August 3, 2020

Johns Hopkins is paying 20x more for hospital gowns. (And it's not alone.)

Daily Briefing

    With the coronavirus pandemic crippling the global supply chain, American hospitals are increasingly relying on domestic manufacturers for much-needed medical supplies—but the shift has made essential medical supplies far more costly, potentially placing both hospitals and patients "in greater financial jeopardy," Lisa Ishii, SVP of operations for Johns Hopkins Health System, writes for Vox.

    How Covid-19 is disrupting your supply chain (and what to do about it)

    The supply crisis

    The global pandemic has halted and depleted health care supply chains across the world. "Factories have shut down or slowed production; countries have restricted exports and imports; and transportation has slowed or halted," Ishii writes.

    The impact has been particularly damaging for the United States, which relies on international suppliers for health care equipment. U.S. health care systems around the country have seen shortages in critical products, from personal protection equipment (PPE) to testing supplies.

    Now, hospitals are looking to domestic manufacturers to address the shortages of these products. However, Ishii writes, "this new domestic strategy has a particular disadvantage: In general, it is much more expensive."

    Why are domestic products more expensive?

    Due to the costs of manufacturing in the United States, as well as heightened demand, domestic prices for health care supplies have skyrocketed, according to Ishii. For instance, Johns Hopkins, which in December 2019 was paying 40 cents per hospital gown from a China-based supplier, currently pays $9 per gown from a supplier in the United States. "That's more than 20 times the former price," she writes.

    Now that China's coronavirus outbreak has slowed down, Ishii writes that it's likely the country will start exporting more supplies, but "the steps so far will not meet the overall increased demand." In addition, the "pandemic will continue to wreak havoc with logistics," including physical distancing requirements that "slow down almost every part of the process," as well as "shortages in the raw material … need[ed] for production," such as the material needed to produce isolation gowns.

    As a result, Ishii writes, "It's likely that health care providers will continue to rely more on domestic suppliers."

    Despite the increased costs, Ishii writes that there are benefits to relying on domestic suppliers. For instance, transportation of the goods is more reliable, and it supports the U.S. economy.

    "But at the same time, the higher costs are putting pressure on health care," Ishii writes. "This change has the potential to significantly increase health care costs, and will only add to the existing strain on health care providers, health insurers, and consumers."

    Is there a solution?

    Ishii writes that the first step to addressing the rising costs of supplies—after acknowledging the situation—is to begin using more reusable health care products rather than disposables. Health care providers can also "do more to conserve supplies, using them carefully and only when necessary," she writes.

    Ishii adds that providers should plan to further diversify their supply chains by "connecting with manufacturers in India, Central America, and elsewhere," and focus on self-manufacturing to relieve pressure on the domestic suppliers. John Hopkins, for instance, has been building some of its own face shields.

    In addition, federal and state governments must ensure that domestic manufacturers "aren't unfairly raising prices" and lend support to help providers better manage the increased costs of supplies. Ultimately, Ishii writes, the U.S. health care system will need to come up with a few solutions to increase access to critical medical supplies both during the coronavirus pandemic and beyond.

    "Right now, increased supply costs may not seem like the most important health care issue we face … But to save lives, we need [PPE], we need tubing, we need gowns," Ishii writes. "Without a reliable, affordable supply of a range of products, we can't properly care for our patients, both those with Covid-19 and those with other health problems" (Ishii, Vox, 7/29).

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