Radio Advisory's Rachel Woods sat down with Advisory Board's Nick Hula to unpack the findings of the 2025 Health System Purchasing Survey and explore how economic and policy pressures are reshaping purchasing strategies across the industry.
Below is a summary of key points from the interview. Download the episode for the full conversation.
While labor remains the largest expense for health systems, purchased goods — ranging from surgical gloves to CT scanners — account for roughly a quarter of total spend. In times of financial strain, these goods become a primary target for cost containment.
According to Hula, "Nobody wants to cut labor, so when you have some financial pressure … purchased goods is typically the first place people look to change to protect their margins."
This year's Health System Purchasing Survey was conducted amid a backdrop of economic and policy uncertainty, including looming Medicaid cuts and new tariffs. These pressures are forcing health systems to revisit their purchasing strategies.
However, Hula emphasized that this isn't just a reactionary shift. "There are some more long-term, I call them slow burn changes happening as well," he said. "Purchasing is more complex than ever."
Health systems are increasingly incorporating factors like real-world evidence, value-based metrics, and supply chain resilience into their procurement decisions. These changes reflect a broad evolution in how value is defined and measured.
The front lines of this transformation are occupied by supply chain leaders and specialized committees such as pharmacy and therapeutics (P&T) and value analysis committees. These groups are tasked with making high-stakes decisions about which products to purchase, often under intense budgetary constraints.
In response to current pressures, over half of health systems are reducing short-term spending and stockpiling goods to avoid tariff-related price hikes. However, Hula cautioned against overreliance on stockpiling.
"Most health systems are not experts at rotating inventory properly … Walmart is good at that. Amazon is good at that," he said. "Health systems, not so much."
Rather than passively absorbing cost increases, many health systems are taking a proactive stance. "Fifty-four percent of respondents say they already plan to renegotiate contracts with suppliers or wholesalers," Hula said. Some are even leveraging AI to scan contracts for clauses related to tariff-driven price hikes.
These renegotiations often involve trade-offs, such as agreeing to longer-term contracts in exchange for price stability. And when renegotiation isn't enough, some systems are using rising costs as leverage in payer negotiations to advocate for higher reimbursement rates.
Hula also emphasized the importance of supply chain resilience. "We've had two or three events over the past five years where having a resilient supply chain has been incredibly imperative," Hula said.
To that end, 86% of survey respondents said they're diversifying their supplier base. This includes not only sourcing from multiple vendors but also considering geographic diversity in manufacturing locations.
However, while the Trump administration's tariffs aim to encourage domestic purchasing, few health systems are moving all procurement back to the United States. "If everything is manufactured in one location … that's not a very resilient action," Hula said.
The definition of "value" in healthcare purchasing is expanding. It now encompasses not just cost and clinical outcomes, but also patient and clinician experience, vendor relationships, and even procedure turnaround times.
"Organizations are getting a lot more sophisticated in their purchasing decisions," Hula said. "They're holistically evaluating goods … What is the total margin impact of that product? What are the revenue implications?"
This complexity makes decision making more difficult. "You're comparing apples to oranges and needing to make a real decision," Hula said. As a result, health systems are increasingly turning to external partners for support.
Group purchasing organizations (GPOs) and health technology assessment (HTA) tools are playing a growing role in helping health systems navigate these complexities. According to Hula, "80% of value analysis committees use GPOs as a top four source of evidence." For P&T committees, half rely on HTAs.
These partnerships are essential not just for data analysis, but also for implementation. "Maybe your role is more in implementation … It's your job to talk about the change management with your care teams," Woods said.
For vendors, especially those in life sciences, the message is clear: Transparency and a holistic value proposition are key. "Sometimes the most valuable thing you can do is provide insight for any peace of mind," Hula said.
Vendors should be upfront about how tariffs and other factors may affect pricing and should clearly articulate their comparative advantages — whether in clinician experience, reimbursement, or patient outcome.
Ultimately, vendors and health systems need to balance responding to the short term while also preparing for the long term. "The truth is you have to do both," Woods said — respond to immediate pressures and build long-term resilience.
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