Each day, the headlines remind us of the desperate shortage of medical supplies to fight the coronavirus. Healthcare workers are forced to treat patients without proper protective gear, manufacturers are scrambling to produce ventilators and masks, and rumors about unproven treatments lead to runs on drug supplies.
While healthcare, policy, and business leaders race to address these urgent needs, there’s a brewing storm on the horizon for our healthcare system that we must not ignore. People’s everyday medical concerns didn’t disappear with the coronavirus, and they can’t be put on hold indefinitely. At the same time, supply chains throughout the world have been disrupted as factories remain shuttered or shift their production to coronavirus supplies.
Fighting the coronavirus pandemic must be our first priority, but we also need to anticipate broader destabilizations in the healthcare supply chain that will ripple out in the coming months, as supplies are exhausted and manufacturers struggle to meet heightened demand. If we don’t turn our attention to these cascading problems, we may wake up and find ourselves unable to fill prescriptions for chronic conditions or secure surgical supplies to treat accident victims or usher newborns into the world. We must act now to head off a healthcare supply shortage that could be even broader and deeper than the one we’re currently facing.
A precarious supply chain with more problems in store
Hospitals are among the most resource-dependent organizations in our economy, producing virtually nothing while consuming a steady stream of supplies from outside sources. My research has found that, on average, supplies make up 15% of total hospital expenditures, though this can be as high as 30% to 40% in hospitals that perform surgery frequently. In recent years, hospitals have tended to focus on supplies as a cost sink that should be managed as sparsely and efficiently as possible. This lean, just-in-time approach doesn’t allow for stockpiles of ventilators and masks for unlikely events such as the current pandemic.
It also leaves hospitals unprepared for other supply shortages headed our way. Many of the “non-urgent” medical procedures that have been suspended, such as cancer surgeries, cannot be postponed for long without harming patients. When these procedures can no longer be delayed, will hospitals have the personal protective equipment, surgical supplies, and hospital beds to perform them? What about the sedatives, anaesthesia, and painkillers they need? We are already seeing shortages as demand for these drugs—which are needed to put COVID-19 patients on ventilators—spiked 50% in March.
Other pharmaceutical shortages are likely to emerge in the coming months. We’ve witnessed runs on hydroxychloroquine after President Trump touted the drug as an unproven treatment for COVID-19, making it difficult to find for patients who regularly take it for lupus and rheumatoid arthritis.
In addition to demand spikes, the pharmaceutical industry may face supply shortages as existing production operations around the globe are disrupted. India, for example, exports more than $20 billion in pharmaceuticals each year—and the country is staring down the barrel of its own growing coronavirus crisis. The pharmaceutical industry struggled with similar problems after Hurricane Maria, when companies with factories in Puerto Rico faced major disruptions, in some cases losing their entire production capacity for months.
Through all this, the healthcare system’s human resources are being depleted as workers on the front lines are pushed to the breaking point. Yet even as states turn to retired healthcare workers and new graduates to help fight the coronavirus, practitioners who specialize in elective procedures are being laid off. According to the American Hospital Association, many healthcare organizations are struggling financially as their usual sources of revenue from outpatient visits and surgeries have been interrupted.
We must act now to avoid cascading problems
We must act now to anticipate and prevent these cascading healthcare supply chain problems, so that we can fight ongoing waves of coronavirus (if necessary) while still addressing our population’s day-to-day healthcare needs.
The White House Coronavirus Task Force, FEMA’s Supply Chain Stabilization Task Force, and other federal and state efforts to coordinate supply chains should focus not only on the most urgent needs, but also on anticipating and responding to the challenges on the horizon. They may be best positioned to look at the entire system and anticipate what medical supplies, drugs, and human resources will be in short supply 3, 6, or 12 months from now.
Healthcare organizations need greater communication and visibility across the chains that supply them with medical devices and pharmaceuticals. They should strengthen ties with suppliers, distributors, and group purchasing organizations (GPOs) to develop plans to meet institutional and community needs in the coming months. Producers and supply chain intermediaries should be more transparent about their supply levels and their contingency and risk management plans.
As many hospitals are overwhelmed with immediate concerns, they may need to reinvigorate state hospital associations to act on their behalf. There is also an important role for “peak use companies” that rent equipment like ventilators to hospitals facing periods of unusual demand. There has been surprisingly little mention of these organizations recently, and we need to better understand their capacity to supply hospitals in the coming months.
As we work to meet our most urgent needs, we must also anticipate what supplies, pharmaceuticals, and human resources will be needed in the coming months.
In addition, the healthcare system should be flexible in how it draws on healthcare workers’ essential skills while protecting their jobs and well-being. The federal government has loosened some regulations, but there is more states can do, such as expanding the scope of practice for key healthcare professions to allow pharmacists, nurses, and other practitioners to provide treatment for coronavirus. The healthcare system must sustain relationships with retirees and laid-off workers, offering incentives for participation and rapid retraining in needed specialties. Policymakers should also consider ways to preserve the jobs of healthcare workers who are being let go so they’re available when non-urgent procedures resume.
Even when COVID-19 recedes, our healthcare system can’t go back to business as usual. This crisis has revealed the dangers of viewing supply chains solely in terms of cutting costs. Hospitals may need incentives to approach supplies from a public health perspective instead and build up reserves for low-risk, high-impact threats. Healthcare workers and leaders need enhanced training so their clinical perspectives can inform supply chain decisions. While the health sector faces many unique challenges, our research at Arizona State University has shown that there is much it can learn from how other industries manage their supply chains.
While the extent of the COVID-19 pandemic is unprecedented in recent memory, we’re facing an immediate shortage of key supplies partially because our healthcare system wasn’t incentivized to stockpile for the future. We must not make the same mistake again. As we work to meet our most urgent needs, we must also anticipate what supplies, pharmaceuticals, and human resources will be needed in the coming months—and where demand will fall short due to production disruptions. Beyond that, we owe it to ourselves to learn from this moment so our healthcare system is not caught off guard the next time there’s a public health crisis.
Eugene Schneller is a professor of supply chain management at the W. P. Carey School of Business at Arizona State University. His research and consulting focus on public and private health system procurement and healthcare supply chain strategy in the U.S. and globally.