Healthcare Supply Chain Managers: What is the Biggest Difference Between Price Savings and Supply Utilization Savings?

Most of us are still dealing in the price world of supply chain expense management and spend little time thinking about supply utilization. To raise the curtain on this issue, we have provided below a comparison between these two savings sources to clarify this issue:

Price Attributes Supply Utilization Attributes
Determined by unit cost of a product Determined by the total cost of ownership
Locked in at signing of contract Major cost drivers – waste, inefficiencies, over-consumption, and value mismatches
Normally, many options in contract offerings Directly connected to hospital centric volumes of patients, tests, cases, procedures, etc.
Standardization and compliance effect of tier levels – The more you purchase from the contracted vendor(s) the better the pricing terms Ongoing tracking and control is the key to weeding out these unwanted and unneeded costs

As the above table points out, searching out and then maintaining better pricing for your healthcare organization’s products, services, and technologies is an ongoing challenge, but managing the utilization of the products, services, and technologies that you purchase is just as paramount.

For that reason, if you don’t manage and control your utilization continuously, even the best pricing in your region won’t enable your hospital, system, or IDNs to move the needle on their supply chain expenses. So, make sure you are attacking not only your price, but also your utilization misalignments to make a real impact on your healthcare organization’s bottom line.