Hospitals have had to turn to domestic suppliers for masks and other equipment, putting them in greater financial jeopardy.
Over 16.5 million people around the world have been infected by Covid-19, and the numbers continue to rise steadily. The pandemic has severely disrupted almost every aspect of the global economy, including the global supply chain. Across the world, factories have shut down or slowed production; countries have restricted exports and imports; and transportation has slowed or halted.
While this turmoil has affected many industries, America’s health care system has been hit especially hard. Over the past two decades, US health care has come to rely heavily on international suppliers, especially in China, for thousands of essential products, from surgical gowns to syringes. In fact, as of 2019, the US was the largest importer of medical goods — including of personal protective products — in the world.
Over the past few months as the pandemic raged, most US hospitals and health systems have responded by turning to domestic suppliers. They are more reliable given the difficulties with transportation and trade, which have become worse since the pandemic began.
This trend is likely to continue, as hospitals and health care systems try to ensure that they have a steady supply of essential products.
But this new domestic strategy has a particular disadvantage: In general, it is much more expensive. And this puts hospitals, and potentially, their patients in greater financial jeopardy.
Higher domestic prices are likely due to a combination of the increased costs of manufacturing in the US, as well as the booming demand that has outpaced supply. For example, in December, Johns Hopkins Medicine, where I oversee the supply chain, was paying 40 cents for a gown from our supplier in China. We are now paying $9 per gown, from a domestic supplier. That’s more than 20 times the former price — all at a time when we need more gowns than ever. 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.
Right now, increased supply costs may not seem like the most important health care issue we face. And it’s not. The immediate task of saving lives obviously takes precedence over all other concerns.
But to save lives, we need personal protective equipment, we need tubing, we need gowns. And we also need to be able to ensure the long-term financial sustainability of our institutions. 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.
How the medical supply crisis got so bad
The current supply problems began in January. With the initial coronavirus epidemic in Wuhan and the realization that it would likely spread globally, hospitals around the world began to stock up on supplies, which decreased their availability. Beyond the overall turmoil brought on by the pandemic, China took additional steps to protect itself that further obstructed the supply chain.
In February, to ensure that the country had adequate domestic supply, the Chinese government took over the production and distribution of medical products. China was not the only country to do this, but because it is a leading global supplier of so many health care products — personal protective equipment (PPE) such as N95 masks, medical devices, antibiotics and pharmaceutical ingredients, to name a few — the decision had major consequences. In 2019 alone, China supplied a quarter of the entire globe’s face masks.
According to the Congressional Research Service, which earlier this year published a report on US imports of medical supplies, China exported in 2019 nearly $21 billion in pharmaceuticals, medical equipment, and health care products to the US. There are no figures yet for 2020, but health care imports from China will almost certainly drop significantly.
For some products, US reliance on China was particularly high. Last year, the US imported $1.9 billion in PPE from China, about 30 percent of our total PPE imports.
China’s response is understandable; it was dealing with a significant disease outbreak. But in the US, this move kicked off shortages of PPE, as well as some medicines, and other important health care products — shortages from which we haven’t yet recovered.
Can we fix the supply problem before the pandemic ends?
China seems to have its outbreak relatively under control, and it has now somewhat eased limits on exports of medical supplies. This is good news, but the steps so far will not meet the overall increased demand.
The pandemic will continue to wreak havoc with logistics, creating bottlenecks that have slowed the movement of supplies. Pandemic restrictions, in particular physical distancing, slow down almost every part of the process, especially production. And some of our suppliers tell us that they are starting to see shortages in the raw materials they need for production, such as the material typically used to make isolation gowns. So it’s likely that health care providers will continue to rely more on domestic suppliers.
There are some benefits to this turn to US supplies. The route from factory to bedside is more stable, and providers are helping to support US workers, and the US economy.
But at the same time, the higher costs are putting pressure on health care; even before the pandemic, most providers were striving to cut budgets. Those pressures will only grow: the pandemic has increased costs at many hospitals (see: the huge increase in the costs of medical gowns), while also reducing revenue, due to the enormous number of appointments and elective procedures (which usually generate a substantial amount of health care systems’ income) that have been canceled and postponed.
So what can we do? I don’t have all the answers, and to be honest, I don’t think anyone does. The first step is to raise awareness of the problem.
On the ground, a potential solution is to return to reusable supplies. Over the past two decades, most hospitals replaced many reusable products with disposables. Johns Hopkins, and I suspect many other systems, will reconsider that choice. And we can do more to conserve supplies, using them carefully and only when necessary.
We also need to diversify our supply chains, connecting with manufacturers in India, Central America, and elsewhere. We can also focus on self-manufacturing; over the past few months, for instance, volunteers at Johns Hopkins have assembled tens of thousands of face shields. Of course, this sort of free labor is not the solution, but local supply handling could help ease the burden somewhat.
Federal and state governments can help by ensuring that domestic product manufacturers aren’t unfairly raising prices, as has apparently occurred in some places. They could also provide financial and logistical support to health care providers so they can better manage higher supply costs.
As this situation continues to evolve, the health care system and its partners will need to develop creative solutions to help ensure that hospitals can continue to afford to keep everyone safe.
Lisa Ishii, a head and neck surgeon, is the senior vice president of operations for Johns Hopkins Health System.
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Author: Lisa Ishii