Healthcare procurement teams face specific challenges that, until recently, have been almost universally answered by group purchasing organizations (GPOs). While these purchasing programs offer benefits in cost savings, contract management, and access to supplies, the healthcare industry is long overdue for a procurement solution that addresses its unique structure and needs. 

By understanding healthcare procurement challenges specific to buying medical supplies and consumables and which healthcare procurement solutions are available as alternatives to GPOs, healthcare organizations find more effective ways to save time and money on everyday purchasing and procurement. 

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What is healthcare procurement?

Healthcare procurement is the process of sourcing goods and medical equipment for clinics, hospitals, and other businesses in the healthcare sector. It involves identifying suppliers, negotiating pricing and terms, tracking procurement activities, and managing the healthcare supply chain. Since healthcare procurement professionals must also ensure vendors comply with certain laws and regulations, proper procurement is essential to multiple aspects of running a successful healthcare organization.

How is healthcare procurement different from purchasing in other industries?

While procurement in most companies is an independent, self-directed activity, healthcare buying is more complex in that it must also meet supply standards and regulatory requirements. Since procurement is integral to healthcare facilities' abilities to deliver care, these organizations must carefully manage order volume and delivery logistics. 

Regulatory environment: Unlike procurement in industries like hospitality and retail, healthcare products and purchasing activities are subject to a specific set of standards. Purchases made on behalf of healthcare organizations must follow regulatory rules and guidelines applied to healthcare finance and other regulated industries. Vendors, therefore, must be able to work within these requirements. 

Decision-making: Clinical staff is instrumental in the decision-making process for healthcare procurement contracts. Buyers must have the expertise to discuss requirements, vet potential suppliers, and negotiate acceptable rates and contract terms. This type of procurement requires special oversight to ensure compliance and optimal pricing outcomes. 

Product requirements: The products and equipment used in healthcare systems must meet the specific needs of a healthcare organization, including volume demands, shipping and logistical requirements, and safety standards. Vendors must be able to certify product quality and availability to fulfill the needs of the procurement contracts they sign.

Procurement structure: Supply chain management in health systems requires coordination among various stakeholders and departments, especially in organizations that use collective procurement methods. This means vendors must be able to route bulk orders to the appropriate places, track shipment and inventory levels across multiple locations, and serve the common needs of buying groups like group purchasing organizations. 

Healthcare procurement solutions, whether traditional (like GPOs) or modern (like procurement software), must address healthcare-specific challenges and constraints to ensure healthcare workers have access to high-quality products to do their jobs.

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Top 10 challenges of healthcare procurement and how to solve them

Buyers and suppliers face many challenges specific to healthcare operations. These difficulties can create time and access obstacles, especially for smaller healthcare providers like local clinics. But there are ways to overcome these issues and make healthcare buying faster, more efficient, and less costly. 

1. Manual procurement management

Manual management of healthcare procurement activities is costly, time-consuming, and resource-heavy. For example, manually entering purchase orders creates delays between ordering and fulfillment, potentially costing healthcare organizations more money.

Procurement automation eliminates manual tasks, saving clinic staff and administrators money, time, and frustration.

2. Inventory fluctuations

Logistics issues and manual procurement management can lead to inventory shortages and shipment delays that waste time and resources. Without proper stock levels, staff may be left scrambling to find supplies or forced to work with insufficient resources during high-demand periods.

Stabilizing inventory in healthcare reduces staff stress, giving them confidence that needed items will always be available so they can provide the best patient care possible.

3. Procurement waste

In addition to shortages, poor inventory management can also lead to excess stock. While having extra supplies or medical devices on hand may seem harmless, many healthcare items have specific storage needs or expiry dates, and expired items or those that aren't held properly can increase overall supply costs. Since solutions like attempting to swap out short-dated products create logistical issues and distract staff from patient care, using procurement software to improve visibility into spending and inventory is a smart way to help reduce waste.

4. Individual, decentralized buying

Group buying leverages healthcare organizations' purchasing power, helping them save money by creating access to volume discounts. When organizations buy this way, they benefit from increased purchasing power that leads to better prices. Large orders of high-use items also enable faster delivery times and enhanced operational efficiency.

Individual supply buying reduces a healthcare facility’s access to price and volume discounts. When departments or organizations buy separately, the smaller orders they place generally come with higher prices, longer delivery times, and less flexibility. Procurement software removes these barriers, making pricing more competitive and buying more efficient.

