Chain Reactions
Healthcare Costs Are Making the Supply Chain Sick

Healthcare Costs Are Making the Supply Chain Sick

It’s not exactly a secret that the rapidly increasing costs of healthcare and healthcare insurance are spooking companies of all sizes. Despite Obamacare having gotten a thumbs-up from the U.S. Supreme Court (okay, it was a half-hearted thumbs-up, but nevertheless), uncertainty seems to rule the day because nobody, and especially not Congress, has much of an idea what exactly is going to happen when the new regulations go into full effect.

One thing that’s got manufacturers and other employers spooked is the fear that aftershocks from Obamacare going into effect in 2014 will spike their costs to the point that they’ll have to reduce payrolls, which are already low due to the slow economy. A recent survey conducted by Mercer indicates that if employers don’t make any changes to their current health benefits package, costs will go up by 8% in 2013. And even if they do reduce benefits, costs will still rise by 6.5% next year.

Not surprisingly, most employers (58%) say they will shift healthcare costs to employees to keep the 2013 increase down.

But what about the opposite end of the spectrum: Do companies in the healthcare industry see the world through different colored glasses? As it turns out, not really. Based on the annual “pain in the supply chain” survey conducted by UPS, 53% of U.S. companies in the healthcare field say they’re still feeling the impact of the economic downturn, in terms of tightened spending and other cut-backs. While 50% of healthcare executives polled say they’re either optimistic (12%) or cautiously optimistic (38%) about the impact that Obamacare will have on their industry, the other half are either negative (26%), neutral (22%) or just don’t know (2%) what to expect.

“Healthcare companies are feeling the pressure to expand and drive new growth while containing costs and ensuring compliance around the globe,” says Bill Hook, vice president, global strategy, UPS Healthcare Logistics. “That has only heightened the need to build more global flexibility, integration and transformation into the healthcare supply chain.”

For manufacturers of healthcare products, from medical devices to pharmaceuticals, 57% of them rank product security as a top supply chain issue, with another 47% saying product damage and spoilage is a major concern. Those concerns, however, finished third and fourth in the poll; the top concern, not surprisingly, is regulatory compliance, which was cited by 65% of respondents. The second-most cited issue is managing supply chain costs.

“While these areas will always be a focus in the healthcare industry, companies can experience positive impact by examining strategies such as increased collaboration, adopting segment based supply chains and leveraging new innovative models and technologies,” recommends Scott Szwast, marketing director of UPS Healthcare Segment.

For instance, 83% of respondents say their companies plan to invest in new technologies over the next three to five years, whether to increase efficiencies or to improve their competitiveness. Most of that investment will go to order management solutions (77% of respondents), followed by web ordering technology (65%) and serialization/ePedigree track and trace, including RFID (54%).

On the distribution side, 8% say they will increase the use of direct shipments to patients over the next 18 months, 15% say they will increase the use of wholesalers/distributors, and 20% say they will increase the use of direct shipments to providers and retailers. Even so, more than half (55%) don’t plan to change their channel strategies.

TAGS: Supply Chain
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