Procurement Tech Offers Relief To Healthcare Firms Stretched To The Brink

Procure-to-pay is a complex workflow often involving multiple systems, processes and parties that must all coordinate to move items and money to where they need to go.

Procurement within the healthcare industry is perhaps more complex than most sectors thanks to an array of factors, but when the pandemic hit, many of the typical challenges exploded into insurmountable hurdles.

From having to manage troves of unfamiliar vendors to navigating a market marred by fraud, the procurement process for personal protective equipment (PPE) was — and is still — not easy, but it’s not the only headache these organizations face.

Speaking with PYMNTS, Rusty Zosel, CEO of healthcare industry procure-to-pay solution provider Procurement Partners, traced back through the biggest pain points healthcare entities experienced as they raced to secure the products they needed to care for patients and keep their heads above water. Plus, he explored the opportunity that procurement digitization offers to an industry still grappling with dizzying demand.

Pre-Pandemic Procurement Pains

Even outside the circumstances of a global pandemic, healthcare procurement processes can be convoluted. According to Zosel, this traces back to the fact that many facilities must work with a wide array of volume of suppliers because they aren’t simply procuring healthcare items. Indeed, these entities must purchase food and beverage, cleaning supplies, office supplies and more to fully operate.

On top of that complexity, he said, many healthcare companies also operate on a national scale, which exponentially increases the vendor base.

Further, hospitals and other healthcare entities typically operate on a just-in-time ordering basis in order to adjust purchasing based on their changing needs.

“Their purchasing needs flex and change very frequently,” said Zosel, noting that because their needs change often, and because facilities rarely have the space for product storage, procurement requirements may adjust on a daily basis. That leaves little room for error to ensure that the right products in the right quantity are ordered in time to be delivered the next day.

The pain points don’t stop there, either. With many industry players receiving government funding, they must also adhere to strict regulations about how much of a certain item they must keep in stock. At the same time, the healthcare sector is facing a labor shortage and high turnover rates, meaning professionals are not always experienced at managing these hurdles.

All of this combined makes for a complicated purchasing landscape in which inventory and spend management remain critical — yet particularly challenging.

Digitization Ahead

The pandemic, of course, made the procure-to-pay workflow even more difficult, particularly when it came to PPE purchasing.

“It’s gotten better, but initially, it was the Wild, Wild West when it came to ordering items,” Zosel said. “People were buying a lot, not knowing what was coming down the road, so inventory ran out very quickly. I don’t think anyone was really prepared for that level of buying.”

Vendors instated purchasing limits, and buy-side organizations were forced to turn to unfamiliar vendors when their typical sellers ran out of items. Often, that new vendor was overseas. In turn, it created a landscape plagued by fraud, with cases of ordered items showing up below the quality standards buyers had required — or not showing up at all.

While the mayhem has quieted somewhat, the pandemic continues to ravage on, and even when a vaccine is available, healthcare organizations will continue to face similar challenges in the race to procure what’s necessary to distribute and administer the vaccine.

And while healthcare providers are deemed essential businesses, Zosel noted that in the back office, many entities are encouraging professionals to work from home, forcing them to manage the maze of procurement in a remote setting.

Digitization and automation are key to overcoming many of these challenges, with entities able to streamline an array of processes like invoice processing and supplier management. But while Zosel said there are more digital platforms than ever available to automate an array of operational workflows for the healthcare space, they don’t all necessarily work together, creating the potential for software overload.

Procurement Partners, which this week announced it secured growth investment from Serent Capital, aims to overcome that challenge through integrating with third-party solutions, including about 30 accounts payable systems in use by existing customers. The company is also looking to help healthcare entities overcome another major barrier to modernization: smaller entities often lack the resources and regulatory mandates to implement digital systems.

The healthcare space is a quickly-growing one, however, with new businesses emerging and existing businesses restructuring. As a result, said Zosel, more entities are forming with the outlook that modernization is key to efficient operations, and thus are looking to implement automation in procure-to-pay workflows, and others, from the onset.

With pandemic-related pain points still plaguing the procure-to-pay process, and with so much complexity already in existence, modernization will be a long road ahead.

“They’re making good process,” said Zosel, “but there is still work to be done.”