Are you Keeping Score with Actionable Key Performance Indicators?
We found, 10 years ago that it was impossible for us to keep our finger on the pulse of everything that was happening in our client’s supply chain expenses unless we changed how we were keeping score. It was like counting the windows on a train as it passed by at 80 miles an hour. It couldn’t be done…
That’s when we started keeping score of our client’s supply chain expenses with actionable key performance indicators (KPIs). We use a measure of their performance (benchmark, target or time frame) that signals to us a change in our client’s purchasing patterns, utilization or demand for all of the products, services and technologies that they were buying.
As an illustration, we now have set an upper limit KPI for all of the client’s products, services and technologies that they are buying in our Utilizer® Dashboard. So when our client’s total cost per KPI go above their upper limit on any of their commodities we and they can see that something has changed in their practices and needs to be immediately addressed.
We also employ single value benchmarks, a range of Activity-Based Costing statistics and literally thousands of demand KPIs to keep score of our client’s supply chain expenses in almost real-time to ensure that our client’s costs are always within acceptable limits.
What does this all mean to you? If you aren’t keeping score of your supply chain expenses utilizing the power of actionable KPIs, you are missing an opportunity to be absolutely and lastingly in control of your supply chain expenses.
We have found, through the school of hard knocks, that you can’t accomplish this feat of conjuring by mere intuition, legacy MMIS systems, spend managers or even the manipulating of your raw statistics.
There is only one way to do so! You will need to reinvent what you are doing now so that you can quantitatively measure with a number, statistics or metric (KPI) every aspect of your supply chain expense activities. Then and only then, will you be able to rest easy knowing that you are firmly in control of your supply chain expenses….going forward.
Is Value Analysis Your Responsibility?
I was paging through AHRMM’s 2009 Material Management’s survey to look for trends that might be of interest to my readers. One trend that jumped out at me was that only 28.7% of the survey’s respondees reported that they were responsible for value analysis for their hospital. This is an astounding statistic when you think about it: 71.3% of MMs aren’t responsible for VA at their healthcare organization!
My first reaction to this eye-opener was that this must be a typo, but then I realized that this number was consistent with AHRMM’s 2007 (30.7%) and 2008 (36.5%) survey results, so it must be right. I also know that many hospitals, systems and IDNs don’t have active value analysis teams, so that’s one reason why this number is so low. Another reason it’s low is that not all supply value analysis programs report to material management. I have often seen this vital function reporting to nursing service, not materials management.
My thinking is that even if this number is a little off, it still shows a dangerous trend in healthcare: Material management isn’t 100% in charge of their healthcare organization’s supply value analysis programs or there is no VA program is place to do so!
As I see it, VA is a mission-critical function of materials management. Every hospital, system and IDN should have a supply value analysis program and it absolutely should report to materials management. This is because price is the smallest factor in the total cost equations (about 21%), while 79% of your product, service and technology cost is attributed to the in-use cost of the commodities you are buying. Based on our empirical experience, only VA teams can drive out these unnecessary and unwanted utilization costs…period!
In brief, if your hospital, system or IDN is to get ahead of the wave in the new healthcare economy that is upon us, you will need to embrace the value of value analysis in controlling your total supply expenses. This means, in practice that you will need to take charge of your VA program if it reports to another department or establish VA teams to get this hard work done.
The alternative is to either ignore this proven cost-cutting methodology or leave it to someone else in your hospital, system or IDN to get this important work done. This doesn’t seem like a plan to ensure your job security to me, so I would suggest that you take charge of your VA program today or get your VA program started to protect your turf and to keep your paychecks rolling in for the foreseeable future. It doesn’t take a whiz kid to see this as the road you should travel.
Looking Beyond Your Traditional Hospital Supply Chain Savings
We are finding that almost everyone in the supply chain business is on top of their game when it comes to their price and standardization savings. Yet, we have observed that these same healthcare organizations aren’t looking beyond these traditional cost cutting measures to shrink their total supply chain spend.
What am I talking about? What I’m referring to is looking beyond your traditional savings to start attacking your purchase service cost which represents as much as 9% of your revenues and up to 50% of your total supply spend. More importantly, we have found that these non-traditional expenses can yield you as much as 12% to 18% (or $2,866 to $4,217 per occupied bed) in additional savings that can go right to your bottom line in less than 12 to 18 months.
