As SVAH’s studies have shown, 1% to 2% in price savings in total supply budget spend are still achievable for your healthcare organization if you belong to a progressive regional group purchasing organization, which is a good thing. However, an additional 5% savings in total supply budget in clinical supply utilization can be equal to 10% to 15% increase in your healthcare organization’s revenues in any given year.
The Effects of the ACA on Your Hospital’s Revenues
Although most hospitals have seen an increase in revenues with the advent of the Affordable Care Act, Fitch ratings is reporting slower growth in “inpatient volume” for the rest of the year. In addition, all third party payers are looking for more shifts in care to outpatient settings for their insured population. In short, everyone is looking to save money with more outpatient services which makes it harder for your hospital to increase revenues on the inpatient side of the ledger. That’s why 5% more supply chain savings can be a game changer!
Supply Chain Can Be a Big Revenue Contributor
Most healthcare organizations don’t think of their supply chain operations as a revenue producing entity, but they should be thought of as revenue contributors when you consider how many dollars ($11.00 to $17.00) of revenue need to be generated to have the same bottom line effect as one dollar in savings. This is because there are expenses that are necessary to produce even one dollar in revenues that reduce its impact on your bottom line. This isn’t the case with supply chain savings; every dollar saved hits your healthcare organization’s bottom line.
Raise the Bar on Supply Chain Savings
As I have already acknowledged, saving 1% or 2% on price of overall supply budget spend is a good thing. Yet, your hospital, system, or IDN’s chief financial officer won’t even notice its impact because of the effects of inflation (.08% through 12 months ending July 2016) in any given year. Nevertheless, 5% more savings in clinical supply utilization will be noticed, commended, and recognized by your CFO since it doesn’t need to be filtered by inflation, expenses, or any additional cost. It can flow right to your bottom line.