toy forklift and van on keyboard to illustrate supply chain
Where to go from here
by Scott Owen

Backorders. Allocation. Delays. Lack of stock. Personal protective equipment (PPE). These are a few of the terms that came to the forefront in 2020 and have carried over into this year.

As we begin to close out the first quarter of 2021, I reflect on the supply channels for the homecare and medical supply industry—and question whether there has been improvement. As we began our first quarter in 2020, we were not prepared for the shortages or needs of the health care industry. The COVID-19 pandemic brought challenges and adversity to the home medical equipment (HME) industry.

We saw automakers and other siloed businesses pivot by stepping up to help supply critical needs for masks, ventilators and gloves. Many of the manufacturer partners in this space said they experienced clogs in the supply chain due to these efforts; however, other opportunities evolved accordingly.

Several standard supply chains have not recovered and may never reach a full sense of normalcy again. When I speak with VGM members, I hear they are focused on finding, securing and ordering products on a routine basis. That’s especially true when it comes to items that are much needed during this timeframe, including PPE, oxygen concentrators and ventilators.

Challenges in Allocation

I expressed concern with certain channel partners at the onset of the pandemic, specifically noting the homecare space was left at the end of the line when it came to allocations. Nearly three weeks into the pandemic and with hospital systems overrun, many in health care began to realize how vital HME providers could be in offering solutions for the pandemic. The goal of keeping individuals safe at home and out of institutions that were over-burdened and under-staffed became intense—and was recognized as a crucial part of the continuum of care.

The numbers are alarming and do not seem to be improving. In a recent industry survey, 39% of respondents reported delays of six to 10 weeks for routine orders. Most of the problems relate to PPE and respiratory devices, but are no longer exclusive to these areas. This not only puts a strain on the level of care that providers can offer, but also increases costs associated with shortages. The federal government intervened in some situations only to find similar challenges. They also encountered price inflation related to pandemic-related items that is still being addressed 10 months later.

VGM assisted HME providers with timely updates for product needs and availability. Soon after most organizations became remote, VGM offered a “swap sheet” on the website giving any interested medical supply company the ability to network and exchange product availability. While this helped fill some immediate gaps in the supply chain, it was determined early on that this was only an interim solution.

Large Orders, Short Stock

As projected, many health care institutions purchased larger orders than normal and maintained excessive inventory in fear of future shortages. This action congested the supply chain and created shortages in some instances.

Many concerns remain about supply chain levels and securing certain products. When we arrive at stable conditions again, the market will most likely be flooded with oxygen concentrators, ventilators and other respiratory devices. Many providers are placing large orders only to be informed by manufacturers of possible 10- to 12-week delays. This is a challenge for providers trying to making decisions about whether to reduce business or even to no longer serve certain areas. Providers have also said they are creating additional warehouse space for any excessive inventory they are able to stock. This will also be an expense that has to be allocated for in 2021.

The pandemic has allowed new opportunities for many medical equipment companies that we did not forecast or plan for. Some reverted to renting equipment and others to investing in refurbished devices. This is a new offering for many, but has been very helpful and takes the pressure for newly manufactured products off the supply chain. Medical device repair companies have also entered the space to prevent the accumulation of discarded, unused or non-functioning devices in need of repair. While this forces providers to take an inventory count and adjust their levels, it has also created opportunities to rely on resources that may be “in house.” These trends will continue and are viable options for offering needed solutions.

Looking ahead and building on past success, networking channels with trade groups such as VGM, the American Association for Homecare, the Health Industries Distributors Association and state associations have helped providers stay out in front of certain supply chain issues. It is also important to stay in touch with local health departments and state Medicaid offices. There is power in communication and many VGM members have expressed satisfaction with these contacts.

As hospitals discharge patients recovering from COVID-19, the recommended oxygen therapy at home is not always a viable option due to inventory shortages. Many VGM members are investing in collecting data for certain markets, products and referral sources. This enables them to forecast for future needs and product selection and gives them the ability to determine which managed care or individual contracts they can fulfill. Also, focusing on different disease states and offerings has allowed many HME providers to diversify their business models.

When the pandemic is under control, there will be a surplus of products and providers may be able to realize additional space where they have stockpiled inventory. The homecare industry will rebound; however, providers may never experience the same inventory control or mechanisms that they had before COVID-19. Providers who are strategic in the par levels, inventory constraints and channels they can control will remain viable.

In 2020, the terms “unprecedented” and “pivot” became a part of our daily conversations. In the future, we will hopefully eliminate these terms as well as inventory constraints, delays or backorders and allocation for the health care segment. Persistence in staying abreast of changes and availability with supply chain partners—and with resources within our industry—will achieve the outcomes we all hope to call “normal” once again.

Scott Owen is senior vice president of contracting for VGM Group & Associates, which represents more than 3,500 home medical equipment providers and is based in Waterloo, Iowa. Owen is responsible for contracting, business analytics and negotiations on behalf of the membership and has a 29-year career in the industry.