July 10, 2023

Weekly Business Insights 07/17/2023

Healthcare IT, including EHR and telehealth, improves outcomes. Average hospital IT budgets are $7.7 million. GPOs save billions through collective purchasing. Key procurement trends: tech adoption and talent development. Balancing cost-cutting and investment is crucial. Collaboration drives industry growth.

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Hospitals with the highest IT operating budgets

Software technology in healthcare has proven integral to improving patient care outcomes and reducing costs. The most prolific example of healthcare IT is the electronic health record (EHR), which enables secure patient data collection and sharing between providers. Other popular platforms include computerized physician order entry (CPOE), PACS, patient portals and telehealth.Operating budgets forecast hospital department expenditures and revenues for the coming year, including IT operating expenses. As the year goes on, hospital leaders and supply chain managers may adjust purchasing and other spending to ensure the actual budget aligns with the original projection.

The average IT operating expense budget across approximately 4,660 hospitals is $7.7 million. This is about 3% of the average total operating expense of $238.2 million for these hospitals.

Top hospitals by IT operating budget | Definitive Healthcare (definitivehc.com)

Top 10 GPOs by staffed beds

Healthcare’s ongoing push towards clinically integrated networks (CINs), health information exchanges (HIEs), and value-based care continues to drive consolidation across the industry. At the same time, providers need allies to help shoulder new technical and financial burdens.  As a result, the purchasing power of affiliated facilities stands to reach new heights. Group Purchasing Organizations (GPOs) managing the buying needs of healthcare providers help hospitals reign in some of that spending by leveraging the collective purchasing power of member facilities to negotiate savings on purchased goods and services.

97% of hospitals have an affiliated GPO, and research from the Healthcare Supply Chain Association (HSCA) suggests that those GPOs decrease the cost of healthcare by as much as $55B each year. 

Top 10 GPOs by staffed beds (definitivehc.com)

What are the key procurement trends for 2023?

Effective procurement teams will have the ability to leverage insights derived from technology,” he said. “Chief procurement officers will face a war on procurement talent and expertise. As the focus increases on indirect spend optimisation, many organisations will realise that their talent pool in areas like marketing or technology buying are not up to the task.

“For too long procurement has played a mostly transactional role in these areas and expertise has become rare. CPOs will realise that there aren’t enough deep experts in the indirect procurement space to fill every vacancy at every major corporation.”

Does procurement have the vision to flourish in a recession?

Consecutive trade shocks over the past three years have placed businesses in an unenviable position: endure or grow? It’s a problem that lays bare the age-old conundrum of whether organisations should look to cut costs or keep investing in the pursuit of stability.

It feeds back into the notion of the supply ecosystem, which recognises that, by raising the floor, you automatically raise the ceiling too; that investing in your partners and working with them is beneficial for profits all round as well as the industry as a whole. It’s an egalitarian view grounded in common sense, not least because it simultaneously builds resilience while laying the foundation for growth.

Does procurement have the vision to flourish in a recession? - Supply Management (cips.org)

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