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Why a Patient-Centered Supply Chain Is Critical to the Future of Healthcare


Michael Walker, global lead for healthcare in Oracle’s Industry Solutions group, wrote in Forbes about how a patient-centered supply chain plays a crucial role in the future of healthcare.

A 2001 report titled Crossing the Quality Chasm: A New Health System for the 21st Century from the Institute of Medicine listed six specific goals for improving the U.S. healthcare system—make it more 1) safe, 2) efficient, 3) effective, 4) timely, 5) equitable, and 6) patient-centered. Achieving these goals would benefit both current and future patients by providing more targeted, widely available, and less expensive care. A patient-centered supply chain is intended to help health organizations achieve these goals.

Why Change Is Necessary

Supply chain plays a central role in any business because its efficiency and effectiveness influence every aspect of an organization. Most hospitals stand to cut their supply costs significantly and improve healthcare outcomes by implementing modern demand-driven supply chain processes and tools. This step toward modernization—along with the introduction of emerging technologies such as data analytics, the Internet of Things, blockchain distributed ledger networks, and artificial intelligence—can help health organizations get closer to their goal of providing patient-centered care.

Everybody knows that healthcare costs are rising rapidly—about 5 percent per year in the United States, where they are estimated to hit $5.7 trillion by 2025. One place to start reining in costs is with hospitals’ second-largest expense: Supplies, which is second only to labor costs. Supplies include medications and other medical and surgical equipment like IV bags, masks, gloves, operating gear, sponges, and bandages.

Hospitals’ asset management practices are, for the most part, highly inefficient.

Consider the following statistics:

  • Hospitals in the U.S. destroy $800 million of expired drugs annually.
  • About 4,500 drugs and medical devices are recalled every year, and 5 percent of those recalls are considered life-threatening.
  • Nurses spend an average of 21 minutes per shift searching for lost equipment.
  • Hospitals only use their mobile clinical devices, such as ventilators and heart monitors, 42 percent of the time. Those devices sit idle for more than half of the time.
    • The upshot: Hospitals buy more mobile equipment than they need.

Additionally, it’s important that health organizations coordinate the supplies that the doctors want to use, known as physician preference items (PPIs), with their agreed-on standards. This ensures that they don’t have 10 physicians using 10 different supplies for the same procedure.

However, patients don’t only go to hospitals for care. Urgent-care clinics and treatment centers for specific disorders are also very popular treatment facilities. Many of these facilities are aligned with local hospital systems, yet each location, for the most part, stocks its own set of supplies. It’s a recipe for inventory overload and waste.

When you take all of these factors into account, it’s no surprise that hospitals are taking measures to know exactly which equipment and supplies they are using, where those supplies are located at all times, and how to get them off the shelves as quickly as possible.

How to Develop a Patient-Centered Supply Chain

All of these reasons are why healthcare executives are looking to adopt supply chain best practices from other industries in order to develop a patient-centered supply chain. Implementing a demand-driven supply network (DDSN), which responds to customer (or in this case, patient) requirements, can help healthcare providers pare down material costs significantly, as it has done in other industries for years.

It’s increasingly important to healthcare providers that they put their patients at the center of their demand and fulfillment strategies, a focus that could be aided by using several emerging technologies:

  • Data analytics and machine learning
  • Internet of Things
  • Blockchain
  • Artificial intelligence

Data Analytics and Machine Learning

Data analytics tools can help physicians and researchers determine the real cost and patient benefits of drugs, supplies, and treatments. Machine learning algorithms can chunk through reams of data for physicians who are looking for patterns in a patient’s health data over time, a tenet of patient-centered care, and for researchers who are studying the outcomes of many different clinical trials in search of cost-effective remedies.

Internet of Things

Known in the industry as IoHT (Internet of Health Things), this set of wireless networking, sensor and analytics technologies will be critical to helping providers keep track of their assets across multiple facilities. It will also play an important role in the emerging field of Connected Care—the ability to monitor and provide services to patients in their homes and other locations.


Since blockchain can provide a shared, immutable, private record of transactions among business partners, blockchain promises to allow authenticity and expedite recalls to remove harmful or defective products from clinical use. When used together, blockchain and IoHT can help improve patient safety, especially in regard to product traceability. Blockchain will help health product vendors to know and fulfill their responsibilities. Meantime, IoHT can help products, especially medications, to reach their destinations on time and un-tampered with.

Artificial Intelligence

A very simple but impactful example of using AI in healthcare is the chatbot. While a patient is rushed down a hallway, a clinician might use a voice command to request an inventory transfer to a specific location, improving the timeliness of care. Chatbots could increase nurses’ effectiveness by providing them with information at the point of care, instead of their having to return to a nursing station. Chatbots could also improve patients’ well-being by providing them with the most convenient care locations for follow-up visits.


Supply chain optimization aligns with the healthcare industry’s move away from hospital-oriented acute care and toward more proactive and ongoing patient-centered care. It also helps support the industry’s phasing out of acute care’s fee-for-service model and implementing one with fees based more on consistency and value.

By implementing a patient-centered supply chain, powered by well-tested tools and emerging technologies, U.S. health organizations can affect much-needed improvements in their processes, procedures, and outcomes.

Why a Patient-Centered Supply Chain Is Critical to the Future of Healthcare