Utilization Management: The New Low Hanging Fruit

Why let these multimillion dollar savings slip through your hands?

Everyone in the healthcare supply chain business is looking for new savings opportunities to replace their diminishing price and standardization savings. Yet, multimillion dollar savings are available at every hospital (even small hospitals), system and IDN if only you would look and then find the new low hanging fruit: utilization management. It’s just like picking up golden nuggets that are strewn in your path!

The reason I can make this bold claim is that no hospital, system or IDN that we have worked with over the last few years has failed to uncover millions of dollars in waste and inefficiencies in their supply stream. Just recently, we identified, 1,265,979 in new utilization savings for a 7-bed hospital, which is just one glaring example of how out of control these utilization savings are at any size healthcare organization.

Why let these multimillion dollar savings slip through your hands?
The first step in uncovering your utilization savings is to track, tend and then monitor the activity-cost (not price), over time, of your commodities, physician preference items (PPI) and purchase services by line item. This data will give you the trending (up and down) of your actual cost and usage per line item to determine if a product, service or technology you are buying is increasing in cost/usage for no apparent reason. For instance, if you see that, over the last three months, your pacemaker cost/usage has increased by 27 percent, while your surgical days are down by 2 percent, in this same period, this is an indicator that something has changed in your pacemaker practices and needs to be investigated.

Second, to ferret out additional savings on commodities, PPI, and purchase services when their activity-cost seems reasonable at first glance, you need to benchmark these items against your peers to identify your utilization misalignments. This is because your activity-cost on these purchases could be beyond acceptable limits and need to be reined in. This happens frequently with oxygen sensors. You think your activity-cost on your oxygen sensors is typical for your size hospital, but in reality you are using three times the amount that is necessary for your operating characteristics. Again, this anomaly needs to be investigated.

Utilization management is the future of supply chain expense management; there is nowhere else to go for double-digit savings. Yes, you can still find some price and standardization savings today, tomorrow and in the future. But these will be meager savings compared to the new low hanging fruit: utilization management. The well has almost run dry on your once abundant savings sources.
It’s just like an oil well that is running dry, you must move on to drill another well or harness new sources of energy (natural gas, wind, solar, etc.) to remain viable and profitable. It’s the same with your price and standardization savings. You either move on to other savings sources, such as utilization management, or you will find that your savings well will run dry – faster than you think!


Robert T. Yokl is president and chief value strategist of Strategic Value Analysis® In Healthcare, which is the acknowledged healthcare authority in value analysis and utilization management. Yokl has nearly 38 years of experience as a healthcare materials manager and supply chain consultant, and also is the co-creator of the new Utilizer® Dashboard that moves beyond price for even deeper and broader utilization savings. For more information, visit www.strategicva.com. For questions or comments, e-mail Yokl at bobpres@strategicva.com.

Robert T. Yokl About Robert T. Yokl

Robert T. Yokl is president and chief value strategist of Strategic Value Analysis® In Healthcare, which is the acknowledged healthcare authority in value analysis and utilization management. Yokl has nearly 38 years of experience as a healthcare materials manager and supply chain consultant, and also is the co-creator of the new Utilizer® Dashboard that moves beyond price for even deeper and broader utilization savings. For more information, visit www.strategicva.com. For questions or comments, e-mail Yokl at bobpres@strategicva.com.

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