“Success is neither magical nor mysterious. Success is the natural consequence of consistently applying the basic fundamentals.” Jim Rohm, the Late Great Speaker and Trainer
It is easy to fall into the trap of always looking for the magic bullet that will help you to successfully manage your healthcare organization’s non-salary expenses and then fall short on your goals and objectives. But to quote Jim Rohm, “…success (in any endeavor) is the natural consequence of consistently applying the basic fundamentals (of your discipline).” Here are five basic non-salary expense management fundamentals that you might want to emulate.
5 Basic Non-Salary Expense Management Fundamentals
It has been our observation that these five-basic non-salary expense management fundamentals, when consistently applied, have been very successful for progressive healthcare organizations in boosting their bottom line:
- Being a Member of 2 to 3 GPOs: It should be obvious that one GPO doesn’t offer all the commodities (e.g., solutions, IV sets, etc.) that you are buying; therefore, it is advantageous to belong to two national GPOs and one regional GPO to take advantage of every price savings opportunity available to your healthcare organization.
- Buying Generic Products: It’s been our empirical experience that healthcare organizations that buy generic products, when available, have the lowest cost per occupied bed in their region.
- Following the Money or 80%/20% Rule: If you exclusively focus on 20% of the products, services, and technologies that represent 80% of your healthcare organization’s supply chain expenses, you will always be on top of your savings game.
- Focusing on Savings Beyond Price: Price is just the tip of the iceberg, or 1% of annual savings (i.e., annual savings/total supply chain expense budget), whereas supply utilization savings range between 7% to 15% annually.
- Standardizing on Manufacturers: While standardization on one product, service, or technology can be challenging, standardization on one manufacturer is doable, and very cost effective!
Back to Basics, Forward to Savings
All great teams have mastered the basic fundamentals of their discipline and revisited the basic fundamentals at least once a year. There is a great story about the late great football coach Vince Lombardi’s theory on teaching the basics. He began every season with the most elemental statement of all. “Gentlemen,” he said, holding a pigskin in his right hand, “this is a football.” And because of this philosophy, Vice Lombardi’s football teams won five NFL championships.
As Jim Rohm says, “Success is neither magical nor mysterious,” regarding your non-salary expenses. All you need to do is embrace the basic non-salary fundamentals every year and you will discover that going back to basics will leapfrog you to new and better savings every year. You can bet on it!