How hospital purchasing decisions shape patient care
Photo illustration by Evelyn McCarthy/iStock
Hospitals face a constant balancing act: delivering top-quality care while keeping costs under control.
But while strategy often gets the spotlight, it’s the execution — the everyday choices about what to buy, how to buy it and how to work with suppliers — that truly shapes outcomes for patients and providers alike.
Researchers behind a groundbreaking international study unpack the “sourcing levers” that hospitals use to turn big-picture goals into practical action, revealing why procurement isn’t just about cutting costs, but about building resilience, improving patient care and sustaining the health care system for the future.
CoauthoredOther researchers include Carolina Belott Pedrosa, University of Twente, The Netherlands; Claudia Rebolledo, HEC Montreal, Canada; and Martin Beaulieu, HEC Montreal, Canada. by Eugene Schneller, professor of supply chain management at Arizona State University's W. P. Carey School of Business, the study “Translating Strategies into Tactical Actions: The Role of Sourcing Levers in Healthcare Procurements” uncovers how hospitals can better rein in costs — particularly for big-ticket, physician-preference items like implants and stents.
Drawing on insights from 15 hospitals across nine countries, the research illustrates how smarter supply chains turn broad strategies into everyday purchasing decisions that cut expenses without sacrificing quality.
The project underscores ASU’s leadership in health sector innovation and global supply chain strategy while also shining a spotlight on National Health Care Supply Chain Week, celebrated Oct. 6–12. The multination consideration is aligned with W. P. Carey’s Department of Supply Chain Management’s mission to advance knowledge in global supply chains.
ASU News spoke with Schneller to discuss the findings of the study, the strategies that emerged and how a multi-university collaboration can help tackle one of health care’s most complex challenges.
Question: Why did you and your colleagues undertake this study?
Answer: Hospitals everywhere are under pressure to deliver excellent care while controlling costs. We realized that while many hospitals talk about “strategy,” the real challenge is execution — how do you turn strategy into day-to-day decisions? We wanted to understand the specific tools, or “sourcing levers,” that hospitals use to make that happen. This is especially important as hospitals are highly resource dependent and supplies are the second largest cost to hospitals — after human resources. A hospital’s sourcing strategy must align with the overall strategy of the hospital itself.
Q: What are “sourcing levers,” in simple terms?
A: Think of them as the tactical tools to bridge the gap between a hospital’s procurement strategy and tactical efforts — by which hospitals put their strategies into action. For example, you might bundle purchases across hospitals within a system to get better prices or standardize products to reduce variation. Others include evaluating the total cost of ownership, optimizing processes with suppliers or building long-term partnerships. They’re the gears that move the strategy forward.
Sourcing levers differ. Sourcing levers pose a significant impact on the actions implemented by decision-makers to attain performance objectives from sourcing strategies since they translate the purchasing strategy into tactical actions.
Q: What’s unique about sourcing in health care compared to other industries?
A: Health care is different because doctors often make the final call on which devices to use — they’re “surrogate buyers.” Suppliers also provide services, like training or even technical help in the operating room. That means hospitals can’t just negotiate on price; they must balance physician preferences, supplier services and patient outcomes. That’s what we call “health care exceptionalism,” differentiating procurement in the health sector from other sectors.
Q: What did you discover that was new?
A: We identified three health care-specific clusters of levers: pre-purchasing activities (doing the groundwork before procurement begins), quality and meeting requirements (making sure products meet standards and doctors’ needs) and maintaining the supply market (keeping suppliers engaged in smaller or fragile markets). These are essential in health care but often overlooked in other industries.
We looked at a variety of nations/markets — all somewhat unique in their nation’s expenditures and ways to finance the provision of care. Included were the U.S., Canada, France, the U.K., Norway, New Zealand and Brazil.
Procurement in smaller markets, for example, requires different strategies ... as supplier availability and services are not readily available. In nations with strong government engagement, such as the U.K., there is a more concerted effort to standardize products, especially expensive items, such as orthopedic implants, across the system. And here at home, in the U.S., with significant independence by hospital systems along with great challenges associated with physician preference, tactics to balance clinician choice and the value accrued from standardization is a significant challenge.
Q: Why does this matter now, in an era of uncertainty and disruption?
A: The pandemic showed us how fragile supply chains can be. Hospitals ran short of masks, gloves and critical devices. Resilience has become just as important as cost savings. By using sourcing levers wisely — especially building strong supplier relationships and preparing thoroughly — hospitals can better weather disruptions and make sure patients continue to get the care they need.
Q: You mention “value-based procurement.” What does that mean for patients?
A: It means we’re not just buying the cheapest product — we’re looking at long-term outcomes. For example, a knee implant that lasts longer and reduces the chance of revision surgery may cost more up front, but it improves patient quality of life and reduces overall costs. Value-based procurement puts the patient at the center of purchasing decisions. The mantra "value-based-procurement” is a common theme across the globe. The ability to achieve the goal, however, remains, in many ways, elusive.
Q: What’s the big takeaway for hospitals and the public?
A: Across nations studied, procurement isn’t just a back-office function. The way hospitals buy medical supplies directly impacts costs, care quality and resilience. We also learned that different systems, given their capabilities and constraints, employ sourcing levers in many ways. However, there is an overarching goal for those engaged in sourcing, bringing value to the patient while considering the economic sustainability to the hospital. This is, of course, a difficult balance. By aligning strategy and tactics — through bundles of sourcing levers — hospitals can move from cost-cutting to value creation. That benefits patients, clinicians and the sustainability of the health care system as a whole.
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