10 Healthcare Procurement Solutions for Challenges Facing Teams in 2024

Healthcare procurement has many characteristics that create unique challenges for buyers. Learn how technology makes a difference in this quick overview.
Written by:  Mark Saltarelli
Last Updated:  April 17, 2024

For decades, healthcare providers like clinics and hospitals have struggled with ineffective and expensive procurement barriers that can drive up patient costs and affect healthcare outcomes. Healthcare procurement faces specific challenges that, until recently, have been almost universally answered by group purchasing organizations (GPOs). 

These purchasing programs offer some benefits in cost savings, contract management, and access to supplies. But healthcare procurement is long overdue for alternative options that specifically address its unique challenges. 

Today we’ll discuss the challenges healthcare organizations face in procuring needed goods and equipment and the solutions technology provides to the millions of healthcare organizations buying items every day. 

Read on to learn more about healthcare procurement and its challenges, including: 

  • What is healthcare procurement? 
  • How is healthcare procurement different?
  • What are the top 10 challenges of healthcare procurement?
  • How does spend efficiency software solve healthcare procurement challenges?

Download the free ebook: Choose the Right Procurement Technology With This Decision Matrix

What is healthcare procurement?

Healthcare procurement is the process of sourcing goods and equipment for clinicians, hospitals, and other healthcare settings. It involves identifying the right suppliers, negotiating pricing and terms, tracking procurement activities, and managing the supply chain. Healthcare procurement professionals also ensure vendors comply with all laws and regulations for purchasing goods and services. Procurement in the healthcare setting is an essential part of running a successful organization.

How is healthcare procurement different?

While procurement in most companies is an independent, self-directed activity, healthcare buying is somewhat more complex. Healthcare procurement differs from other types of procurement management in the following ways:

Regulatory environment: Healthcare products and purchasing activity are subject to different standards than most types of procurement. Purchases made on behalf of healthcare organizations must meet certain standards and follow regulatory rules and guidelines applied to healthcare finance. Vendors, therefore, must be able to work within these requirements. 

Decision-making: Clinical staff is instrumental in the decision-making process for healthcare procurement contracts. Buyers must have the expertise to discuss requirements, vet potential suppliers, and negotiate acceptable rates and contract terms. This type of procurement requires special oversight to ensure compliance and optimal pricing outcomes. 

Product requirements: The products and equipment used in the healthcare setting must meet the specific needs of a healthcare organization, including quality thresholds, volume needs, shipping and logistical requirements, and safety standards. Vendors must be able to certify product quality and availability to fulfill the demands of the procurement contracts they sign.

Procurement structure: Supply chain management requires coordination among various stakeholders and departments, as many healthcare organizations use collective procurement methods. This means vendors must be able to route bulk orders to the appropriate places, track shipment and inventory levels across multiple locations, and serve the common needs of buying groups (called group purchasing organizations). 

procurement tech guide

Choose the Right Procurement Technology With This Decision Matrix

There are A LOT of procurement softwares out there. Make sure you're choosing the right one for your business.

Download the ebook

Top 10 challenges of healthcare procurement (and how to solve them)

Buyers and suppliers face many challenges specific to the healthcare industry. These challenges can create time and access obstacles, especially for smaller healthcare providers like local clinics. But there are ways to overcome these issues and make healthcare buying faster, more efficient, and less costly. 

1. Manual procurement management

Managing healthcare procurement manually is costly, time-consuming, and resource-intensive. A common example of manual procurement management is the entry of purchase orders.  When administrators or floor staff enter and transmit individual orders manually, it creates a delay between ordering and fulfillment, potentially costing healthcare organizations additional money.

Procurement automation eliminates manual tasks, saving clinic staff and administrators money, time, and frustration. 

2. Inventory fluctuations

Logistics issues and manual procurement management may also lead to mismanaged inventory levels, shortages, and inaccurate shipment tracking — all of which cause further fulfillment delays or wasted resources. Floor staff must scramble to find necessary supplies or make do with insufficient resources during times of high need. 

Stabilizing inventory levels within the healthcare setting results in better patient care and lower stress for clinical staff. It gives workers the confidence that the items they need will be there when they reach for them. 

3. Procurement waste

Poor inventory management can also lead to excess stock of certain items. While access to plentiful supplies doesn’t seem negative, many consumable items in the healthcare setting have storage requirements or expiry dates. When these items sit on shelves unused, they present the potential for wasted procurement dollars or, worse, expired goods that aren’t usable when needed.

Trying to put these items to use through trade creates an internal logistical issue and draws staff attention away from patient care. Procurement software brings visibility to spending and inventory to reduce waste.

4. Individual, decentralized buying

Group purchasing and leveraged buying help healthcare organizations save money by creating access to volume discounts. When organizations leverage buying this way, they benefit from better prices and increased buying power. Large orders of high-use items also enable faster delivery times and enhanced ordering accuracy.