If you are a regular reader of my Savings Beyond Price™ e-newsletter and my blog, you know that I have been singing this tune for many years. This is because I still don’t see enough hospitals, systems and IDNs capturing these big savings opportunities that I just talked about.
Now that the healthcare reform bill has been signed into law and is beginning to be implemented in small, incremental and then eventually big doses over the next few years, we as an industry don’t have the luxury of waiting until these new regulations are fully implemented to reduce our total supply chain expenses. We need to reduce our total supply cost today, tomorrow and every year going forward so that we are ready when our reimbursement from all sources contracts, evaporates and eventually becomes a very small stream.
To quote one of my favorite sayings, “Noah didn’t wait until it was raining to build his ark”; don’t you wait any longer to cut all of your supply chain savings to the bone.
ZAPPOSIZE Your Customer Service
I hope that all supply chain professionals realize that their #1 job is customer service, since without exceptional customer service all of the other important things (savings, quality and logistics) you do for your healthcare organization will be ignored.
Simply stated, I have never seen a supply chain professional fired for not saving enough money, but I have seen dozens fired or retired for not providing top notch customer service. Doesn’t this Make Sense?
That’s why I believe we all need to ZAPPOSIZE (Zappos is the on-line leader in customer service) our customer service to ensure that we have the fundamentals, nuances and right people in place to achieve exceptional customer services. Here are six of Zappos secrets to getting it right the first time:
1. Make Customer Service a Priority
I’ve been in a few healthcare organizations that make customer service a priority (not a sometime thing), but these organizations have been an exception – not the rule. How many times do your customers get a live person on the phone? How many times do your customers get a call back within one hour? How often are your customers getting their storeroom delivery on time? Make it a priority that they do in the future!
2. Empower Your Employees to do the Right Thing
Train your front line employees to have all the right answers, do the right thing and always be pleasant and helpful. Rarely should they have to transfer a call or go to a supervisor for answers. Your customers are looking for speed, agility and flexibility in all of their interactions with your department.
3. Don’t Permit Customers to Abuse your Employees
Just because you are a service department, doesn’t mean your employees should be abused by your customers. If you find this is happening nip it in the bud by reporting this abuse to the offending party’s immediate supervisor for resolution.
4. Don’t Hide your Phone Numbers
Plaster your help desk’s phone numbers everywhere (exchange carts, nursing stations, operating room suite, etc.) so anybody at anytime can call your department immediately for help. A problem that festers, just get’s bigger!
5. View Customer Service Cost as an Investment
Most healthcare organizations believe that customer service is a cost, not an investment. Nothing can be further from the truth! If you place your best people on your help desk they will not only save your customer’s time, money and frustration, but your department too! Nothing costs more (or is more annoying) then having your clinical staff searching for answers to solve a supply, service or equipment problem and they can’t find anyone to give them a straight answer.
6. Celebrate Great Service with Great Stories
It’s also very important to celebrate your great service with great stories about your staff going the extra mile: how a help desk person solved a problem that has never been resolved before, how your storeroom manager came in on his day off to find a missing case of IV sets or how your purchasing department was able to get same day delivery on a critical product. Then share these stories with all of your staff to keep them pumped, motivated and energized to do even more for your customers than ever before.
As these six tips suggest, exceptional customer services isn’t one of the topics that is often talked about in supply chain circles, but I hope you would agree after reading this article that it’s really job #1 for all supply chain professionals. Once you have this aspect of your job on automatic pilot, then all of the other jobs you have (savings, quality and logistics) will be much easier to master, since you have now built a foundation of good will with your customers that will go a long way toward smoothing the road for any changes you might propose along the way.
When Vendors Manage Your Inventories, Is it a Win-Win?
The answer to this question is MAYBE YES or MAYBE NO; it all depends on what your healthcare organization’s operating philosophy is! It’s been my experience that many vendors do an excellent job of managing a healthcare organization’s forms, office supplies, sutures, stents, pacemakers, orthopedic inventories, etc. This can provide a value added service that is hassle-free, low cost (or no cost) and saves your hospital inventory dollars over the short and long term.
