If you would break down a typical hospitals’ total supply spend (supplies and purchase services) you would find that about 17% would fall into the category of surgical services, 19% into drugs and a whopping 33% into purchase services. These three top spend categories alone represent 69% of everything your hospital buys! The balance or 31% would fall into categories representing your routine supply (office, laboratory, medical/surgical, food, x-ray, etc.) purchases. Have you connected the dots yet?
If your healthcare organization doesn’t have a laser focused on these top three cost containment targets then your hospital, system or IDN is missing a huge opportunity to shave 3%, 7% or even 9% of sorely needed dollars from your total supply spend. Remember, what a healthcare organization deems important, vital and mission critical to its survival — happens!
Now let’s look at how you can optimize these three top spend categories to their fullest extent. We are still uncovering millions of dollars of savings opportunities for our clients in surgical service expenses since most healthcare organizations are still focused at the price at the pump and not how their OR products are being utilized and employed by their surgeons and OR staff. To dig the last dollars out of your surgical service spend you need to do it with data — not price concessions.
Drugs rarely fall under the supply chain sphere of influence, but you should be aware that, from a price standpoint, we have discovered all GPOs are equal in their offerings. Where the rubber meets the road is with your hospital’s drug formulary. Is it an open or is it a closed system? Is your pharmacist reactive or proactive in formulary changes? Is he or she tracking drug utilization and demand patterns? This is where your hospital’s real hard drug savings can be realized and optimized.
I can tell you from my own experience, that purchase services are the most overlooked supply expense of these three top spend categories. Only a handful of supply chain managers are in charge of (or even care about) this enormous supply chain expense where 11% to 18% in cost reductions are achievable – almost overnight! My advice to you is to take charge today of this widely ignored cost driver where millions of dollars are just waiting to be harvested.
Since time, money and resources are a very limited commodity in healthcare, supply chain professionals need to point their guns at just a few targets that will reap the most rewards. No longer can healthcare organizations employ the shotgun approach to saving money and then think they are controlling all their costs. To be truly efficacious healthcare organizations, in the new economy, will need to connect the dots so they can optimize all their supply chain savings opportunities. This is how you do more with less!
Robert T. Yokl
Chief Value Strategist
Strategic Value Analysis® in Healthcare