Every hospital supply chain director has a version of the same story. The distributor portal shows the SKU as available until the morning it does not. Then the allocation notice arrives, and the sourcing work that should have taken six quiet months gets compressed into six days. The problem is not that shortages happen. It is that most hospitals plan for the last one instead of building a standing process for the next.
The last shortage is the wrong model for the next one
The fall 2024 IV fluid crisis is the one everyone remembers. Hurricane Helene flooded Baxter's North Cove plant in North Carolina, which Vizient describes as the source of nearly 60 percent of the country's IV fluids. Baxter did not report all 10 lines back in operation until mid-February 2025, and Healthcare Purchasing News noted allocations were still necessary. Hospitals spent months on conservation protocols for a product few had listed as a risk.
Vizient's timeline of recent disruptions also lists the 2020 propofol surge, when average demand for 50 mL and 100 mL vials rose 280 percent, the 2022 contrast media shortage after a plant shutdown in Shanghai, and the 2023 tornado at Pfizer's Rocky Mount facility. Different product, different cause, same scramble on the floor. Build the plan around how your facility is exposed, not around what failed last time.
Tier your SKUs by what stops a procedure
Start with the item list, not the supplier list. Pull 12 months of purchase history and sort every SKU using two questions: what happens clinically if this is gone for two weeks, and how many qualified sources can actually ship it.
| Tier | Definition | What the plan requires |
|---|---|---|
| 1 | Stops or delays a procedure; one or two qualified sources | Clinician-approved substitute on file, second source with purchase history, conservation protocol |
| 2 | Degrades workflow; several sources but long lead times | Approved substitute list, quarterly availability check |
| 3 | Commodity with broad supply | Standard par, no special action |
The FDA Medical Device Shortages List is a good check on where Tier 1 hides. As of its June 16, 2026 update the list included neurosurgical patties, stereotactic breast biopsy needles, angiographic control syringes, endoscopic vessel harvesting systems and oxygenators for extracorporeal circulation. None is a high-volume commodity; they are the few-source items a team skips when it tiers by spend alone. FDA notes that listing does not by itself mean patient care has been affected: it is an early signal, not a verdict.
Learn how allocation works before you are on it
Allocation decides who gets product in a shortage, and most buyers learn its rules too late. ASPR TRACIE's August 2024 supply chain guidance spells them out. Allocation is a contractual arrangement between supplier and distributor that gives each customer a share of product based on a percentage of its historical purchasing. It does not account for surge demand. And distributors commonly decline orders from new customers while a shortage is on.
If your first order with a secondary source is placed the week the shortage hits, you are the new customer being declined. A second source only counts as continuity if it holds your purchase history before the event. A small standing order on Tier 1 items is enough, but it has to exist.
The same guidance names two habits that make shortages worse. Just-in-time and low-unit-of-measure programs keep facility par levels minimal by design; ASPR TRACIE puts typical medical product distributor inventory at roughly 20 to 30 days of normal consumption, not surge. And duplicate orders placed with several distributors inflate apparent demand and lead distributors and manufacturers to miscalculate real need; distributors confirm out-of-norm orders before processing them, so the duplicate order buys nothing.
Pre-approve substitutes with clinicians now
ASPR TRACIE's instruction to distributors and facilities is direct: "Agree to acceptable alternatives and substitutions ahead of time." That means a clinician-signed substitute for every Tier 1 SKU, on file before it is needed. The value analysis committee is the right body. The week of the shortage is the wrong time to convene it.
AHRMM's CQO Summit white paper adds that data sharing has to run both ways, suppliers showing operations and providers sharing inventory and demand forecasts, and that hoarding by one facility creates shortages for others and waste through expiration. Send the substitute list to your primary distributor and secondary source so both can stock against it.