On the opposite side of the coin, I have seen vendors that have bloated a hospital’s inventory with their highest priced feature-rich products just so they could make a few extra dollars on their accounts. Or, though benign neglect, one of my client’s vendors was costing his customer $196,239 annually because he didn’t perform any value analysis studies on the forms he was inventorying and ordering for this client.
Can it be a win-win? This is where your operating philosophy enters into the picture. We have talked to one for-profit healthcare system that won’t let their vendors do anything that their staff can do even if there is a savings by doing so. Then again, other hospitals, systems and IDNs we have talked to believe that if a vendor can demonstrate significant savings by managing their inventories, this then is a win-win for them. It’s your call…
One word of caution! I have always liked President Ronald Reagan’s philosophy of “TRUST, BUT VERIFY” if you want the results you expect, require, and are paying for from your vendor. I would recommend a quarterly audit of your vendor’s inventory process to ensure you are hitting the targets they promised, or else, you could be spending even more money than you ever anticipated with the wrong vendor.
Summing up, there is no right answer to the question, “Should you have your vendors manage your inventories?” As I said previously, “Maybe yes – Maybe no”. It comes down to this, “can a vendor do it faster, better and less expensively than your hospital can? Only you can be the judge of the answer to this question, but make absolutely sure that you can’t do it yourself.
When the Going Get’s Tough — Don’t Fixate on Price
If you are a regular reader of my blog, then you know that I’m predicting a bumpy road ahead for healthcare organizations due to the unintended consequences of the new healthcare reform bill.
If you don’t believe my prediction then you only need to look at Massachusetts’ decision last week to place price controls on all but a few healthcare insurance companies operating in their state — after only three years — of enacting its own statewide healthcare reform legislation.
To me this decision means that these insurance companies will be cutting their reimbursement to their hospital customers almost overnight, because they have no other option if they want to stay in business. I see this same scenario in the other 49 states too in just a few years.
What can we do about this? First off, don’t fixate on price savings if you want to continue to have double-digit savings to counterbalance your hospital’s lost reimbursement that will be coming your way in a few years. This is because if you do fixate on price, it won’t generate enough savings to stem the tide of red ink on your hospital’s financial statements.
On the other hand, progressive healthcare organizations throughout the country are finding another answer to the conundrum. They are maintaining their price stability (i.e. holding their price increases to below the annual rate of inflation) with the help of their national and regional GPOs and their own custom contracts. But instead of stopping their expense management efforts here, they are now seriously focusing on eliminating their utilization misalignments (in use cost) of the millions of dollars of products, services and technologies they are buying annually.
We call this evolution the “Supply Expense Savings Triangle” or the price, standardization, utilization continuum. Once you have attacked your price and standardization savings, there is no where else for you to go but to focus on your utilization misalignments. In doing so, you can save an additional 7% to 15% (overall) in your supply chain expenses to build your cash reserves.
If you would like to read more about this new emerging best practice, I would suggest that you order our new “Healthcare Supply Utilization Revolution” book that we are providing to our “Savings Beyond Price™” blog subscribers at no cost.
In closing, while price savings are important to the competiveness of your healthcare organization, unfortunately they aren’t limitless. In fact, price savings are slowly disappearing at most healthcare organizations today. So if you want to keep your savings humming over the next few belt tightening years you will need new strategies, tactics and techniques beyond price just to stay in place. Utilization management is the answer to this challenge and will generate the next level of savings that you will be looking for when the going gets tough at your hospital, system or IDN. There is no where else to go…
Physician Preference Item Customization is More Important Than Ever
We all realize that our physician preference items (PPI) can represent as much as 40% of our supply spend, but despite our industry’s best efforts, over the last few years to hold our PPI costs down, they are still going up every year — not down.
The reason for this PPI inflationary spiral every year, even though most hospitals have slowed their PPI price increases, is two fold as I see it. The first cause of this PPI cost proliferation is that new technology is being introduced into our healthcare organizations faster than we can measure their efficacy. The second reason is that we aren’t doing a good enough job of “value justifying” what our surgeons are implanting.
