With few exceptions, most supply chain/value analysis leaders believe that every dollar they saved goes right to their healthcare organization’s bottom line. Well, I have a surprise for you. SVAH’s studies show that hospitals, systems and IDNs are losing 26% to 46% of the value analysis savings they are reporting to their senior management because of the following four reasons:
- Faulty Contract Conversions: We consider new contract conversions as the most critical time when savings are lost by healthcare organizations because of inadequate or non-existing communications, training or follow-through by hospital, system or IDNs implementation teams. What happens after the products are converted?
- Things Change and People Change: Just because you have the right people doing the right things at the execution of a new savings initiative, doesn’t mean that these same people, and the agreed upon policies and protocols will continue to be adhered to during the life of your Value Analysis initiative. In fact, due to retirements, advancements and transfers the chances are 50/50 that you won’t be dealing with the same people in the same environment that you began your initiative with.
- Customers Fall Back to Their Old Bad Habits: People fight change of any kind, so it isn’t unusual to discover that the people involved in your savings project revert back to their old bad habits and repeat their wasteful practices. This could be a simple as not placing disposables in reprocessed bins for collection. You are banking on reprocessed savings, but you must first fill the funnel with disposables otherwise you can’t reprocess and save the 40% to 60% that your organization intends to save.
- Vendor Upsells: We have observed that when there is a product failure, to solve the problem, vendors will frequently substitute a higher cost product to resolve the issue. This, consequently, wipes out any savings that were anticipated from the original contract.
For too long, we in healthcare supply chain and value analysis management have relied on faulty data in reporting our value analysis savings to our senior management. This can no longer stand. As these biggest reasons for lost savings suggest, we need to verify our savings before, during and after our value analysis initiatives life to ensure we are providing the best information for our CFO to use as budget guidelines. To do less, is risking the loss of confidence from your healthcare organization’s senior management that will be very hard to regain.
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