Mayo Clinic CEO blasts 'just-in-time' ordering as pandemic changes supply chain

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The CEO of Mayo Clinic said the "just-in-time" inventory strategy that minimizes the need for inventory overhead doesn't work in healthcare, especially during a pandemic. (Wikimedia Commons)

The COVID-19 pandemic will force hospitals to rethink the “just-in-time” supply chain strategies that led to shortages of needed supplies, Mayo Clinic's CEO said.

The strategy is used by some hospital systems and other industries to order supplies only when needed in order to cut inventory expenses. But the inherent vulnerabilities of "just-in-time" ordering were exposed in the face of the COVID-19 crisis as hospitals struggled to get enough personal protective equipment (PPE) and ventilators.

Mayo Clinic President and CEO Gianrico Farrugia, M.D., said at an event Tuesday sponsored by Fortune magazine that the supply chain was one area in which the system was lacking.

“We failed when it came to understanding how fragmented our system was and, of course, the strange way we pay for healthcare,” Farrugia said.

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Mayo has learned that while a just-in-time supply chain works well for other companies, it doesn’t work for healthcare under a pandemic, he said.

“We are preparing for the next one,” Farrugia said. “That requires us to have a much more robust supply chain with many different pathways to ensure we have the right supplies.”

Hospitals have taken several moves to ensure they have enough supplies as COVID-19 cases ramp up. Some systems, such as Advocate Aurora and Banner Health, even bought a stake in a domestic PPE manufacturer to counteract the supply chain’s reliance on overseas manufacturers.

While just-in-time may not stick around in hospitals, something else might: telehealth.

Farrugia said telehealth use has exploded, much like the rest of the healthcare industry, as the Trump administration gave more flexibility to providers to get reimbursement.

Now, healthcare systems are trying to figure out how to make the changes permanent after the pandemic.

“It is incumbent we transform healthcare from within by not going back to the old way of doing things,” Farrugia said. “We expect to have a much more integrated healthcare experience where you don’t differentiate between your telehealth visit and in-person visit.”