Press Release

STAMFORD, Conn., November 17, 2016 View All Press Releases

Gartner Announces Rankings of Its 2016 Healthcare Supply Chain Top 25

Intermountain Healthcare Takes No. 1 Slot in the Eighth Annual Healthcare Supply Chain Top 25 Ranking

Gartner, Inc. has released its eighth annual Healthcare Supply Chain Top 25 ranking. The ranking recognizes companies across the healthcare value chain that demonstrate leadership in improving human life at sustainable costs.

"Leaders in healthcare realize that the patient and demand-driven concept is the alignment of the supply chain to the customer need that it ultimately fulfills," said Stephen Meyer, research director at Gartner. "One aspect of being patient and demand driven is already universal in the industry — every player in the value chain is aware that there is a patient requiring care at the end. Leading organizations understand satisfying a customer is more than just treating a patient's disease or condition. Patient expectations of treatment cost, location and convenience are an opportunity that leaders from all industry segments are using to define their supply chains."

Intermountain Healthcare took the top spot in the Healthcare Supply Chain Top 25 for 2016 after two years at No. 3 (see Table 1). Intermountain Healthcare's journey to the top is the culmination of strategy, talent and capital coming together in a sustained effort to transform its supply chain. The provider delivered on an initiative to standardize across 62 clinical product categories with alignment and buy-in from the C-Suite. That effort generated $24 million in savings in clinical commodity products.

The company also strengthened its Intalere acquisition, building the Intermountain Committed Contracts Program that aims to leverage IM's strength in direct sourcing as a new offering. Service is also a priority as the company expanded its vision for its Supply Chain Operations Center to include medical devices and a rise in service levels to 99 percent on commodities.

Table 1. The Healthcare Supply Chain Top 25 for 2016

2016 Rank

Company Name

Three-Year Weighted ROA (2013 to 2015)1

One-Year, End-of-Year Inventory Turns (2015)2

Bond Rating3

Truven 15 Health Systems Study4

Peer Opinion5
(101 voters)

Gartner Opinion5
(20 voters)

Composite Score6A,6B

1

Intermountain Healthcare

 

 

AA+

Top Quintile

1095

267

8.67

2

Cardinal Health

4.2%

10.8

 

 

1392

290

8.59

3

Mayo Foundation

 

 

AA

15 Top

922

277

8.45

4

Mercy

 

 

AA-

15 Top

679

258

7.29

5

McKesson

3.4%

11.7

 

 

824

275

7.17

6

Owens & Minor

3.5%

9.1

 

 

925

226

6.54

7

CVS Health

6.0%

9.1

 

 

762

238

6.46

8

Johnson & Johnson

11.6%

2.7

 

 

1377

189

6.36

9

AmerisourceBergen

0.6%

13.6

 

 

540

196

5.56

10

Cleveland Clinic

 

 

AA-

2nd Quintile

788

132

5.51

11

Walgreens Boots Alliance

6.2%

8.8

 

 

521

192

5.43

12

Banner Health

 

 

AA-

Top Quintile

312

190

5.38

13

Medtronic

4.1%

2.6

 

 

906

202

5.00

14

Ascension Health

 

 

AA+

3rd Quintile

273

224

4.89

15

Ochsner Health System

 

 

A-

2nd Quintile

389

188

4.64

16

BD

6.3%

2.9

 

 

690

194

4.63

17

Novartis

10.7%

2.8

 

 

457

184

4.29

18

Pfizer

6.3%

1.3

 

 

598

193

4.11

19

Advocate Health Care

 

 

AA

2nd Quintile

287

100

4.00

20

Amgen

8.6%

1.7

 

 

478

182

3.98

21

BJC HealthCare

 

 

AA

3rd Quintile

508

79

3.86

22

Henry Schein

8.2%

5.0

 

 

353

133

3.83

23

Duke University Health System

 

 

AA

2nd Quintile

411

73

3.81

24

Roche

13.4%

2.0

 

 

318

148

3.64

25

Abbott

8.2%

3.4

 

 

