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The purpose of this article is to shed light on hospital supply expenses, which form the second largest expense category after payroll and hold more promise for improving cost-efficiency compared to payroll. However, limited research has rigorously scrutinized this cost category, and it is rarely given specific consideration across cost-focused studies in health services publications. After reviewing previously cited estimates, we examine and independently validate supply expense data (collected by the American Hospital Association) for over 3,500 U.S. hospitals. We find supply expenses to make up 15% of total hospital expenses, on average, but as high as 30% or 40% in hospitals with a high case-mix index, such as surgery-intensive hospitals. Future research can use supply expense data to better understand hospital strategies that aim to manage costs, such as systemization, physician–hospital arrangements, and value-based purchasing.

Cover -- Title Page -- Copyright Page -- Contents -- Acknowledgments -- About the Authors -- Remembering -- About the Companion Website -- List of Exhibits -- List of Acronyms -- Preface -- Chapter 1 The Healthcare Supply Chain Environment-Here's the Big Picture -- 1.1 The Healthcare Supply Chain: Evolving Recognition and Importance -- 1.2 Healthcare System Challenges and Strategies -- 1.3 Supply Chain as a System of Systems within Healthcare as a System -- 1.4 What Is (Healthcare) Supply Chain Management? -- 1.5 Supply Chain Processes and Functions -- 1.6 The Supply Chain Stakeholders -- 1.6.1 Primary Actors: Buying and Selling Organizations -- 1.6.2 Supporting Actors -- 1.6.3 Influencers -- 1.6.4 Fusion Organizations -- 1.7 FISCO Functions and Supply Chain Maturity -- 1.8 From Cost Center to Strategic Asset -- 1.8.1 Clinician Centrality and the Customer -- 1.8.2 Who Is the Customer? -- 1.8.3 Advancing Capabilities -- 1.8.4 Lessons from Other Industries -- 1.8.5 Clockspeed -- 1.9 Chapter Summary -- Notes -- Chapter 2 Building a Strategy for Healthcare Supply Chain Management-Creating the Vision -- 2.1 Introduction -- 2.2 Vision Statements -- 2.3 Mission Statements -- 2.4 Corporate Objectives -- 2.5 Business Process Strategies -- 2.6 Technology Framework Strategies -- 2.7 Distribution Network Strategy -- 2.8 Action Initiatives/Strategies -- 2.9 Chapter Summary -- Notes -- Chapter 3 Risk Management Strategies-Healthcare Is Risky, So Is Supply Chain Management -- 3.1 Introduction -- 3.2 The Nature of Supply Risk -- 3.3 Risk Categories -- 3.3.1 Strategy Risk -- 3.3.2 Market Risk -- 3.3.3 Demand Risk -- 3.3.4 Implementation Risk -- 3.3.5 Cost Risk -- 3.4 Response and Resilience to Risks -- 3.4.1 Mitigating Risks -- 3.4.2 Reducing Risk Through Technology -- 3.5 Chapter Summary -- Notes.