A recent McKesson study shows that, “The rapid pace of change in healthcare payments continues unabated, with payers reporting they are 58% along the continuum toward full value-based reimbursement, a 10% leap since 2014. Hospitals aren’t far behind, reporting they’re 50% along the value continuum, up 4% in the past two years.” What does this mean to you? It means that over the next few years cost containment (labor and non-labor) is going to become even more important to your healthcare organization to enable it to grow revenues with value-based payments.
Market Share Today is Less Important than Cost/Quality Management
For decades, healthcare organizations thought gaining market share was the key to ever increasing revenues, but this trend is fading now that value-based payments are gaining strength in our industry. Nowadays, it’s all about cost and quality management, not market share, for a healthcare organization to grow their bottom line. This is an opportunity for your supply chain department to grow professionally, gain a seat at your management’s table, and shine brightly by leveraging your supply chain data to obtain an edge on your value-based payments (i.e., one payment for end-to-end case management) over your competition.
Two Facts that Can Make the Difference in Your Healthcare Organization’s Revenues
There are two facts you must keep in mind when leveraging your supply chain data to increase your revenues. The first is that your supply costs are 30% to 40% of your healthcare organization’s total cost structure. The second is that your clinical supply utilization misalignments (i.e., wasteful and inefficient consumption, misuse, misapplication, and value mismatches) represent 7% to 15% of your healthcare organization’s total costs. In real terms, this means millions of dollars of savings for your hospital, system, or IDN are available to increase your value-based payment revenues if you decide to reduce, contain, and control these costs even more effectively.
The Search for More Savings Must Be More Strategic
We see a new trend with healthcare supply chain organizations that are desperately searching (e.g., GPO price maximizer services, price audit services, and switching GPO memberships) for more price savings to meet their healthcare organization’s new revenue challenges. Yes, you can be successful if you can find the right strategic partner and eek out additional savings beyond your current measured savings. However, you must seek strategic partners who are well entrenched with supply utilization being combined into the price and contracting processes as you will no longer be looking for the best prices but you will also need to hold your vendors accountable for supply utilization. This is the edge you have been looking for.