From Order-Taking to Value Creation: The Evolution of Healthcare Supply Chain
This article was originally published by The Journal of Healthcare Contracting.
At the HITLAB symposium in New York City earlier this year, entrepreneurs shared how AI and novel data are being used to improve patient care and reduce health system costs. As a health system CFO for 30 years, I was struck by the number of elite students in attendance who are focused on healthcare careers, many with a specific interest in supply chain management.
When I began my CFO career, the supply chain was tucked away in a backroom, largely overlooked. But since the pandemic disruptions and the rise of international tariffs, supply chain management has moved to the forefront of health system leadership priorities. One key takeaway from the symposium was the growing visibility of data that CFOs previously lacked, data that is critical for forecasting and risk analysis.
Mark Van Sumeren, Chair of Healthcare and Life Sciences at LogicSource and a former EY partner who led the national healthcare supply chain consulting practice, emphasized the evolution of supply chain strategy. It is no longer about order-taking; it is now a C-suite-level decision about what to purchase and from whom.
During his remarks, Van Sumeren focused on the “front end” of the supply chain: sourcing and contracting. These are the foundations of effective procurement, and executing them professionally is where value creation begins. If the data is curated and the right questions are asked, the next generation of supply chain professionals can use AI to identify strategic partners and make more informed sourcing decisions.
Non-clinical spend often involves thousands of suppliers, each with unique service levels, terms, and pricing structures. This complexity challenges category managers to maintain competitive and consistently valuable vendor relationships. AI can help by improving visibility, accelerating sourcing, and, most importantly, enabling supply chain leaders to focus on strategy rather than day-to-day execution. Given the historical volume and fragmentation of non-clinical procurement, this shift is not just a productivity improvement; it is a strategic necessity.
Vendors have long capitalized on healthcare’s complexity, often applying a “wedding premium” to their pricing strategy by charging more simply because they can. Unit prices are not the only concern, as many contracts lack controls on utilization or performance measures. According to LogicSource’s experience, only one in four non-clinical contracts is well-negotiated.
“For a typical health system with annual net revenue of $1B,” Van Sumeren noted, “they will spend 20% of their annual revenue on non-clinical supply chain, or $200 million. Multiply that by a 10% savings, and that is $20 million back to the bottom line.”
Van Sumeren and others emphasized that AI alone does not drive value. Human judgment remains essential. With curated data and decision-making support from AI, future health system executive teams will be better equipped, with supply chain leaders contributing real-time expertise at the strategic level.
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About the Author
David Kirshner
Managing Partner, Healthcare
David Kirshner serves as managing partner for the healthcare practice at LogicSource. David formerly served as CFO for Lifespan Health System, University of Rochester Medical Center, Boston Children’s Hospital, and several other healthcare provider organizations. He also served as a Senior Executive Advisor in EY’s Healthcare Advisory practice. He is a licensed CPA in Massachusetts and a member of the Massachusetts chapter of HFMA.