Individual buying, however, reduces the ability of a hospital or health system to access these price and volume discounts. When each department buys separately, the organization loses its purchasing power due to smaller order sizes. The result is higher prices and longer delivery times for vital items. Organizations that go it alone in traditional healthcare procurement face increased costs and reduced flexibility when responding to change. Procurement software eliminates buying barriers that make individual buying less competitive.

5. Poor delivery logistics

When healthcare organizations buy in bulk, they face different delivery challenges. Large orders can overwhelm hospitals with too much inventory and overstock on particular items or create situations where staff must spend resources tracking and placing inventory where it’s needed. 

Additionally, products may not be shipped in the right quantities or arrive at their destination on time, leading to further headaches for staff. All these logistical issues create additional costs for the organization and reduce procurement efficiency. Automated order tracking and fulfillment reports improve logistics and delivery times to keep staff well-supplied and focused on higher-priority tasks. 

6. Productivity losses

In addition to the increased costs of manual tracking and placing of inventory, healthcare workers can also spend too much time looking for what they need — up to 40 hours a month, by some estimates. All this time getting the right items to individual clinicians, searching for needed supplies, or shuffling items between different healthcare locations or departments costs money and productivity. These lengthy manual processes pull staff members away from important work. If procurement is delayed, it puts stress on the entire system. 

Issues in procurement also reduce efficiencies in treatment and prevent workers from providing optimal patient care. These productivity and quality losses can lead to an overall decrease in performance for the organization. Automation and tracking create visibility for staff while reducing their time spent managing inventory.

7. Fraud risk

Manual procurement processes are vulnerable to fraud and misconduct since it can be difficult to detect errors or wrongdoing if procedures are not standardized and documented. The lack of oversight makes it easier for internal actors to engage in fraudulent activities and abuse their access to medical supplies.

Improved procurement software ensures more transparency because procured inventory is tracked and monitored. This reduces the risk of mismanagement that costs healthcare organizations millions due to unintentional errors, internal bad actors, and third-party fraud activities. Software creates visibility that makes fraud and errors far less likely to occur. 

procurement tech guide

Choose the Right Procurement Technology With This Decision Matrix

There are A LOT of procurement softwares out there. Make sure you're choosing the right one for your business.

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8. Regulatory management

Healthcare organizations face significant regulatory management challenges in their procurement practices. Manual procurement makes it difficult to comply with changing requirements for patient safety and quality standards. Manually maintaining accurate records is especially challenging, as providers must document the origin of each item they procure and ensure they meet the necessary regulations. 

Errors in documentation can lead to costly fines or sanctions from regulatory bodies, meaning healthcare organizations must always have complete oversight of their procurement activities. They must keep up with changing regulations and laws to remain compliant and protect against financial losses. Software makes it easier to administer purchasing and ensure it remains compliant.

9. Supplier restrictions

Supplier restrictions further complicate healthcare procurement. Many healthcare organizations are limited to a select group of suppliers who may not offer the best prices or terms, leading to more expensive purchases. Additionally, some regulations require organizations to source particular supplies from pre-approved vendors, driving up internal costs and potentially affecting patient premiums. This forces healthcare organizations to carefully assess and manage supplier relationships to verify they meet all necessary regulations. Procurement software makes vendor management easier, enabling compliance management and benchmarking efforts while keeping costs as low as possible.

10. Poor procurement visibility

Poor visibility into procurement practices affects healthcare organizations in multiple ways. Without a comprehensive view of procurement operations, organizations cannot accurately benchmark prices, measure profitability, or optimize cash flow. This leads to higher costs and less successful negotiations with suppliers. It also limits the ability to see and access savings opportunities.

In some cases, this lack of effective visibility into the organization’s procurement activities may result in non-compliance with external regulations and laws. By implementing better approaches to data management and analytics, healthcare organizations gain greater transparency in their procurement practices, pricing, and cash flow management.

How spend efficiency software solves healthcare procurement’s biggest challenges

Procurement technology is one of the most effective tools for reducing costs and complications related to healthcare procurement. A platform that works effectively with regulated procurement environments will greatly improve procurement outcomes, compliance, visibility, and patient care. 

Spend efficiency software provides the following key benefits to healthcare buyers in need of more effective solutions:

  • Improved visibility into pricing, budgeting, and cash flow management
  • Ability to access preferred and pre-approved vendors
  • Enhanced reporting for compliance with external regulations and laws
  • Streamlined processes that enable faster decision-making and reduced costs
  • Robust data management capabilities for better insights into procurement activities

Get Order.co to modernize your healthcare procurement strategy

Spend efficiency specifically designed for high-regulatory settings combines flexibility with full support for the needs of healthcare. Order.co offers all the procurement and security features needed to streamline pricing and practices for clinical buyers of all kinds, including: 

  • Regulation-compliant, secure data handling to meet healthcare regulations 
  • Ability to access vendors in a curated, permission-based catalog of items to ensure compliant purchasing and high-quality goods
  • Automated workflows and purchase order building to place orders quickly and get clinicians back in front of patients 
  • Reporting capabilities to track purchasing and provide data for regulatory audits

If you need procurement solutions that keep the needs of healthcare organizations in mind, request a demo of Order.co today

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