Open up a whole new world of savings you didn’t know existed
Supply chain expense benchmarking in its classic sense is “the search for best practices” or why you are different from your competitors. Do they know something you don’t know about the products, services and practices you are buying that has led them to superior performance? Benchmarking can give you the answer to this question, yet I often hear supply chain professionals doubt the wisdom of this art and science. This is especially true when it comes to utilization benchmarking.
Some believe utilization benchmarking can be their best friend since it can quickly direct them to their utilization misalignments (e.g. wasteful and inefficient consumption, misuse, misapplication and value mismatches) in their supply streams. While others misunderstand this new art form and mistakenly believe it can be a foe by virtue of stirring up their clinical staff with claims that can’t be justified. Or, worse yet, they are certain it is a fad that will quickly disappear in a few years.
While it might be intellectually stimulating to have a debate about these opinions, it won’t open up a whole new world of savings for your healthcare organization if you believe utilization benchmarking is at cross purposes with your historical mission to reduce your hospital, system or IDN’s total supply cost from acquisition to disposition.
It will in fact stymie or inhibit it!
We too weren’t sure, 16 years ago, that utilization benchmarking was even possible, but through trial and error we discovered that not only was it conceivable to do so, it was a breakthrough on how we determined the effectiveness and efficacy of our clients’ supply chain practices. For example, we recently assisted one of our clients in identifying, through benchmarking, $3.9 million in new supply chain expense savings; 33 percent of the savings or $1,272,665 was price oriented while $2,643,841 or 67 percent was in utilization savings. If this client was only focused on price and standardization savings, they would have lost the opportunity to wring the towel dry on all of their savings opportunities by a ratio of 2:1. By the way, this client has implemented $1,665,267 in savings or 43 percent to date, so these are real and achievable savings, not just projections or estimates. They are the real deal!
To ignore, disregard or blow off utilization benchmarking as a foe or fad is counterproductive. It is an emerging best practice that can increase your annual saving yield by as much as 79 percent. Now that inflation is rearing its ugly head, your group purchasing savings are winding down, and standardization has been achieved at most hospitals, (excluding PPI items) you have nowhere else to go for savings. It’s not about price any longer; it’s about savings beyond price that matters! =