Becker's Hospital Review

16 Executive Briefing Sponsored by: H ospital supply chain teams have always operated with tight budgets and an eye toward savings. This year, however, the COVID-19 pandemic has spawned a set of circumstances that have crushed supply chain budgets and pushed many supply chain teams to the breaking point. Becker's Hospital Review recently spoke with Carl Natenstedt, founder and CEO of Z5 Inventory, about the new challenges facing supply chain teams and how health systems have overcome these obstacles by collaborating with expert partners. The COVID-19 pandemic has created ideal conditions for a healthcare supply chain crisis This year has been unique for hospitals and health systems due to the convergence of three pandemic- related trends. Most organizations experienced decreased profitability as the number of elective surgeries plummeted. "Most health systems depend on surgical volume for a large percentage of their revenue and profitability," Mr. Natenstedt said, "and suddenly that model was flipped upside down." At the same time that revenues were decreasing, personal protective equipment prices skyrocketed. According to Mr. Natenstedt, it was not unusual for hospitals to pay $6 to $8 for an isolation gown that used to cost less than $1. Also, to protect employees and patients from COVID-19, PPE consumption increased dramatically. Z5 Inventory has seen health systems using five to ten times more PPE than before the pandemic. Although the supply chain situation has rebounded a bit, it hasn't returned to pre-COVID-19 levels. "Prices have come down substantially for PPE, but they are still higher than before the pandemic," Mr. Natenstedt said. "In addition, PPE consumption is still at an all-time high. As a result, supply chain budgets are still experiencing extreme pressure." Supply chain leaders are confronting pandemic- related challenges with an innovative mindset Healthcare supply chain leaders have responded to pandemic-related issues with agility and flexibility. "Most of our health system customers quickly shifted from managing their normal inventories for surgical products and basic hospital commodities to acquiring enough PPE to handle spikes in COVID-19 hospitalizations," Mr. Natenstedt explained. As supply chain leaders turned their attention to PPE acquisition, they had to find new suppliers and participate in offshore sourcing, which many had never done before. Many organizations have opened new warehouses to store excess PPE and launched systems to track PPE purchasing activity. "For a long time in supply chain and in healthcare, there's been a 'business as usual' mentality," Mr. Natenstedt said. "The pandemic has shaken that up. The pressure is on to find new ways to find savings and improve operations that will make organizations resilient against future pandemics. All these factors are motivating supply chain leaders to be more creative, innovative and open to new ideas in 2020 and beyond." Leading health systems have partnered with experts to unlock savings from existing supply chain operations Many health systems have turned to companies like Z5 Inventory to generate additional savings from their supply chain. Z5 Inventory's mission is to help healthcare organizations right size their inventories by reallocating excess product to a different facility in their system, selling it to other health systems through Z5's third-party network or donating it. During the early days of the pandemic, Z5 Inventory offered its platform for free to all hospitals and health systems to manage their PPE inventory. Organizations suddenly had large volumes of masks, gowns and other PPE supplies that, in many cases, they acquired directly from China. Many, however, didn't have good systems to manage these inventories. Z5 Inventory also helped customers by sourcing products from offshore vendors. "Although this was a new business for us, our clients trusted us. They were bombarded by brokers with whom they had no relationship. Those brokers wanted 50 percent paid up front, which could represent millions of dollars for a large No more business as usual: How hospitals' COVID-19 response may bring lasting innovation to the supply chain

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