Healthcare Has Changed. So Has the Job of Keeping It Running

Healthcare has dramatically changed in the last 20 years. You’d be hard-pressed to find anyone—from a nurse at the bedside to a chief supply chain officer in the boardroom—who would disagree with that.

We’ve all watched the various pressures ramping up on our industry: The increasing number of mergers and acquisitions, the redefining of care settings, a global supply chain with more points of failure than ever.

All of that has changed care, and it’s also meant one thing: The distributor is an increasingly vital partner, working to ensure care continues amongst all of that change.

A new healthcare landscape

A recent study found that there were more than 1,100 mergers among roughly 5,000 acute-care hospitals between 2000 and 2020. Physician office consolidation has moved in parallel, with 47% of physicians consolidated within health systems in 2024, up from 30% in 2012. And while we all see the health systems growing larger and larger, we also have to acknowledge that the hospital is not the center of care it once was.

There are now 6,600 Medicare–certified surgery centers across the country, growing at a 2% rate annually. Vizient projects a 20% growth in outpatient volumes vs. 7% inpatient, with home health volumes up 13% over the past five years. That means while health systems have consolidated in increasingly larger networks, patient care settings have spread out everywhere.

If you wind back the clock ten or so years ago, distributors delivered pallets to a loading dock. Now, product needs to arrive in low-unit-of-measure to thousands of small sites, some with no dock, storeroom or materials management staff. A large health system manages anywhere from 30,000 to 60,000 SKUs. And while a hospital may still have their centralized supply room, they’re likely now part of a larger system with supplies that need to get to a physician office miles away. Or, as we look at care in the home, that last mile delivery means product ending up at a patient’s front door.

Time for a new model

Here’s where the old mental model breaks down. For a long time, the distributor was thought of as the cog in the system that moved boxes: buy in bulk, warehouse it, ship it out. That description was never quite complete, and today it misses the point entirely.

Distributors take legal ownership of product and assume the financial risk of carrying it, freeing manufacturers to invest in innovation. They aggregate products from more than a thousand manufacturers and deliver to more than 330,000 sites of care. They break bulk into the units a supply closet or a patient’s home actually need. And they hold the inventory that becomes a provider’s buffer when something goes wrong upstream.

That last function is the quiet engine of resiliency. No one needs an accounting of all of the disruption we’ve seen in the supply chain since the COVID-19 pandemic. For most health systems, how much buffer they have against a disruption depends almost entirely on what’s already sitting in their distributor’s warehouse. Finished product that’s already in your region, already on a shelf, can move fast when it needs to.

A quiet phone call that says it all

A recent example makes the point better than any statistic. A third-party vendor who sells their products only direct to providers suffered a severe disruption. Not an uncommon occurrence today when faced with natural disasters, geopolitical upheaval and cyberattacks. In this case, it meant the vendor couldn’t ship product out to the healthcare providers it served.

A health system reached out to Medline to see if we could help get that third party’s product to them, even though Medline doesn’t distribute for that company. Read that again, because it captures the whole shift. When something breaks today, providers don’t just ask, “What will the manufacturer do?” They ask, “How can the distributor help fix this?” The center of gravity for problem-solving has shifted.

Everyone has to be at the table

Healthcare is more complex, more broadly distributed, and more disruption-prone than it was even five years ago. Resiliency remains a shared responsibility. When a cyber event, a recall, or a hurricane hits, it takes all three parties—providers, manufacturers and distributors—jumping in together to ask the same question: how do we fix this, and how do we make sure it hurts less next time?

And manufacturers and providers look to distributors to be that central point of collaboration to help maintain resiliency. The organizations positioned to absorb that complexity are the ones that will keep product on shelves when it counts.