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Cost Control Policy


Healthcare costs have been a growing concern across various healthcare organizations Within the United States. The world health organization (2020) report suggests that the past two decades have recorded a continual rise in healthcare spending. One of the strategies health systems are adopting to ensure the huge healthcare costs are slightly scaled down is formulating effective policies that can suppress this trend. This discussion focuses on exploring the supply chain cost control policy utilized in cost regulation within cardinal health, a health service provider and a pharmaceutical product company located in the US (cardinal health, n.d.). This paper will also discuss the details of this policy, its impacts, how it affects patient care, what are its unintended consequences and potential alternatives.

Policy details

The cardinal health supply chain cost control policy was declared effective from April 1st,2018, across all the departments in Cardinal Health. The chief human resource officer was assigned to ensure that this policy is amended across the organizations (cardinal health, n.d.). Some of the other responsibilities delegated to the human resource to ensure a successful implementation of this policy include fully supporting compliances and training that are related to this policy, investigating any noncompliance incidences of this policy and assisting in creating a healthy environment that supports employees to report violations of this policy (cardinal health, n.d.). The policy cuts across all the cardinal health employees and health locations. This policy acts as a cost control measure in the supply chain. The policy establishes the guidelines for the procurement process, outlines the criteria to be used in selecting viable vendors, and addresses inventory management to ensure that healthcare costs within cardinal health are effectively regulated (cardinal health, n.d.). The supply cost chain policy strategically optimizes the purchase prices, cuts down on the supply chain cost, and promotes an enhanced financial performance for both their clients and the organization.

In terms of product supply, the policy suggests that clients should deliver products at the cardinal health facility as agreed. The client shall be responsible for all the expenses and risks for the product stored within the cardinal health warehouse, with the exemption of losses that solely result from the negligence and misconduct (cardinal health, n. d). Cardinal Health expects all the vendors to ensure transparency and openness while conducting business operations and evaluate the performance risks to avoid blind business decisions that can predispose the organization to losses (cardinal health, n. d). The prices change implementations should be communicated 72 hours before the price implementation date. The supply chain policy prioritizes support for secure, quality, and reliable supplies. The employees are mandated not to compromise quality, and in case they observe any quality issues, they are advised to report to their managers for swift responses to prevent the uptake of products that can breed business losses (cardinal health, n. d).

Noncompliance with these policy guidelines will expose the organization to the risks of increased operational expenses and reduced profits, which can threaten the financial stability of the organization. The resources and finances can be allocated without assessing the risks that can bring about losses. Additionally, it can affect the reputation of the organization. For example, the instant increment of prices and noncompliance to integrity can trigger trust issues which are key in defining the reputation of a service or commodity provider. At a unit level, noncompliance with this policy can disrupt the availability of supplies and can easily cause budget overruns and department delays. At an individual level, noncompliance to this policy can attract penalties or disciplinary actions that can affect the job morale of an employer. Acting contrary to the supply chain policy on cost control can display a healthcare system that discourages the commitments to the attainment of healthcare goals in varied ways. Bowra et al. (2022) acknowledge that financial burdens and corruption can threaten the attainment of the standard development goals of promoting the well-being of all ages.

How the policy impacts fiscal aspects of the organization

The healthcare policy on supply chain cost control adopted by cardinal health has the capacity to establish basic guidelines that can govern a smooth, reliable, and economical procurement, vendor selection and inventory management process that prioritizes profitability and client satisfaction (cardinal health, n. d). The policy ensures that the organization negotiates better terms in seeking suppliers; it focuses on implementing timely inventories that have minimal losses and optimizes the ready market (cardinal health, n. d). The policy also has the potential to prioritize patients’ needs by ensuring the availability of quality health services and pharmaceutical products that are readily available at a cost-effective price that patients can afford. Affordable cardinal health products and services will enhance the aspects like efficiency and quality of health care service, which are essential in promoting quality care for patients.

Unintended consequences of this policy

Some of the secondary unintended consequences of this policy is the possibility of the policy introducing the monopoly of business partners who, in case of any disagreement or cancellation of partnership, can consume significant time in restructuring or restoring the partnerships. This effect can cause various influences across various units. For example, tight cost policies can limit the organization’s diversity in producing competitive products. The tight supply chain policies can cause increased workloads that can easily cause staff burnout and stress if the staffing population is less proportional to the workload. In case of any disruptions, due to monopolies can cause delays in accessing healthcare products. The policy can be revised periodically to accommodate the challenges and trends that arise in the healthcare market and, at the same time, ensure total stakeholders’ involvement in various stages of the supply chain to easily and openly receive proposals and suggestions that can be amended to promote improvements at cardinal health.

Alternatives to the Policy

Since the supply chain cost policy is formulated to ensure cost-effective products and services at cardinal health. There exists a need to develop strategies that can ensure cost reduction strategies are coupled with practices that can promote the quality of the products and services offered at cardinal health. A good alternative to this policy can be Periodic auditing and monitoring of the vendor’s performances and their risks with other stakeholders to identify aspects to be improved in the near future.


In conclusion, one of the strategies that health systems are adopting is to ensure that huge healthcare costs are slightly scaled down. The healthcare policy on supply chain cost control adopted by cardinal health has the capacity to establish basic guidelines that can govern a smooth, reliable, and economical procurement. The policy can be revised periodically to accommodate the challenges and trends that arise in the healthcare market.


Bowra, A., Saeed, G., Gorodensky, A., & Kohler, J. C. (2022). An exploration of anti-corruption and health in international organizations. Plos one17(8), e0269203.

Chen, J., & Miraldo, M. (2022). The impact of hospital price and quality transparency tools on healthcare spending: a systematic review. Health Economics Review12(1), 1-12.

Policy global human rights and labour standards – cardinal health. (n.d.-b).

Standards of business conduct – cardinal health (n.d).

Who are we? (n.d.-a).

World Health Organization. (2020). Global spending on health 2020: weathering the storm.


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