Hospitals and health systems are facing growing financial strains as tariffs, inflation, and ongoing supply chain disruptions continue to drive up costs. These pressures create significant challenges for hospitals as they strive to protect margins while simultaneously providing high-quality patient care. Total spend management offers a proactive, data-driven approach that allows health systems to identify risks, uncover savings opportunities, and strengthen financial resilience even in uncertain markets. With the right strategies in place, hospitals can better navigate these pressures and find new opportunities to manage costs more effectively.
Strengthen Contracts Through GPO Partnerships
Working with a group purchasing organization (GPO) allows hospitals to evaluate their current agreements and ensure they are positioned for stability in the face of potential disruptions. This partnership provides both visibility and leverage, helping leaders identify risks and achieve savings where possible. Consider the following when reviewing existing contracts:
- Contract strength: Assess terms and conditions, including force majeure clauses, to understand protection against tariffs.
- Visibility to manufacturing country of origin: Determine the manufacturing country of origin for the goods and services acquired today to understand potential tariff impact.
- Firm pricing: Have a thorough understanding of which agreements offer firm pricing for the term of the agreement.
- Contract expiration timelines: Ensure processes are in place to track tentative expiration dates to prioritize renegotiations and ensure continuity.
With this groundwork in place, GPOs can help hospitals stay ahead of risks while maximizing the value of negotiated terms.
Building Alignment Through Proactive Communication
Strong communication is essential for successful spend management. Health systems should work closely with their GPO partners to evaluate supplier-by-supplier exposure and understand potential impacts. At the same time, building open dialogue with distributors and supplier partners ensures organizations receive timely updates on pricing changes or potential shortages. Internally, leaders must keep executive teams, finance, and clinical departments informed so the entire organization can respond consistently when suppliers introduce cost adjustments. This proactive communication loop strengthens trust and creates alignment, making it easier to manage challenges collaboratively.
Evaluate Alternative Product Options
Even when strong contracts are in place, hospitals still face exposure in off-contract spend areas. Most off-contract supplies and services have no protection from tariff impact. Health systems need to determine ways to mitigate impact in these areas.
Consider strategies such as:
- Transitioning off-contract to on-contract alternatives: Enhanced analytics can help quantify the value to convert off-contract products to on-contract product alternatives.
- Partnering with value analysis and clinical leaders: Reviewing top savings opportunities alongside clinical teams ensures substitutions balance both financial and patient care needs.
- Broadening the review to all spend categories: Beyond medical supplies, areas such as purchased services, dietary spend, and employee benefits, including pharmacy benefit management, may provide untapped opportunities to mitigate rising costs.
By taking a broader view of spend, hospitals can identify savings beyond supply chain contracts, building long-term sustainability and financial resilience.
Plan Ahead for Capital Equipment Needs
Capital equipment planning often represents one of the largest areas of spend for hospitals. Instead of waiting until a purchase is urgent, organizations can benefit from advanced planning with their GPOs. Leveraging benchmarking tools and quoting expertise provides visibility into fair market pricing. Hospitals can also take advantage of bulk buy and group buy opportunities to further reduce expenses. This forward-looking approach not only delivers savings but also ensures that equipment investments are timed strategically to support clinical growth.
Turning Cost Pressures into Opportunities
Spend management is a path to greater efficiency, collaboration, and long-term financial health amidst the implications of tariffs. With the right strategies in place, hospitals can turn rising costs into opportunities for smarter resource use. With the right partnerships and proactive strategies, organizations can safeguard their financial stability while continuing to deliver high-quality care and positive clinical outcomes.