722

62

3.56

Notes:
1 ROA:
((2015 net income/2015 total assets) x 50%) + ((2014 net income/2014 total assets) x 30%) + ((2013 net income/2013 total assets) x 20%)
2 Inventory Turns: 20145 cost of goods sold/2015 inventory
3 Bond Rating: All ratings were mapped to the Standard & Poor's (S&P) rating system using an industry-standard mapping system
4 Truven 15 Top Health System Study: Based on score in Truven Health Analytics’ 2016 15 Top Health Systems Study
5 Peer Opinion and Gartner Opinion: Based on each group’s forced-rank ordering of performance to Gartner’s Healthcare Supply Chain Capabilities Model
6A Composite Score, Health Systems: (peer opinion x 35%) + (Gartner opinion x 35%) + (Bond Rating x 15%) + (Truven ranking x 15%)
6B Composite Score, Nonhealth Systems: (peer opinion x 30%) + (Gartner opinion x 30%) + (ROA x 20%) + (Inventory Turns x 20%)
2015 data used where available. Where unavailable, latest available full-year data used.
All raw data normalized to a 10-point scale prior to composite calculation.

Source: Gartner (November 2016)

Cardinal Health maintained the second spot in 2016 and is the highest ranking distributor on the list. However, Cardinal Health is more than a distributor. The company emphasizes technology to help develop and deliver tailored new products and services to patient groups. Recent announcements include a new distribution agreement with Biosensors International to extend its interventional vascular business for coronary stent portfolio. Additionally, Cardinal's FUSE innovation lab brings customers and healthcare stakeholders together to explore technology opportunities to help shape future products and services.

Although Mayo Clinic dropped to the No. 3 spot in this year's ranking, it has been one of the most consistent performers in the top 25. It ranked in the top five for the past six years and was No. 1 in 2015. In 2016, the company developed and launched Reveal, a program that provides real-time visibility and transparency for suppliers in measuring contract compliance across their facilities and affiliates. The company simultaneously delivers value for itself and its affiliates via organic growth and working with partners. Mayo Clinic is approaching 10 years of continued expansion of these commercialization efforts with consistent year-over-year revenue increases from those services.

"The supply chain capabilities being built today are the foundations that will enable effective and affordable healthcare in the future. However, that future will likely see significant challenges in terms of cost, patient outcomes, and how and where care is delivered," said Mr. Meyer. "It is unlikely that these challenges will be solved by small iterations of change to the current model. Instead, innovation will likely come in the form of new technologies and new competitors. Leading supply chains want to be a 'disrupter' and not a 'disruptee.' They are building incubators to pilot new technologies. They are collaborating with visionaries from other industries, such as Google, Amazon and Uber, and some are playing the 'long game' and investing in solutions that won't demonstrate their real value for years."

More detailed analysis is available in the report "The Healthcare Supply Chain Top 25 for 2016." Additional analysis on the Healthcare Supply Chain Top 25 is also available in the complimentary Gartner webinar "The Gartner Healthcare Supply Chain Top 25 for 2016."

About the Healthcare Supply Chain Top 25 Methodologies

Consistent with Gartner's Top 25 research methodologies, the Healthcare Supply Chain Top 25 ranking is derived from two main analyses: quantitative measures and opinion. Quantitative measures provide a view into how companies have performed in the past, and establish proxy connections between financial health, performance and supply chain excellence. The opinion component offers an eye to value chain leadership and demonstrated supply chain performance — crucial characteristics of Gartner's Top 25 ranking. These two components are combined into a total composite score.

Gartner analysts will further discuss supply chain initiatives in healthcare at the Gartner Supply Chain Executive Conference 2017 taking place May 23-25 in Phoenix, AZ. and September 20-21 in London. Follow news and updates from the events on Twitter using #GartnerSCC

Contacts
About Gartner

Gartner, Inc. (NYSE: IT) is the world's leading research and advisory company. The company helps business leaders across all major functions in every industry and enterprise size with the objective insights they need to make the right decisions. Gartner's comprehensive suite of services delivers strategic advice and proven best practices to help clients succeed in their mission-critical priorities. Gartner is headquartered in Stamford, Connecticut, U.S.A., and has more than 13,000 associates serving clients in 11,000 enterprises in 100 countries. For more information, visit www.gartner.com.

Comments or opinions expressed on this blog are those of the individual contributors only, and do not necessarily represent the views of Gartner, Inc. or its management. Readers may copy and redistribute blog postings on other blogs, or otherwise for private, non-commercial or journalistic purposes. This content may not be used for any other purposes in any other formats or media. The content on this blog is provided on an "as-is" basis. Gartner shall not be liable for any damages whatsoever arising out of the content or use of this blog.