U.S. hospitals wasting about $25.4B on supply chain every year

Hospital finances
U.S. hospitals have an opportunity to save more than $25 billion collectively, according to a new report. (Getty/anyaberkut)

The amount of money U.S. hospitals will waste on unnecessary supply chain spending will reach $25.4 billion this year, up about 10% or $2.4 billion over last year, according to a new report.

In its study (PDF) of 2,300 hospitals, consulting firm Navigant also found that hospitals could save up to 18%, or $11 million a year per hospital, by reworking supply chain. That's the equivalent of 160 registered nurses, 42 primary care doctors or the cost of building two outpatient surgery centers, the firm said.

"At a time when operating margins continue to decline, we have found that hospital leadership not fully investing in their supply chain are missing changes to optimize the financial potential of their organizations," said Navigant Director Rob Austin in a statement. 


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The study's findings largely held true no matter a hospital's size, regional location or whether the hospital was urban or rural, nonprofit or for-profit, the firm said in its report.

What should hospitals do about it? Reducing pricing variation, such as by standardizing the use of physician preference items and medications proven to produce clinically equivalent outcomes at a lower cost should continue to be areas of focus for hospital supply chain, Navigant said.

RELATED: 4 healthcare executives weigh in on a supply chain conundrum

Hospitals must also invest in getting actionable data to help tie costs to patient outcomes, as well as staff who know how to analyze the data.

A report released earlier this year by the Healthcare Supply Chain Association, which represents the country’s biggest group purchasing organizations, estimated GPO's achieved healthcare cost savings of between $392.2 billion and $864.4 billion from 2013 to 2022.

Still, supply chain can be difficult to change in healthcare. When Amazon notably decided to scrap plans to sell pharmaceuticals to hospitals last spring, experts said that was at least in part because hospitals are very set in their ways when it comes to supply chain management.

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