Hospitals say they’re better prepared with PPE than spring, but supply chain uncertain

Eight-hospital Beaumont Health, which treated more COVID-19 patients than any hospital in Michigan, is on its way to stocking personal protective equipment in its warehouses for up to 90 days in preparation for a second surge of the pandemic.

That’s what the Southfield-based system estimates is needed to care for 1,200 hospitalized patients, the number of people the system cared for during the pandemic’s peak in early April.

“We have been preparing for a second surge now for four months and learned a lot as we climbed the hill and then came down the backside of the curve,” said Melanie Fisher, Beaumont’s supply chain director. “We’ve spent the last few months building up our inventory (of PPE) days on hand. We are anticipating less than the 1,200 (hospital patients) we had in the peak.”

Beaumont currently has 161 hospitalized patients with COVID-19, up 15% from 140 on Oct. 1.

In 2019, Beaumont used 50,000 N95 masks the entire year. But at the height of the COVID-19 pandemic, those 50,000 masks lasted fewer than 10 days, Fisher said.

“Those are the wild fluctuations in burn rates that we’ve seen during this COVID journey that no one really could have predicted,” she said. “We created a daily report on burn rates for high PPE categories (masks, gloves, gowns, face shields and other eye protectors) and monitor it on a daily basis.”

Most other health systems in Michigan have improved their PPE supply chains to a three- or four-week supply, based on their predictions of COVID-19 patients this fall. But executives acknowledged they have been placed on a limited PPE allocation from their supply distributors and could be reduced further at some point if coronavirus spread worsens.

Jay Fielder, division director at the Michigan Department of Health and Human Services for emergency preparedness and response, said the state has built up a warehouse of up to 90 days of PPE supplies for emergency distribution to health care providers. The exception is gloves, which are in short supply.

“We’ve been doing everything we can to try to amass a cache of PPE in preparation for what we’re expecting to be a second wave of COVID-19,” Fielder said. “We’ve looked at burn rates and have information from hospital systems and all types of entities that report to us and are in a pretty good situation.”

Fielder said Michigan has one major warehouse in Lansing and two dozen other regional storage areas for local providers.

“Those who have really struggled are the smaller buyers. Independent hospitals and nursing homes have had a more difficult time getting materials regularly,” said Fielder, adding that the state is working more closely to keep those providers supplied.

Over the past decade, hospitals began reducing the amount of supplies on hand in inventory to four days to a week to cut costs and increase efficiencies, said Michael DeLuca, executive vice president of operations and co-founder of Prodigo Solutions, a Cranberry Township, Pa.-based inventory supply chain consulting firm.

Now, with the COVID-19 pandemic, hospitals are looking at increasing specific supplies such as N95 masks, gowns and gloves, DeLuca said.

“Not only did hospitals not take it (pandemic) into consideration, but the national strategic stockpile was woefully unprepared” to serve as a backup, DeLuca said. “Group purchasing organizations played a role. All these decisions were driven by money. They were looking at the financial stats more” instead of anticipating a possible worldwide pandemic like COVID-19, he said.

Dave Mazurkiewicz, CFO with McLaren Health Care in Grand Blanc, acknowledged the 15-hospital system’s strategy was to keep expenses low. He said the system continues to maintain normal supplies of PPE at hospitals, but now it is bulking up on PPE in central warehouses.

“It’s business as usual. I don’t want to build 15 warehouses,” one for each hospital to store 90 to 180 days of supplies, Mazurkiewicz said. “I am trying not to spend money when I don’t have to.”One practical reason is prices for PPE remain high, up to four times the costs for masks and gloves in January, Mazurkiewicz said.

McLaren and other hospitals ran into a breakdown of the PPE supply chain during April and May, when all supply distributors and hospitals were backlogged because of the pandemic, Mazurkiewicz said.

Over the summer, McLaren, Trinity Health and Beaumont, among other health systems, invested in domestic mask manufacturers. Mazurkiewicz said McLaren is nearing a deal on a second category of PPE, a product he declined to name.

“We’ve been working with suppliers to build our strategic stockpile for us,” Mazurkiewicz said. “The difficulty is how to build up supplies without substantially raising the cost of health care. If there is a break in the supply chain, I have an ability to go to that stockpile and make sure we secure the right amount for our employees.”

Michael McKenna, M.D., McLaren’s chief medical officer, said he believes the health system is prepared for another COVID-19 surge. The question is how big will the surge be?

“We really don’t know, but we better be prepared,” McKenna said. “We aren’t seeing a lot of evidence now (that it will be worse than spring). With this disease, it is so hard to predict.”

Rob Handfield, professor of supply chain management at North Carolina State’s Poole College of Management in Raleigh, said hospitals have been purchasing more PPE to avoid shortages like earlier this year. But he said most still rely on the unpredictability of Asian manufacturers for the bulk of supplies.

Over the past several months, the federal Strategic National Stockpile has been purchasing billions of dollars of PPE to replenish depleted warehouses from earlier this year, Handfield said.

“They have loaded up on PPE and are sitting on it,” said Handfield, who has seen a 72-page report on the national distribution plan for PPE that the Republican-led House Energy and Commerce Committee wrote in late August.

Handfield said he is conducting a major survey of state PPE preparations. He said officials in most states told him they are worried they will not be able to rely on the Strategic National Stockpile for PPE if normal distribution channels peter out. He said California and Utah have done a good job warehousing PPE, but he has not spoken yet with Michigan officials.

Fielder, of MDHHS, said the state has spoken several times with Region 5 officials for the Federal Emergency Management System, which includes Ohio, Indiana, Illinois and Wisconsin. He said he feels confident that Michigan can rely on the federal stockpile for most PPE, except gloves, if supplies run low.

“FEMA asked us to look at 90 days cache and we asked (health systems) to do that,” said Fielder, adding most health systems have increased their internal PPE supplies. “N95 masks will be tough to get again.”

Ed Hisscock, Trinity’s senior vice president of supply chain management, said the 92-hospital system has a distribution center in Fort Wayne that supplies its Michigan hospitals with PPE.

“It has been a godsend to have it ready. We have space for more PPE and can move it to hospitals if we need to,” said Hisscock, who said Trinity has increased hospital PPE on-hand supplies from about five days to up to two weeks.

During the past six months, domestic manufacturing around the U.S. of medical supplies and PPE has accelerated. Hospitals use 3D printers to make swabs. Apparel companies are now making gowns. Alcohol distillers produce hand sanitizer. Auto manufacturers are making face shields and ventilators.

But Chinese and Asian manufacturing has ramped up even more quickly and are flooding U.S. markets with less expensive alternatives, Handfield said.

In September, the Government Accountability Office reported that PPE shortages persist nationwide. The GAO said HHS and FEMA should develop specific plans to help mitigate the supply gaps.

The GAO said the Trump administration pulled $6 billion from the $16.7 billion originally allocated to the Strategic National Stockpile to replenish stocks of PPE, ventilators and testing supplies, to use the money for Operation Warp Speed, its effort to develop and distribute a COVID-19 vaccine.

DeLuca said Prodigo’s data showed the average backorder rate for PPE increased from the typical one week time to up to two months at the height of the pandemic in April. Prices for PPE went up an average of 49%.

“When products went on backorder, we saw hospitals looking for new product substitution” from domestic manufacturers, he said. “We saw substitutes of greater than 95% of PPE coming from domestic suppliers. One day a local vendor is doing alcohol, the next day making hand sanitizers.”

This story first appeared in our sister publication, Crain’s Detroit Business.