5. Poor delivery logistics

 When healthcare organizations buy in bulk, they're more likely to face certain delivery challenges. Large orders can overwhelm hospitals with too much inventory, creating situations where staff must spend resources finding homes for everything. Other logistical issues like products getting shipped in incorrect quantities or arriving late also increase costs and reduce procurement efficiency. Automated order tracking and fulfillment improve delivery logistics, keeping staff supplied so they can focus on priority tasks.

6. Productivity losses

Manual tracking and managing inventory can be costly, and healthcare workers may spend up to 40 hours a month searching for supplies. Time spent finding items in storage, delivering them to clinicians, or moving them between locations reduces productivity and wastes money. These manual processes take staff away from critical tasks, reducing treatment efficiency, hindering patient care, and lowering overall organizational performance. Automation and inventory tracking improve visibility and give staff time to focus on more productive activities.

7. Fraud risk

Since it can be difficult to detect errors or wrongdoing if procedures are not standardized and documented, manual procurement processes tend to be vulnerable to fraud and misconduct. A lack of oversight makes it easier for internal actors to engage in fraudulent activities and abuse their access to medical office supplies.

Improved procurement software ensures more transparency because procured inventory is tracked and monitored. This reduces the risk of mismanagement that costs healthcare organizations millions due to unintentional errors, internal bad actors, and third-party fraud activities. Software creates visibility that makes these issues far less likely to occur. 

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8. Regulatory management

Manual processes make managing regulatory compliance especially difficult for healthcare organizations, complicating efforts to meet evolving patient safety and quality standards. Manually tracking and documenting each item's origin is particularly challenging, and errors in this and other areas can lead to fines and regulatory issues. 

To ensure compliance and avoid financial losses, healthcare organizations must stay updated on regulations and maintain full procurement oversight. A platform-based healthcare procurement solution simplifies purchasing while enhancing compliance management.

9. Supplier restrictions

Supplier restrictions add another layer of complexity to healthcare procurement. Since many healthcare organizations are limited to a select group of suppliers, they may not receive the best prices or terms, leading to more costly purchases. Additionally, some regulations require organizations to source particular supplies from preapproved vendors, driving up internal expenses and potentially affecting patient premiums. 

To navigate these challenges, healthcare organizations must carefully assess and manage supplier relationships to ensure compliance. Procurement software makes vendor management easier, enabling regulatory management and benchmarking efforts while keeping costs under control.

10. Poor procurement visibility

Poor visibility into procurement affects healthcare organizations in many ways. Without a clear view of operations, they can’t benchmark prices, measure profitability, or optimize cash flow. This leads to higher costs, weaker supplier negotiations, and missed savings. It may also result in noncompliance with regulations. By improving data management and analytics, organizations can achieve greater transparency in procurement, pricing, and cash flow management.

How software-based healthcare procurement solutions solve healthcare’s biggest challenges

Procurement technology is one of the most effective tools for reducing costs and complications for healthcare organizations like medical offices, dental practices, physical therapists, and treatment centers. A platform that works effectively with regulated procurement environments can greatly improve procurement and patient outcomes, compliance, visibility, and patient care. 

Spend efficiency software provides the following key benefits to healthcare buyers in need of more effective solutions:

• Improved visibility into pricing, budgeting, and cash flow management
• Increased access to preferred and pre-approved vendors
• Enhanced reporting for compliance with external regulations and laws
• Streamlined processes that enable faster decision-making and reduced costs
• Robust data management capabilities for better insights into procurement practices

Get Order.co to modernize your healthcare procurement strategy

Order.co has the flexibility and centralized control to improve procurement in many healthcare settings, such as: 

• Primary care providers
• Surgical centers 
• Urgent care providers
• Testing laboratories
• Assisted living facilities
• Home healthcare and hospice 
• Dental and orthodontic practices
• MedSpa businesses
• Massage and physical therapists
• Wellness centers

Procurement software designed for high-regulatory healthcare settings combines flexibility with full support. Order.co offers all the procurement and security features needed to streamline pricing and practices, including: 

• Regulation-compliant, secure data handling to meet healthcare standards 
• Ability to access vendors using a curated, permission-based catalog to ensure compliant purchasing of high-quality goods
• Automated workflows and purchase order building to place orders quickly and get clinicians back in front of patients 
• Reporting capabilities to track purchasing and provide data for regulatory audits

If you need a procurement solution that meets the needs of your healthcare organization, request a demo of Order.co today.