Promise and problems with supply chain management approaches to health care purchasing

Eric W. Ford, Dennis P. Scanlon

Research output: Contribution to journalReview articlepeer-review

48 Scopus citations


BACKGROUND: Double-digit health care inflation, coupled with widespread reports of poor care quality and deadly medical errors, has caused private sector employers to reevaluate their health benefits purchasing strategies, with a focus on supply chain management approaches. In other industries, this strategy has proven to be an effective method for simultaneously reducing costs and increasing quality. PURPOSE: This article describes four current applications of supply chain management network methodologies to health care systems and identifies potential ways to improve purchasers' return on investment. In particular, information exchanges, purchase decision, and payment agreement components of integrated supply chains are described. APPROACH: First, visual depictions of the health care supply chain are developed from a purchaser's perspective. Next, five nationwide programs designed to realign incentives and rewards across the health care supply chain are described. FINDINGS: Although several nationwide efforts are gaining traction in the marketplace, at this time, no cost reduction and quality improvement program initiative appears to systematically align the entire health care supply chain from providers to purchasers, raising doubt about the ability of supply chain management network techniques to significantly impact the health care marketplace in the short run. PRACTICE IMPLICATIONS: Current individual efforts to coordinate the health care supply chain do not act on all of the actors necessary to improve outcomes, promote safety, and control costs. Nevertheless, there are indications that several of the individual efforts are coming together. If national efforts touching on all critical elements can coordinate with purchasers, then the health care supply chain's performance may improve significantly.

Original languageEnglish (US)
Pages (from-to)192-202
Number of pages11
JournalHealth Care Management Review
Issue number3
StatePublished - Jul 2007

All Science Journal Classification (ASJC) codes

  • Leadership and Management
  • Health Policy
  • Strategy and Management


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