Response to Navigant Report

November 2019

Focus on Implant Management to Address a $25.7 Billion Supply Chain Savings Opportunity


Craig Lan
Craig Lan
Vice President,
Product Management

According to Navigant’s annual Healthcare Supply Chain Report1, hospitals can safely reduce their supply chain expenses by an average of 17.4% or $12.1 million annually. This represents an increase of 22.6% from 2017 and equates to an annual cumulative savings of $25.7 billion. The analysis further reveals that equal savings opportunities exist across multiple hospital characteristics, including size, location, and for-profit or not-for-profit status.

The clear takeaway from Navigant’s findings is that despite current efforts by hospitals and health systems to optimize supply chain processes and product utilization, creative tactics and solutions are still needed -and I couldn’t agree more.

Implants, though just one segment of the overall supply chain, can represent up to 30% of a hospital’s total supply spend2. Expensive on their own, sometimes accounting for more than 50% of the cost of procedures, implants can be a major source of additional expenditures if not managed closely. According to the Global Healthcare Exchange, hospitals and suppliers nationwide lose up to $5 billion in implantable devices annually because of waste and ineffective processes3.

From my experience working with hospitals and supply chain leaders across the country, I see tremendous opportunity to improve the management of implantable tissues and devices in three key areas – to both yield financial savings and to improve the quality and safety of patient care:

  1. Reduce waste
    Many hospitals continue to use homegrown systems in an effort to track implants, from receipt of items through use in patient procedures. While these solutions perform the job of detailed tracking, they typically do not highlight areas where waste is excessive. For implants, common sources of waste include Expiration, Loss, and Items Used but not Billed for. Software that monitors inventory closely can greatly reduce these types of waste.
  2. Optimize inventory levels
    Hospitals need to manage inventory levels to avoid the risk of stock-outs and to avoid carrying too much inventory. By effectively tracking inventory, supply chain managers can stay within optimal inventory levels, simultaneously minimizing the risk of running out of items, and avoiding an unnecessary quantity of expensive implants.An additional inventory consideration, specific to implants, is the need for hospitals to diligently monitor device recalls. By ensuring the facility is notified of recalls quickly, supply chain managers can remove items from stock to avoid threatening patient safety scenarios.
  3. Reduce clinical variation
    Variation in implants used exists in every complex health system. With the sheer number of options for implant types available to clinicians, different implants that serve the same clinical purpose are used. Sometimes this variation is warranted when a strong clinical reason exists, but other times clinicians may not realize there are lower cost and equal value alternatives. By tracking implants used for identical procedures and comparing these over time, supply chain managers can better inform clinicians about the cost side of the equation when such expensive variability exists.

To address the above opportunities, hospitals will need to invest in a software solution that enables the unique tracking and management requirements of tissue and device implants. A solution with strong predictive analytics and reporting, recall matching, and monitoring of device usage and variation are just a few fundamental features to look for. It is the right time for the status quo of supply chain management to be challenged-and implants are an important place to start.

1. “Annual Supply Chain Savings Opportunity Reaches $25.7 Billion for U.S. Hospitals, Navigant Analysis Finds,” Navigant, November 2019
2. Taken from the Navigant 2019 report (1), total supply chain spend includes: medical and implantable device costs, medical/surgical and pharmaceutical supplies charged to patient care departments, and supplies related to buildings/fixtures, maintenance, and plant operations
3. “Industry’s Achilles Heel: The Supply Chain,” Global Healthcare Exchange (GHX), 2013