OC Reilly Blog: Razor-Thin Margins Beg for Better Supply Chain Control

By Mike Polaski, Director of Logistics Services, OC Reilly Inc.

At the Central Penn Business Journal’s Healthcare Symposium in late July, speakers addressed the wide array of issues facing hospitals and other key players in the healthcare industry.  You can see excerpts from all of the speakers here.

But one presenter stood out perhaps more than his counterparts, because his remarks dealt in part with what I believe is a core concern – the financial survivability of hospitals and other healthcare providers in today’s environment.

As seen in the conference’s online highlights page, Andy Carter, President and CEO of the Hospital and Healthsystem Association of Pennsylvania, took the financial question head-on, with comments like, “Hospitals are being told they have to operate more like other industries, where failures fail and success is the only option.” 

Carter went on to say, “The majority of our members are on razor-thin margins, and nearly a third of our members have negative margins.”

In prior OC Reilly Blog entries, we have commented on this phenomenon, especially as it affects Pennsylvania-based hospitals and health systems.  Achieving and maintaining a healthy, positive, sustainable margin must be a clear and unflinching goal, if a healthcare provider hopes to meet and carry forward its mission.

We believe that paying closer attention to supply chain decisions can be a successful strategy to help hospitals and health systems improve their margins immediately.

Taking a hard look at contracts and spending decisions, including the dispersion of decision-making regarding purchases, and other elements of the supply chain function is the first step.

Establishing smarter, more efficient long-term programs regarding supply chain decisions can keep costs contained, improving the financial bottom line without impacting the ability to provide quality care to patients.

At OC Reilly, we refuse to accept the notion that the “razor-thin margins” Andy Carter described in his remarks will become the unavoidable norm.  There is a better way.  A proven way.  Stronger supply chain systems offer a path to improved margins.

Copyright 2013 OC Reilly Inc.