competitive market for providers and other workers means it's more important than ever for practice leaders to shore up their purchasing and leverage the savings associated with a group purchasing organization (GPO).
 
While these challenges may seem like intractable problems, MGMA BestPrice has been on the front lines of supply chain and labor challenges over the past 20 months to ensure that medical practices aren’t left behind as they serve patients of the front lines of care delivery. Here’s what we recommend administrative leaders do heading into the new year to hit the mark on new budgets even though several pandemic-related concerns persist:

• Align your purchasing with a national distributor. When supply is restricted, you benefit by consolidating spend with suppliers. While it always makes sense to have two national distributors, you want to focus your spend with a primary. 
• Protect your independent practice by aggressively utilizing suppliers and a GPO. For exam gloves or any product with supply chain vulnerability, reach out to your group purchasing organization to confirm "on-contract" pricing and availability, especially if you are purchasing non-contracted or private-label products where pricing can be much more volatile. 
  • Why is this important? If you don’t align your organization with committed purchasing through a GPO contract, you are making it much easier to push price increases on your organization. In many cases, you may be subsidizing committed GPO purchasers. Manufacturers are least able to raise prices, restrict supply, and generally change terms with committed GPO purchasers. Coordinating with the GPO helps you protect yourself.
• Review contract pricing with your GPO account manager. If you are an MGMA BestPrice member accessing the HealthTrust (HPG) contract portfolio, email support@mgmabestprice.org or give us a call at 844.234.6462.
• Act fast to engage your GPO, suppliers and distributors as soon as you become aware of an issue, and consider reaching out via the MGMA Member Community.

Learn more

Still want to know more about how a GPO can help your organization secure supplies and contain costs? Read "Dinosaurs, Aggregators, and the Case for Commitment in Group Purchasing.”
 
*Analysis includes average price paid by more than 3,000 independent providers utilizing all major national manufacturers, GPOs, and medical distributors during Q3 2021.