Hospital, system, and IDN’s price savings are slowly disappearing as a new age of supply chain expense management is emerging. It’s called data-based decision making. This concept allows supply chain professionals to go beyond price and standardization to embrace a whole new level of supply expense savings (7% to 15% of a typical supply expense budget) they hadn’t thought possible. Here are three reasons why data-based decision making is becoming normalized at most healthcare organizations today:
1. Eliminates Waste and Inefficiency in Supply Streams: It has been estimated that waste represents 20% of total healthcare spending. We approximate that a minimum of seven percent of this total waste is represented by supply chain expenses (i.e., changing IV sets too frequently, not recycling medical devices, or disposing of reusable products).
2. Analyzes Clinical Data to Improve Patient Outcomes: Supply chain can contribute to better patient outcomes by eliminating stockouts, reducing infection rates with safer products, and ensuring that all products, services and technologies are properly vetted.
3. Improves Product, Service, and Technology Utilization: As one supply chain vice president said to me a few years back, “It’s not about price at the pump any longer. It’s all about the utilization of the products, services, and technologies we are buying.” Remember, for every dollar you are spending on products, services, or technologies, seven to 15 cents of that dollar are wasted through misuse, misapplication, or value mismatches.
It has been estimated that these three tactics together can improve a healthcare organization’s profit margins by three percent or 11 million dollars per hospital. Therefore, it is mission critical for supply chain management to look beyond price and standardization for new and better savings in the 21st Century.
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