Saving Money Isn’t Getting Any Easier
There used to be more new savings opportunities just lying around waiting to be implemented than there is today. In fact, GPOs are announcing more price increases than decreases on every contract that comes across your desk. Standardization has been achieved at most hospitals, systems and IDNs and value analysis teams are spending most of their time on GPO contract conversions with meager savings results. Saving money isn’t getting any easier, but that isn’t a good reason to throw up you hands in frustration, since most healthcare organizations are looking for savings in all the wrong places.
There is actually 7% to 15% overall in new supply expense savings available to you right now if you decide to reorient your savings efforts in three supply chain areas of your operations:
Utilization Management
We have proven beyond a doubt that healthcare organizations are bursting at the seams with utilization misalignments in their supply chain operations. These wasteful and inefficient consumption, misuse, misapplication, misappropriation and value mismatches are bloating your budget and need to be attacked by your value analysis team(s), and not waste their limited time on GPO contract conversions.
To this end, we recommend that you should have a Value Analysis Team dedicated to GPO conversions, if your VA teams are spending all or most of their time on this GPO activity, so they can focus their valuable time where your real supersized savings reside.
Demand Management
This is a new area of your supply chain operations that encompasses “measuring the velocity, intensity and frequency of the products, services and technology utilized over time”. We have found this to be a key metric to enable supply chain managers to begin a meaningful dialog with their physicians and department heads to understand why the utilization of any commodity they are buying is increasing or decreasing — beyond normal acceptable justifiable limits.
Contract Management
With few exceptions, we are observing that healthcare organizations aren’t ferreting out obvious and visible savings in their purchase service contracts where up to 18% in savings overall can be achieved. Every hospital has millions of dollars of purchase service contracts no matter how many occupied beds you have. These contracts should be benchmarked for price, utilization and demand reduction opportunities at least annually, to ensure that they are within acceptable justifiable limits.
These three areas of your supply chain operations are ripe for hundreds-of-thousands dollars (maybe millions) in supply chain savings for your healthcare organization if you decide to refocus your time, talent and VA teams on these untapped gold mines. This will then make saving money a whole lot easier, while everyone else is looking for savings in all the wrong places.
Filed Under: savingsblog • Supply Chain