What can you do about this? The first solution is very straight forward, every hospital, system or IDN needs to have a technology value analysis committee, with broad and deep physician representation, to evaluate and then select the most effective new technology that makes economic sense. Healthcare organizations that have followed this path have greatly reduced costly mistakes that are made when one or two individuals make — behind closed doors –these decisions on their high-cost/high-impact technology purchases for their healthcare organization.
The second answer to this challenge, and the most important in my opinion, is for you to CUSTOMIZE all of your PPI implants to the exact medical indications of all your patients. I can say this with full authority, since we have observed over the last 10 years that most hospitals are losing millions of dollars a year because their surgeons are selecting the highest cost implants without any regard to what is “medically indicated” for their patients. It’s like buying a thorough bread race horse that you only ride for weekend recreation. What a waste of money!
We can only assume that surgeons who insist on implanting these value mismatches are ignoring their patient’s medical indications by selecting their implants either out of habit, due to a sales rep influences or a lack of knowledge. This situation, we have found, can easily be remedied if a hospital employs a “PPI Medical Indication Checklist” to select the right implant for their patients.
To recap, our PPIs are the fastest growing and largest expense category in our supply spend and need to be controlled in an organized, systematic and scientific manner. Just ratcheting down your price at the pump won’t get the job done efficiently or effectively.
On the other hand, if you employ a filter (value analysis technology committee) to hold back your unnecessary and/or unproven technology expenditures and then customize your PPIs to their exact medically indications you will be going a long way to finally bending the curve on these considered necessary, but ultra expensive medical devices.
What do Your Eye Glasses and the Healthcare Supply Chain Have in Common?
Did you ever wonder why your glasses (traditional or sun glasses) are never an exact fit. Well, I just was reading about the answer to this question. Here’s why? No adult or child has the same skull and nose structure or ear size. In fact, American’s ears are typically set about 10 mm farther back than most other countries necessitating longer arms. Our skulls are, on average 20 mm wider than Europeans requiring broader fronts. Children, on the other hand, often have problems with the fit of the bridge on off-the-rack glasses. I know these facts to be true since I have been wearing glasses for decades and they have never fit right. How about you?
To my surprise, most frame manufacturers have standardized their glasses in one size only. In so doing, they are making it impossible for you and me to get an exact fit. There is only one way for me and you to get the right fit with our glasses these days and that is to pay a little more money to have a custom frame manufacturer (not the one-size-fits-all glasses you have been buying from your optician for years) CUSTOMIZE your glasses to your exact specifications. Otherwise, you will be paying for glasses that never will be really comfortable.
How does this fit into the healthcare supply chain? It is our industry’s belief that one size, type, or family of products, services or technologies will be a good fit for all of our customers, so we standardize throughout our hospital, system or IDN on one commodity per category of purchase.
However, the secret to getting an exact fit (just like my glasses illustration) is to CUSTOMIZE your products, services and technologies to the precise specifications of your customers. More importantly, it’s costing your healthcare organization hundreds of thousands (maybe millions) of dollars a year in unneeded and unwanted functions and features by not doing so.
For example, we once worked with a client who had standardized all of their surgeon’s, floor and utility gloves under one manufacturer and then mandated one type of glove be used for each customer classification, thereby saving $135,892 annually before we showed up on the scene. This sounds good on the surface doesn’t it?
Here’s the rest of the story! After surveying the results of our client’s decision and getting their customer’s feedback, we found that their lab was buying off contract, since they hated the gloves they were told they must use. Their food service was using Nitrl gloves without authorization and their floor gloves were a poor fit for the various nursing departments that were required to use them.
Based on our survey results, we convinced our client to redo their glove value analysis study by interviewing and observing their different customer group’s glove functional requirements and then obtaining agreement on their specifications. Lastly, we had our client research their GPO contracts and match their customer’s glove specifications to the lowest cost alternative. Once this job was completed and the new gloves were purchased, delivered and distributed, with great success, our client saved an additional $238,923 annually. Not bad for a few hours work!
How could this happen? The answer is that our client CUSTOMIZED their glove purchase to their exact customer’s requirements vs. STANDARIZING them as they had previously done. They then matched their requirements to the lowest cost alternative gloves off their GPO contracts, instead of buying from one manufacturer’s line of gloves. This was done because there is always a hidden cost when doing business with only one glove manufacturer since no one has the corner on the market on quality, service and price.
