Hospital Cost-Cutting focus Shifts to Utilization
I think that most hospital executives are getting it that under healthcare reform many organizations will need to reduce their overall operating expenses by 15% – 20% (or, about five-percent below the Medicare rates you are receiving now) with supply chain expected to be a major contributor.
The other big “aha” that is hitting home is that hospitals aren’t going to obtain these deep cuts with price cutting or staff reductions alone. They will need to target their utilization misalignments in their clinical and supply chain operations where seven percent to 15% in new savings is obtainable.
It is the conventional wisdom that we as an industry, have about 24 months to make these changes happen before the full impact of the Patient Protection and Affordable Care Act takes effect. This transformation can only occur if hospitals are more data driven. This will enable them to ferret out these wasteful, inefficient and non-conforming products, services, technologies and processes.
Why? They can’t be seen with the naked eye! Only by applying the concept of value analysis analytics can a healthcare organization determine where they have unexplained wide-ranging variations in their practices. For example, why has your ligature cost per procedure (case mix adjusted) jumped 57% in one year? Or, why have your compression sleeves increased by 9% per procedure (case mix adjusted) over the last four quarters? These are the metrics that you need to trend, track and analyze to be successful in the New Healthcare Economy we are facing. Not price or standardization alone!
Lastly, a recent study by AHA showed that there is “significantly lower support for supply chain (in the C-suite) in the form of advocating investments (in technology and resources) and promoting use of the supply chain among C-level executives than among supply chain leaders.”
This finding tells me that supply chain professionals need to do a better job of selling their supply chain initiatives to their CEOs, COOs and CFOs if we are to be a central player in healthcare reform, since they aren’t hearing your message that the supply chain can have a big, indispensable and dramatic effect on their bottom line results!
Now go get this message out loud and clear for all to hear: The supply chain can make a significant impact on your healthcare organizations survival over the next decade. It no longer is just a service department – it can and is a money-saving machine that needs to be well oiled (time, money and resources) to perform at peak performance.
Filed Under: Best Practices • Utilization Management
