Dockworkers’ strike should be a ‘wake-up call’ for healthcare supply chain

For the first time in more than four decades, 45,000 dockworkers walked off the job at ports from Maine to Texas, raising fears of supply chain disruptions.

A cargo ship enters the port of Miami in this file photo. Hospitals and healthcare leaders feared a lengthy dockworkers' strike would disrupt medical supplies. The dockworkers' union suspended the strike Thursday after securing a tentative wage deal. (Image: ©Mariusz - stock.adobe.com)

After three days, the union representing dockworkers, the International Longshoremen’s Association, suspended the strike. The dockworkers said Thursday that they are going back to work after reaching a tentative wage agreement with the U.S. Maritime Alliance, as the Associated Press reports. The union has paused the strike until Jan. 15 to allow time to negotiate a new contract.

For hospitals and health systems, a lengthy strike could have caused major headaches, analysts say.

While the immediate threat has subsided, experts say there is a need for a smarter, more resilient supply chain to reduce the risk of shortages of medical supplies and other items that are critical to hospitals and health systems.

About half of all goods imported to the U.S., including medical supplies, come via ports on the East Coast and Gulf Coast, analysts say.

In an interview before the dockworkers agreed to go back to work, Ash Shehata, KPMG’s U.S. sector leader for healthcare, said that hospitals and health systems still rely on the ports for a lot of their supplies.

“The medical supply chain is still coming through major containers that are moving through the shipping systems,” Shehata told Chief Healthcare Executive®.

Shehata says pharmaceutical companies can use different supply chains and are less reliant on the ports. But medical supplies coming from other countries are transported via boat.

The dockworkers’ dispute provides another compelling reason for a more nimble, transparent and data-driven supply chain, he said.

“Knowing where those products and services are and moving all the way to their point of manufacturing is really critical,” Shehata said before the tentative deal was announced.

He said the strike ought to be viewed as a “wake-up call.”

Shehata notes that the federal government has solicited proposals to understand the resiliency of the supply chain. He also points to efforts to create more autonomous transparency of the supply chains of hospitals and health systems.

But he says those efforts should take on new urgency.

“I think this event is going to remind us that it will likely now need to move at pandemic speed,” Shehata said. “Because we might be facing another pandemic. We might be facing another strike. We may be facing a global supply shortage that isn't necessarily related to ports.”

Kyle MacKinnon, senior director of operational excellence and disaster preparedness & response lead for Premier, said a longer strike could have posed problems, since half of the nation’s imports of medical supplies arrive via ports affected by the strike. A prolonged strike could have led “to port congestion through late 2024 and potentially into 2025,” MacKinnon said via email to Chief Healthcare Executive.

Healthcare Ready, a nonprofit organization that works to ensure healthcare access during emergencies and natural disasters, said the East Coast and Gulf Coast ports handle about 50% of all U.S. imports across multiple sectors, including pharmaceuticals and medical supplies.

Another disruption emerges

While the dockworkers’ deal alleviates the threat of some disruptions in medical supplies, health systems may see shortages tied to Hurricane Helene.

Baxter International, a medical technology company, operates a plant in Marion, North Carolina that experienced flooding from Helene. The plant is closed, and it’s the nation’s leading supplier of intravenous and peritoneal dialysis solutions, Healthcare Ready says.

As of Oct. 1, the FDA said it has not declared any shortages of medical supplies related to the plant’s closure.

Baxter said it is communicating with customers and the company is looking to ramp up production at other facilities to help ensure adequate supplies.

José (Joe) E. Almeida, chair, president and CEO of Baxter, said earlier this week, “Remediation efforts are already underway, and we will spare no resource – human or financial – to resume production and help ensure patients and providers have the products they need."

The American Hospital Association says it’s closely watching disruption in the supply of IV solutions caused by the flooding of the Baxter facility.

Hospitals have dealt with other shortages this year.

Earlier this year, the American Society of Hospital Pharmacists reported “an all-time high” in the shortage of medications. The group reported a record of 323 active drug shortages, including cancer drugs and other life-saving medications, in the first quarter of 2024.

Hospitals have also had to deal with shortages of bottles for blood cultures in the summer.

Looking ahead

Going forward, Shehata sees a clear need for smarter operations of supply chains. He points to good steps in recent years, with distributors signing strategic agreements with health systems to manage portions of their supply chain, not just getting from the dock to the warehouse but throughout the health system.

“If these supply chains are so fragile, there might need to be more end-to-end visibility and maybe end-to-end partnerships with the health systems and the supply chains,” Shehata says.

As distribution risk becomes more global, healthcare organizations may look to choose medical supply partners that can route products from different markets, he says. He also says it may be prudent to find more suppliers of certain goods in the Americas than Asia, even if it means paying a bit more.

While health systems are likely going to continue to rely on some medical supplies made overseas, Shehata says organizations may need to look at more products made domestically, or at least from countries closer to the U.S.

“I do think on the higher commodity cost products, we're going to see more and more local sourcing,” Shehata says.

Premier has also been pushing for more development and production of medical supplies in the U.S.

“Premier has long advocated for policies to strengthen domestic medical supply chains and help insulate patients and providers from supply disruptions and shortages in the future,” MacKinnon said.

Tom Cotter, the executive director of Healthcare Ready, told Chief Healthcare Executive in a 2023 interview there needs to be greater insight in the healthcare supply chain.

“I think people think there's more visibility and transparency than there actually is in the supply chain, especially in the healthcare sector,” Cotter said.

Cotter stressed the need for better data in the healthcare supply chain. He called for a greater understanding of the key players, including those who hold significant market share for certain products.

“The supply chain at the end of the day is more of a supply web,” Cotter said. “And there's a lot of interdependencies.”