Every Supply Chain/Value Analysis Manager loses sleep over where to find more price, standardization, and utilization savings for their healthcare organization’s survival. Yet, what these same individuals don’t realize is that there are hundreds of thousands or even millions of dollars being lost annually because of contract non-compliance issues. When are we going to plug the holes on these mission critical non-salary savings?
All Non-Salary Savings Projections Need to be Verified
The typical hospital, system, or IDN’s supply chain management department will project and then report to their senior management the estimated savings for a finalized price, standardization, value analysis, or utilization project based on the commodity’s prior purchase history, but rarely, if ever, verify that the savings are achieved down the road. Wouldn’t you agree that this is fuzzy math?
SVAH’s studies show that less than 86% of the savings that are reported each year to a healthcare organization’s senior management hits their bottom line because of compliance issues due to product upsells, inadequate training, too much product variation, etc. That’s why all non-salary savings projections need to be verified quarterly, annually, and for the life of the contract.
The Ultimate Compliance Monitoring System
One of my staff recently spoke to a large hospital IDN that was going through a major standardization program with their contract portfolio. An executive told my staff member that he had 20 projects currently in process and 20 projects that had already been implemented that spanned multiple hospitals and over 50 different vendors. What concerned this executive was that they only had a spreadsheet showing them the annual spend on these projects, but there was no way to easily or readily verify the actual savings on these 40 initiatives. Yes, they could verify the standardization to vendors, but did it really save them what they projected? This fact made them nervous because they didn’t want to report savings to senior management that didn’t materialize, since it could be a career ender!
That’s when we talked to this executive about developing the with him to track, monitor, and then verify his savings on all of his price, standardization, and utilization projects. This assured him of accurate savings numbers on all his savings projects going forward.
Inconvenient Truth: A Savings Isn’t a Savings Until It Is Verified
How much longer can we project price, standardization, and utilization savings that never happen? How much longer will our bosses accept this fuzzy math? It is our contention that the moment of truth has arrived when supply chain professionals will be held accountable for our savings projects. May I suggest that you buy, rent, or develop a compliance monitoring system that will assure you of accurate savings numbers on all of your saving projects with certainty.