For each Tier 1 SKU, the continuity record should carry:
- Primary manufacturer part number and current distributor item number
- Country of origin, lot and expiration documentation requirements
- The clinician-approved alternate, approval date and signer
- The secondary source, with open account and purchase history
- The conservation protocol, if one exists, and the clinical owner
Fold it into the emergency plan CMS already requires
You do not need a new governance structure. Hospitals participating in Medicare are already required under 42 CFR 482.15 to maintain an emergency preparedness program built on a documented, all-hazards risk assessment, with policies that cover medical and pharmaceutical supplies. The plan must be reviewed and updated at least every two years, and the hospital must exercise it at least twice a year.
A supply disruption is an all-hazards event. Put the Tier 1 list in the risk assessment and make one of the two annual exercises a shortage tabletop: a 506J notice lands on a Tier 1 device, the primary distributor moves to allocation, and the team works the continuity record. ASPR TRACIE points hospitals to its DASH Tool to estimate what should be immediately on hand for infectious disease, trauma and burn emergencies.
Watch the signals so you move before the allocation notice
Section 506J requires manufacturers of life-supporting, life-sustaining, surgical and emergency care devices to notify FDA during a declared public health emergency at least six months ahead of a discontinuance or supply-disrupting interruption, or as soon as practicable; outside an emergency FDA encourages voluntary notices and publishes the shortage list either way. Keystone tracks that list, recalls and manufacturer notices on our disruption monitor, and our continuity sourcing program is built for hospitals that want a second source on file before the notice arrives.
The cost of waiting is measurable. Vizient's June 2025 survey of 132 respondents found hospitals spent roughly 20 million hours managing drug shortages in 2023, nearly $900 million in labor and more than double the 2019 figure, while monitoring an average of 43 shortages at a time.
Keystone Supply Group, founded in August 2025 with an office and warehouse at 7330 Ohms Lane in Edina, Minnesota, is the second source for hospitals and health systems that need one already on file. We quote from 60,000 SKUs across 270+ manufacturer relationships, ship stocked items in 1 to 3 business days, quote the same day during business hours, and extend Net 30 to approved accounts.
Send your Tier 1 list to Orders@KeystoneSupplyGroup.com or call (320) 808-3686 and we will build the alternate and secondary-source columns with you. Explore the catalog or Request a quote.
Sources
- FDA, Medical Device Shortages List: https://www.fda.gov/medical-devices/medical-device-supply-chain-and-shortages/medical-device-shortages-list
- FDA, Notify the FDA About a Medical Device Supply Issue (section 506J): https://www.fda.gov/medical-devices/medical-device-supply-chain-and-shortages/notify-fda-about-medical-device-supply-issue
- ASPR TRACIE, Partnering with the Healthcare Supply Chain During Disasters (August 2024): https://files.asprtracie.hhs.gov/documents/aspr-tracie-partnering-with-the-healthcare-supply-chain-during-disasters.pdf
- Cornell Law School Legal Information Institute, 42 CFR 482.15 Condition of participation: Emergency preparedness: https://www.law.cornell.edu/cfr/text/42/482.15
- Vizient, Strategic Spend: Supply shortages keep climbing, but assurance pushes forward (March 31, 2026): https://www.vizient.com/insights/blogs/strategic-spend/supply-shortages-keep-climbing-but-assurance-pushes-forward
- Vizient, New Vizient survey finds drug shortages cost hospitals nearly $900M annually in labor expenses (June 17, 2025): https://www.vizient.com/newsroom/news-releases/2025/new-vizient-survey-finds-drug-shortages-cost-hospitals-nearly-900m-annually-in-labor-expenses
- Healthcare Purchasing News, Baxter's North Cove Facility Restarts All Manufacturing Lines (February 19, 2025): https://www.hpnonline.com/sourcing-logistics/news/55269254/baxters-north-cove-facility-restarts-all-manufacturing-lines
- AHRMM, AHRMM20+ CQO Summit White Paper: Building a More Resilient Health Care Supply Chain: https://www.ahrmm.org/ahrmm20-cqo-summit-white-paper
