Hospitals in the U.S. face many problems when managing their supply chains. These problems have gotten worse with events like the COVID-19 pandemic and natural disasters. These issues affect both costs and the quality of patient care.
One big problem is that important medical supplies often run out. For instance, during the start of the COVID-19 pandemic, almost one-third of U.S. hospitals ran out of face masks, and 13% had no plastic face shields. Natural disasters like Hurricane Helene in 2024 caused major disruptions too. Flooding at a plant stopped about 60% of the country’s intravenous (IV) fluid supply. These events show how easily the supply chain can be hurt by outside problems.
Hospitals need many supplies every day, from syringes and gowns to special machines like heart valves and X-ray tools. When there are shortages, hospital work is affected and patient safety can be at risk. Delays and backorders make it hard for hospitals to keep enough supplies and give steady care.
Many hospitals still use manual methods to handle buying and tracking supplies. These manual systems cause mistakes, delays, and make it hard to see current stock levels. Without real-time data, hospitals can either order too much or too little, which leads to waste.
Hospital workers spend a lot of time fixing inventory problems. Studies show that clinicians spend about 17% of their workweek on supply chain tasks instead of patient care.
Hospitals often depend on only a few suppliers for important products. This makes them more at risk if those suppliers have problems. Issues like trade tensions, tariffs, and shipping delays make this worse and can increase costs by around 15% or more.
The medical supply chain has strict rules to follow. But there are more recalls of medical devices and products now. For example, FDA recalls of devices almost doubled from 2012 to 2022, rising to nearly 900. Poor-quality or unsafe supplies during emergencies threaten patient safety and the hospital’s reputation.
Supply chain costs take up 15% to 40% of a hospital’s budget. Inefficiencies cause billions of dollars of losses each year—about $26 billion is wasted on supplies and supply chain issues. To control costs, hospitals sometimes have to cut spending on staff or technology, which may hurt the care they provide.
Group Purchasing Organizations, or GPOs, play an important role in hospital supply chain management in the U.S. Almost 97% of hospitals use GPOs to combine their buying power, which lowers costs and improves supply reliability.
GPOs let hospitals join together to buy in bulk. This teamwork helps them get better deals from manufacturers and distributors. For example, the largest GPO, Vizient, manages contracts for over half of the acute care hospitals in the country and saves more than $30 billion a year. Hospitals using GPOs typically spend 10 to 15% less on supplies than those that don’t.
By grouping demand, GPOs get better prices and contract terms. This is very helpful for smaller hospitals that don’t have as much buying power alone.
In addition to better pricing, GPOs offer tools that improve how hospitals see and manage their inventory. They use data to check supplier quality and help avoid supply problems.
GPOs gather buying data from all members, giving hospitals forecasts based on size, location, and patient types. This helps keep the right amount of supplies, reducing shortages and excess stock that can expire.
GPOs help hospitals access more suppliers, including smaller and local ones. This reduces reliance on just one or a few suppliers and strengthens the supply chain against disruptions.
By speeding up the process of adding new suppliers, GPOs make sure hospitals have multiple options for important products. This lowers the risk if one supplier has issues.
Many hospital buying teams lack special knowledge about supply chain best practices. GPOs offer education, benchmarks, and advice programs to help hospitals. They guide hospitals to standardize medical devices, balance doctors’ preferences with cost-effective buying, and improve supply management.
Programs that focus on cutting waste and standardizing inventories have helped hospitals spend less without lowering care quality.
Technology like artificial intelligence (AI) and automation is becoming important in hospital supply chains. These tools help reduce manual work, cut errors, and give better predictions for planning.
AI looks at past data, outside factors like pandemics or weather, and current stock to predict future needs. Hospitals using AI were able to prepare better for supply shortages during COVID-19.
Nearly 46% of U.S. healthcare organizations now use AI for tracking risks and optimizing inventory. AI helps find possible product shortages early and lets hospitals plan by building stock or finding new suppliers.
Manual buying systems are slow and have errors. Connecting supply chain systems with hospital software for orders, billing, and payments lets hospitals automate many steps.
Hospitals like Northwestern Medicine and Piedmont Healthcare have seen big results, such as an 81% drop in price errors and more than double their payment rebates. Automation also reduces staff workload, so they can focus more on patients.
Technologies like RFID (Radio Frequency Identification) and IoT (Internet of Things) devices let hospitals watch supply use in real time. This helps stop running out or having too much stock, saving resources and cutting waste.
For example, Forest Baptist Health uses automated data capture when supplies are used, improving billing accuracy and reducing mistakes.
AI and automation improve communication and data sharing between hospitals, suppliers, distributors, and GPOs. This makes the supply chain clearer and helps fix problems faster.
Experts say working together with shared digital platforms cuts delays and waste, making the supply chain stronger.
Healthcare supply chains in the U.S. are affected by economic and political issues. Higher tariffs, recalls, and labor shortages make buying supplies harder. The government has put more than $1.5 billion into making essential medical supplies in the U.S. to depend less on other countries.
Hospitals are rethinking their deals with GPOs and Integrated Delivery Networks (IDNs). They want partnerships that help with long-term supply security, not just short-term savings.
Groups like the Healthcare Supply Chain Association (HSCA) and AHRMM offer updated policies, education, and online training to help hospital supply staff handle these changes.
Hospitals and medical practices in the United States still face many challenges in managing supply chains. These problems affect budgets and the quality of patient care. Group Purchasing Organizations help by lowering costs, improving supplier connections, and giving better insight into supply operations. Together with AI and automation, these tools can help make healthcare supply systems stronger and more efficient.
GPOs are entities that help health care providers aggregate their purchasing power to negotiate discounts on medical supplies and services from manufacturers and distributors, ultimately aiming to reduce costs.
GPOs enhance supply chain efficiency by benchmarking supplier performance against competitors and fostering collaboration among suppliers, which can lead to better pricing and improved quality.
Approximately 97% of all hospitals in the U.S. utilize a GPO for procurement, indicating their widespread adoption in the healthcare sector.
Large GPOs, such as Vizient, generate over $30 billion in aggregate savings annually for hospitals through optimized purchasing practices.
Hospitals often lack expertise in supply chain management, making it challenging to control supply costs while ensuring high-quality patient care.
The findings provide insight for policymakers, such as the Centers for Medicare and Medicaid Services, to develop strategies aimed at reducing healthcare costs.
The effectiveness of GPOs in enhancing buyer-supplier relationships can vary based on the hospital’s dependency on suppliers and their ability to coordinate directly with them.
GPOs can significantly support hospitals’ supply-chain outcomes but the effectiveness of their support depends on the hospitals’ dependency and coordination capabilities.
It is the first paper to empirically analyze the role of organizational collectivities like GPOs in marketing, contributing new insights to this complex area.
The researchers suggest exploring cooperative arrangements among hospitals, pharmacies, and community health agencies within multi-party alliances for improving patient care.
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