Creating Resilience

Healthcare: Optimizing procurement for healthier facilities

Sector perspectives in Facilities Management Procurement

April 27, 2023 5 Minute Read


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Labor and supply chain challenges in a people-centric sector

The entire healthcare industry is recovering from the challenges of COVID-19. The pandemic impacted all business functions, particularly the workforce, with employee burnout and staffing shortages still plaguing the sector. Prioritizing workforce wellbeing has risen to the top of the agenda as healthcare systems struggle to retain talent. Many companies are implementing employee wellbeing programs and offering hybrid work when appropriate to address attrition and allow health systems to focus on their number-one objective: excellent patient care.

Pandemic-related challenges and the ever-increasing demand for medical services also fueled wage inflation and put a spotlight on the operations and supply chains of healthcare companies. Maintaining the highest standards of hygiene and patient care is mission-critical, which means the continuous availability of medical supplies is essential.

Skyrocketing global shipping and labor costs, a backlog of domestic freight operations and a multitude of logistics issues are causing a shortage of goods and materials— exacerbated by steep rises in energy costs. This supply chain instability is adding complexity and uncertainty around service delivery and costs for health systems.

Facilities management (FM) procurement teams can limit their risks and maintain resilience during this volatile time.

Combatting inflation

Inflation continues to grip the world’s economy, and procurement teams face tremendous cost challenges. Spending naturally soared when the pandemic hit, but now companies are looking for ways to drive savings and mitigate rising costs. With healthcare systems often operating with less than 5% net margins, the pressure to reduce operational costs and capital spending is intense.

While healthcare operators are eager to take advantage of their scale and tap into procurement leverage to support cost savings, many struggle to do so and often default to more fragmented operating and sourcing practices. However, there is a conscious shift among healthcare operators to correct this. As a result, more strategic and agile supply chains are emerging with a heightened focus on supplier consolidation, which can significantly reduce costs for FM procurement teams.

Image of a doctor and patient

ESG: the art of the possible

Sustainability and net-zero goals are increasing priorities among enterprise healthcare organizations, especially since the Biden administration’s Health Sector Climate Pledge. Inefficient energy use in aging facilities, hazardous waste and transportation of medical supplies are a few of the challenges companies in this sector must contend with as they work to decarbonize their footprints. However, opportunities for emissions reductions are substantial due to historic underinvestment in both sustainability initiatives and the energy consumption profile of many healthcare assets, which operate 24 hours a day every day of the year.

Procurement teams typically have access to suppliers’ emissions data and therefore are responsible for monitoring a company’s decarbonization progress. Attention to ESG initiatives creates an opportunity for health system procurement leaders to drive progress toward sustainability and cost savings targets. FM procurement teams are exploring solutions such as data-driven, third-party service delivery models, sustainable LED lighting, more efficient HVAC systems, electric vehicles and solar energy to reduce emissions portfolio-wide.

Greater alignment of procurement and real estate

Recognition is growing in the healthcare sector that procurement and CRE teams need greater alignment in developing real estate and FM strategies. At a tactical level, a lack of alignment can impair day-to-day services. But at a strategic level, it can affect facility operations and quality of care holistically.

The pandemic has revealed the fragility of our global supply chain. To prepare for future disruptions, companies are encouraged to standardize purchasing and equipment configuration, forward-buy critical spares, optimize inventory management and engage with suppliers to understand their dependencies and delivery risks. These practices become increasingly achievable when procurement and FM teams work in lockstep.

As FM procurement leaders seek to improve relationships with their CRE clients, procurement teams must provide the subject matter expertise to re-design and optimize services. Taking that approach is most effective for driving cost savings, quality, and innovation.

Image of an operating room

Find out more

CBRE manages around 6,000 sites in this sector, including nearly 200 acute care hospitals. That equates to a total real estate footprint of over 145 million square feet.

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