Healthcare Expense Reduction: A Systematic Approach
The phrase “Healthcare Expense Reduction” can have many different interpretations. It could mean getting the best price, benchmarking to find the best practice, searching for the best value products, services or technologies or reducing your inventory levels to near zero. However, I would suggest that “Healthcare Expense Reduction” if done correctly needs to be all of these things and much more.
In point of fact, from our empirical experience it requires a systematic approach to reducing your healthcare organization’s supply chain expenses to get it right. This concept is analogous to what the insurance industry calls BLANKET COVERAGE, a single unifying policy that covers any and all of your risk or exposure to unforeseen calamities. This BLANKET COVERAGE idea holds true with “Healthcare Expense Reduction”; To get it right you need to cover all of your supply expense categories of purchase – all at one time.
To get you started on this journey, we have listed seven core elements of a successful “Healthcare Expense Reduction” unifying system. We advocate these core elements for you to obtain the highest return-on-your-investment of time, effort and resources in order to attack ALL of your supply expense savings simultaneously.
You will notice that these seven core elements described herein are actually interconnecting programs which you should have in place which cover the total spectrum of your “Healthcare Expense Reduction” efforts as follows:
1. Utilization Management Program
2. Value Analysis Program
3. Contracts Administration Program
4. PriceCheck™ Program
5. Inventory Management Program
6. Linen Management Program
7. Forms Management Program
As this list suggests for your “Healthcare Expense Reduction” to be effective you need to have complementary and synergistic expense reduction programs in each of your supply chain disciplines, not one-time events. This way you can be assured that you have “Plugged all of the leaks” in your supply expenses before they become mile-high gushers or raging rivers.
This isn’t just a theory, but the actual system that we have employed ourselves over the last 23 years to assist hundreds of healthcare organizations in reducing their supply expenses to absolute minimums, and then to keep their expenses under control — going foreword.
Have You Gotten Your Free Copy of “Healthcare Supply Utilization Revolution?”
Healthcare Supply Utilization Revolution
Read this book and in a few weeks save more money than you have in years. Sounds unbelievable? Robert T. Yokl and Robert W. Yokl, healthcare’s leading authorities in Supply Utilization Management, have helped hundreds of hospitals, healthcare systems and integrated delivery networks to saved close to a half billion dollars by employing the same utilization management strategies, tactics and techniques that they will teach you in this book.
There’s More Than One Way to Shave Your Purchase Service Costs
I often talk about a healthcare organization’s purchase service savings opportunities being “equal to or greater than” their supply expense savings prospects, but too often this statement is interpreted to mean the price you are paying for your purchase services only. In fact, we have found that there is more than one way to shave your purchase service cost if you know where to look for them. Here are three additional ways you might want to use to discover them.
Utilization Misalignments
Just because you have the best price for your purchase service contracts doesn’t mean they are cost effective. You also need to eliminate all waste and inefficiencies in their value streams. Just like one of our clients found when they looked at their telecommunication invoices only to find they were being slammed with thousands of dollars of phone charges annually they hadn’t authorized. So don’t stop searching for additional purchase service savings because you think you have best price, when there literally is hundreds of thousands of dollars of new and better in-use savings that are just waiting for you to harvest.
Specification Overkill
When I read a purchase service contract that hasn’t had its specifications revised, improved or amended in a number of years, I can always find small or big savings opportunities because our customers don’t need everything that is included in the contract to perform the service that is described.
For example, how many times does your hospital’s windows need to be cleaned in any given year? Have many times a year does your high and low-tech equipment really need to have preventive maintenance? How many rent-a-guards do you need on each shift? Do you get the idea?
In-Sourcing Opportunities
For many years it becomes such an ingrained habit to outsource a particular service for many years that we overlook the possibility of in-sourcing these services again when the timing and conditions are right to do so. Food service or environmental service outsourcing are good examples of this happening. It’s been my experience that these departments generally aren’t outsourced for lower cost alone. It’s usually quality issues too, that drive the decision to outsource these departments in the first place. Therefore, it’s my suggestion that when any purchase service contract comes up for renewal it should always be considered a MAKE or BUY decision, not just a contract renewal decision. This way you never-ever leave any purchase savings dollars on the table – untouched!
