Is Your Healthcare Organization Achieving Rapid Cost Reductions?

Based on our observations, every hospital, system and IDN’s (big and small) supply chain department is working on saving money. Our question to you is: Is your supply chain department achieving rapid cost reductions or are your savings projects going on forever? We believe that your answer to this question is likely to be, “Our savings projects seem to go on forever,” since this appears to be the norm in the healthcare industry. This should be the exception to the rule, not the rule. If your healthcare organization requires three, six, or even 12 months to complete each and every one of your savings projects, then you need to rethink what you are doing.

Speed is Now a Supply Chain Imperative

For at least a century, the healthcare supply chain imperative has been to get the right product, at the right time, to the right place, at the right price. Well, this imperative is changing in the new healthcare economy we live and work in. Speed too is now imperative. This is because if your prices aren’t competitive, then your products, services and technologies aren’t substantially standardized, your utilization misalignments are off the charts, and your delays in not fixing these cost drivers rapidly is costing your healthcare organization millions. For example, we see hospitals, systems and IDNs taking forever to save hundreds of thousands of dollars in their oxygen sensors’ utilization while they work on their low hanging fruit. As an alternative, they should be working on all of these savings opportunities simultaneously.

Secret to Rapid Cost Reductions

The secret to achieving rapid cost reductions is to triage your savings opportunities as they are presented to you. For instance, if you see that there is a five percent GPO price savings on an equal product that you are buying through the same vacutainer vendor you are now using,  try fast-tracking by just sending an e-mail to your laboratory buyer to change vendors on his next order to receive the savings. If your utilization metrics show a $63,344 savings in your linen utilization, then schedule a meeting with your hospital’s linen manager to discuss, investigate and fix the problem. If a new product’s documentation claims to save $35,678 for your hospital if you replace your bathing system, triage this product to your value analysis team for investigation with a 90-day timeline for completion. Note that no savings opportunity in this value analysis model follows the same path to resolution!

Why a Triage System Makes Sense

This is the opposite of the practice of sending every savings opportunity through your value analysis team for value justification on each and every product, service or technology. As we see it, the main culprit that is delaying rapid cost reductions at most healthcare organizations is overreliance on your value analysis teams to make all supply savings happen.

Our point here is that there is not one track, but multiple tracks to follow to implement savings opportunities that will lead to rapid cost reductions for your healthcare organization. Remember, one is the worst number in supply chain management. Therefore, always have more than one savings implementation option that can rapidly speed up your cost reductions to meet the demands of the new healthcare economy. This is because speed is now just as important as getting the right product, at the right time, to the right place, at the right price.