Michigan-based hospital system Trinity Health has taken a bold move to cut costs: It will run its own supply chain in-house.
The organization, one of the country's largest Catholic health systems, has set up its own supply hub in Fort Wayne, Indiana and has hired an outside firm, XPO Logistics, Inc., to help manage it, The Wall Street Journal reported.
Essentially Trinity is creating its own dedicated distributing organization. A company spokesperson said that Trinity would also continue to rely on HealthTrust Group Purchasing as its GPO. A 2014 study by the Healthcare Supply Chain Association estimated that the use of GPOs save hospitals as much as 18 percent on their supply costs.
The healthcare system expects to save about $20 million a year taking such tasks in-house, according to the article. The advantages of performing supply management in-house have distinct advantages given Trinity's size: It now operates 90 hospitals in 21 states, about double its size from just a half dozen years ago. The system had already engaged in extensive preparations in bringing its supply chain in-house, cutting down the number of items used among its hospitals and centralizing the procurement of supplies.
"As we're bringing more organizations together, we naturally want to take advantage of economies of scale." Trinity Senior Vice President Lou Fierens told The Wall Street Journal. "We had to rigorously reduce the amount of SKUs [individual products] that we use inside the hospital" and centralize procurement of the medical goods.
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