Gartner Announces Rankings of Its 2013 Healthcare Supply Chain Top 25

Cardinal Health Retains the No. 1 Slot in the Fifth Annual Healthcare Supply Chain Top 25 Ranking

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Gartner, Inc. has released the fifth annual Healthcare Supply Chain Top 25 ranking. The 2013 ranking identifies organisations leading the way in transforming the healthcare value chain to meet new revenue challenges through enhanced service and lower costs with an increasing focus on improved patient outcomes.

"The Fifth Annual Healthcare Supply Chain Top 25 ranking is representative of all the main constituents of the healthcare value chain - manufacturers, providers, distributors and retailers," said Eric O'Daffer, research director at Gartner. "The past couple of years have seen more large distributors and wholesalers investing in global growth markets that expand their scope and importance to the manufacturers. Likewise, retail pharmacies are vertically integrating supply chain while they position themselves as healthcare and wellness providers to their patient-consumers. Leading providers are innovating in new areas as well."

Cardinal Health took the No. 1 spot in the Healthcare Supply Chain Top 25 for the third year in a row with strong peer and analyst recognition for the breadth of the company's capabilities across distribution and manufacturing. Cardinal uniquely brings together, under one ownership structure, an expanding global presence and increasing vertical integration in the form of a manufacturer, medical surgical distributor, international sourcing company, pharmaceutical wholesaler and retail pharmacy along with a myriad of other services.

Mayo Clinic is Gartner's highest ranked Health System for the second year in a row and closed the gap significantly in the ranking on Cardinal Health, coming second in the ranking. Mayo received strong peer and analyst support along with quality of care and bond rating scores near the top. Mayo earned high ratings through a disciplined approach to supply chain that positions the company as an orchestrator of internal and external functions. The organisation serves multiple markets across the US through strong governance, talent management and metrics discipline.

Jumping up two spots to No. 3 after spending the past two years ranked fifth in the top 25 is Owens and Minor (O&M). O&M joins Cardinal Health as one of two companies to make the top five in all five years of the ranking. O&M rose through the rankings based predominantly on better recognition by peers and analysts, plus improved inventory turns from 9.6 to 10.5 year over year. Already well-recognised among health systems and manufacturers alike for its leadership, O&M has been building a market strategy to expand both its existing market in North America and branch out overseas.

"There was definitely movement between companies further down on this year's Healthcare Supply Chain Top 25 ranking," said Stan Aronow, research director at Gartner. "This reflects the realities of our times as consolidation, enabling profitable growth through supply chain, the impacts of globalisation and an increasing focus on patient outcomes take centre stage."

Consolidation happened across the healthcare value chain in 2013. The mergers of health systems continued, with more than 100 transactions last year. Large systems are growing larger through acquisitions of physician practices, individual hospitals and integrated delivery networks (IDNs). Many organisations added complexity to their supply chain and were challenged by another set of integrations to manage. Distributors and wholesalers in North America have made strategic moves to expand their reach in core markets, as well as overseas and even integrated with key customers in some cases.

Enabling profitable growth through the supply chain became more important in 2013. Increasingly, companies with a supply chain vision and solid execution teams are stepping ahead of their competitors. Gartner's research into the Healthcare Top 25 found that the capabilities and initiatives of leaders are more far reaching than ever before, creating distance between the Top 25 and other companies.

"Change is a constant in the healthcare value chain, and we expect more of it in the next five years," said Mr O'Daffer. "The focus on building fundamental capabilities, including the ability to correlate supply chain cost and service data, patient outcomes, and quality data, and on adapting to changing revenue models will take centre stage.

"It is clear that the access to and management of data will increase in importance, enabling enhanced, operational supply chain capabilities. It is also clear that supply chain will be at the centre of the discussion, bringing together organisational silos no matter where they sit in the supply chain. Organisations that embrace supply chain as an enabler of profitable growth will thrive, and we expect the difference between the 'haves' and 'have nots' to widen in this area, further increasing the likelihood for consolidation."

More detailed analysis is available in the Gartner Special Report "The Healthcare Supply Chain Top 25 for 2013." The report is available on Gartner's web site at http://www.gartner.com/...'daffer.

About the Healthcare Supply Chain Top 25 Methodology

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 our Top 25 ranking. These two components are combined into a total composite score.

Health systems have vastly different operating models. Access to common, public financial data is not easily captured, compared with publicly traded manufacturers, distributors and pharmacies. Therefore, Gartner utilised different assessment methodologies for these two major segments of the healthcare value chain.
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