By Robert T. Yokl
Chief Value Strategist, Strategic Value Analysis in Healthcare, www.utilizer-Dashboard.com
Your price and standardization efforts – no matter how aggressive they are – will only realize 2 percent to 3 percent in additional supply chain expense savings (supply savings/total expenses annualized) for your healthcare organization based on a Strategic Value Analysis in Healthcare’s multi-year study.
This might be a hard fact to swallow, but it’s the reality of healthcare supply chain expense management today. What can you do about this dire circumstance since your hospital, system or IDN’s management expects double-digit savings from your department or division to counter the effects of the Affordable Care Act?
You might not know it, but if you use supply utilization analytics, you can turn your data into dollars that can represent a big boost (7 percent to 15 percent) in your supply chain expense savings.
Supply utilization analytics is the “extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions” according to Thomas H. Davenport, the author of Competing on Analytics.
What this definition is saying in layman’s terms is that if you organize your supply spend into standardized descriptive categories (e.g., intravascular sets, dressings, office supplies, Oxisensors, transcription service, etc.) and then measure these same products, services and technologies’ activity-based performance against your own historical standards and that of your peers, your data will turn into dollars right before your eyes. For example, we identified with our Utilizer® Dashboard (which does all the analytics work for our clients) that a 248-bed hospital client’s transcription service utilization cost was $1.64 higher than their peers, or $211,888 based on annualized savings. When our client investigated this anomaly in their supply spend, they not only discovered that they were spending too much on their fragmented and decentralized outsourced transcription service, but they also decided after a thorough analysis to outsource all of their transcription functions for an additional savings of $66,999 annually.
It’s not an accident that our client uncovered this big transcription savings and 96 other utilization misalignments (i.e., wasteful and inefficient consumption, misuse, misapplications or value mismatches) in their supply streams. It was because our client used supply utilization analytics to do the difficult work of identifying their hidden utilization savings that they never would have uncovered with the naked eye or even intuition.
Remember, “things change and people change.” Therefore, this fact always brings about new supply utilization savings opportunities when your look at your data retrospectively. This was the case with a 98-bed hospital we worked with that reduced its contrast media cost by $42,632 the first year after it identified a utilization misalignment in this category of purchase. Then the hospital had to revisit this same commodity two consecutive years thereafter when its contrast media utilization cost spiked repeatedly. The reason for these lapses in protocol was that the radiology staff members kept falling back to their old habits and had to be re-educated about the best practices that were keeping their contrast media cost in line in the first place.
As you can see by these case studies, it’s a worthwhile and a very profitable effort for you to refresh and then analyze all of your supply utilization analytical data on a quarterly basis to ensure that your supply utilizations trends, patterns and variations are within acceptable limits and have not spun out of control. A reversal in your supply chain expense performance metrics can easily happen, especially when your hospital’s census has a large variance for any given month or quarter. Supply utilization management is an emerging best practice you should strongly consider adding to your supply chain expense management toolbox, if you haven’t done so already, since it is the future of supply chain expense management.