As more and more supply chain managers take on the responsibility of sourcing, bidding and negotiating their healthcare organizations’ purchase service contracts, just remember that your purchase service contract price is just-the-tip of the iceberg! Your greatest purchase service savings are actually to be found below the waterline. This can represent as much as 26% in aggregate purchase service savings annually for your healthcare organization in the first round of value justifying your purchase service contracts. Don’t you think this is a much better way to shave your purchase services cost, than just attacking your price alone?
Do You Have a Reliable Saving Ideas Pipeline?
I know that most value analysis teams get off to a flying start with a lot of good ideas to save money, and then they “hit a wall” after a few months because they don’t have a pipeline of new saving ideas to fall back on to fuel their savings fire. To help you avoid this savings stumbling block to your VA program, here’s a pipeline of savings ideas from my new book, “The Healthcare Value Analysis Bible: Your Ultimate Saving Resource*” which is scheduled for publication in April 2010.
Large Dollar Expenditures - Products, Services or Technologies with an annual value of $25,000 or more.
Vendor Recommendations – Review brochures, catalogs, samples from vendors to cull new savings ideas.
Magazine Articles On Savings Opportunities - Call article authors to find out exactly how they did it. They will be happy to help you out without a fee.
New or Changes in Regulations - Most new or proposed changes in regulations costs can be reduced through Value Analysis.
New Clinical and Administrative Employees – Interview new employees for savings ideas they have been exposed to at other healthcare organizations.
Benchmarking – What are other healthcare organizations doing to save money?
Any Disposable Product – Can you return to a reusable product?
Any Type of Custom Kit or Tray – Contents of kits and trays should be fully investigated for their value!
New Technology – In addition to the cost of the new technology there is always add-on cost of labor and supplies that must be value justified.
High Utilization – Any Product, Service or Technology that has a high utilization cost is a candidate for study.
Product Recalls – Value Analysis Team(s) should be empowered to investigate why the product was recalled and the corrective action required to bring into conformity.
Bundled Products – Products like IV Starter Kits, Admission Kits, etc., need to be value justified.
Old Technology – Old technologies tend to be wasteful and costly and should be evaluated for appropriateness.
If you have any additional savings pipeline ideas, I would love to hear from you (bobpres@strategicva.com), since there is still time for me to add them to my new book. Naturally, if your idea is used in the book I would give you attribution for your idea. I’m looking forward to hearing from you.
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* “The Healthcare Value Analysis Bible: The Ultimate Savings Resource” will retail for $29.95, plus $5.98 for shipping and handling (pricing subject to change in the future). If you would like to pre-order this A-Z blueprint for establishing, refining or re-energized your supply value analysis program we are now offering a 10% discount on the retail price of the book, if you pre-order by February 26, 2010. You can e-mail your order (with your name, title, organization, phone number, e-mail address, and shipping and billing address) to bobpres@strategicva.com. You will then be the first to receive this important breakthrough must-read book no later than May 2010.
We’ve Come a Long Way from the Basement in Hospital Supply Chain Management
I remember at my first three jobs a the hospitals I was employed as a materials manager my windowless office was located in the basement, ether next to the storeroom, or near the receiving dock or half-way between both of these locations. Come to think about it, my salary was pretty much matched my location in the pecking order at these hospitals too. Yet, I was happy, productive and enthusiastic about my job, but I still had to work two jobs for many years just to keep a roof over my family’s head and bread on the table for my wife and kids.
I’m sure many of you can relate to these musings since you have found yourself in the same circumstances as you have moved forward in your own supply chain career. But the times are changing FAST in supply chain management. Many of us have moved from the basement to the rarefied upper-level floors of our healthcare organizations where we too have a window to gaze out when we get a few minutes to do so. Better yet, our salaries are now competitive with any industry I can think of and the perks (incentives, bonuses, health club membership, flextime, etc.) being offered are getting better every year.
To prove my point, I was just reading the results of ARMM’s Compensation Survey for 2009 which found that the average salary for MMs in 2009 was $87,650. The report also noted that 33% of the MMs surveyed are receiving bonuses, 58% have formal incentive programs and 9% are receiving other incentive benefits such as tuition reimbursement, child care and parental leave. Not bad for a profession that was considered basement dwellers just a few decades ago.
We have come a long way from the basement as attested by the results of the AHRMM survey I just referred too. But here are a few statistics from this same report you might not be aware of that tips the scale in favor of high income producers: MMs that had the highest salaries and held the most prestigious jobs in our industry had the highest educational levels (MA or MS), were Fellows in AHRMM, and had 50 or more staff reporting to them. This isn’t a coincidence!
As this data suggests, if you want to have the highest salary, best perks and to permanently move out of the basement like these trailblazers have done, you will need to go back to school, get CPM certified, become an AHRMM Fellow and get hired by one of the largest healthcare organization in your region.
Don’t get me wrong! I’m not saying this should be the goal for everyone reading this blog, but if you have aspirations for a bigger and better salary, more perks and additional responsibility this is the roadmap you should be following to meet this objective. As Sherlock Holmes would say to his friend Dr. Watson, “It’s as elementary as 1, 2, 3”.
Building a Supply Chain Business Case for Change!
I have found that the best way to get your supply savings ideas (especially those big creative ones) approved by your senior management, customers and stakeholders is to make a formal written business case for change. Why? Because too much is left unsaid, misunderstood or lacking in logic when you try to verbalize your savings ideas on complicated issues that need to be internalized before they are put into practice.
I have followed this same advice in my own career where I have proposed big business changing savings ideas at every healthcare organization I have worked in my supply chain management employment. For instance, I have proposed (in writing) a new supply value analysis program at every healthcare organization that I have worked and NEVER once have my proposals been turned down by senior management, customers or stakeholders.
I once decentralized the centralized buying function that had been in place for 46 years at my multi-hospital system and then replaced it with a GPO model based on a written business case for change that saved my healthcare corporation millions of dollars — almost on day one.
I proposed in writing, and eventually received approval from my board of directors, to move forward with a group purchasing program for their 27 long-term care facilities where I was Vice President of Support Services. This reinvented the way they had done business for decades.
I’m sure you get the idea! Developing a written business case for change in order to introduce, test the waters and then to gain approval on your big and even little supply savings ideas is a powerful instrument for the changes you believe are mission critical to your healthcare organization.
Here’s how it works! This business changing and decision-making instrument begins with a written document that would give the background of the problem or opportunity and description of what you want to accomplish. It would describe how it benefits your organization, how it fits into your organization strategic plan, the risk and rewards, the resources required, the responsibilities and the timing and the operational and financial considerations.
Your business case for change doesn’t need to be elaborate, but it does need to be thorough, concise and well thought out. Most importantly, it needs to be your tool of choice that you employ when you want to “change the way we do things around here”.
Actionable Hospital Supply Metrics Will Make Change Happen!
We all deal with metrics everyday (statistics that measure or quantify our data), but is this information ACTIONABLE? For example, most hospitals use the metric supply cost/net revenues to compare their hospital’s supply chain performance to their peers to see how their hospital fits into a regional or national norm, but what does this information really mean?
Let’s say this exercise shows that your hospital is on the high side of this metric. Does this information allow you to make decisions or take action to reduce your supply cost? The answer is no! This metric is only directional. Meaning, it only shows if your hospital is going in the RIGHT or WRONG direction on your supply expenses. However, it doesn’t tell you why or how you can change the direction you are going if results are unfavorable.
That’s why you also need to have ACTIONABLE metrics that will help you make informed decisions and take immediate action to correct the defects in your supply chain. For instance, we just had a quarterly review with one of our Supply Dashboard clients where we talked about how his lab reagent metric (total reagent cost/Billable Lab Tests –CMI adjusted) has been going up. He then told us that he picked up this fact on his supply chain radar screen too. After some research, he found that he had a few reagents that he was buying that weren’t under contract that was causing this anomaly, which he said has now been fixed.
That’s what ACTIONABLE metrics can do for you (enable you to make informed decisions and take immediate action) vs. generic metrics that ONLY tell you that you are going off course. For this reason, if you want to make positive change happen at your healthcare organization you will need to establish ACTIONABLE metrics at the ground level to greatly enhance your supply chain decisions. Otherwise, you will be nibbling around the edges of your supply chain expense savings when a windfall of savings is just waiting for you to take action.
