By: Amy Denny, Vice President of Supply Chain Strategy at Premier, Inc.
How can I improve? Is there something I’m missing? What else can I do or which behaviors should I change?
We’ve asked these questions of ourselves not only in regards to our personal lives but professional endeavors, as well.
These are somewhat similar to the daily questions that supply chain executives deal with.
· How can we save another $10 million?
· Could we cut our capital budget by 20 percent?
· Are there other factors I should consider beyond cost?
But where do supply chain leaders turn when they’re looking to find that next $10 million in savings? What rocks are left to turn over?
Savvy supply chain leaders must go beyond medical product pricing to achieve the next level of savings for their organizations.
Here are 3 areas to consider the next time your organization begins the search for additional savings.
1. Purchased services
Purchased services spend is widely believed to be equal to supply spend (if not slightly greater) for most organizations. A typical integrated delivery network (IDN) allocates between 20 to 25 percent of its total operating expense to purchased services. Sometimes referred to as “indirect spend,” it consists of expenses outside of medical products and labor. For many providers, purchased services spend is highly fragmented, with owners and contracts spread across the organization with centralized oversight. Other organizations may ask that supply chain departments streamline management of non-labor spend and scale resources to meet the organizations’ needs, including additional services found outside of a non-acute care setting. Achieving success in these areas requires both an enterprise-wide cultural and operational shift.
A couple tips to help uncover savings in purchased services:
Know your numbers
Review your accounts payable records to determine where your organization is spending money. Start by researching current vendors and the services they provide. Work with your GPO to get your data cleansed so that you can understand vendor overlaps and spend in the numerous categories that comprise purchased services. Consolidating spend with a smaller number of vendors often yields significant savings.
Herd the cats
Seek out copies of contracts from across your organization and carefully review terms and conditions. Contracts could have been in place for a very long time and may have expired or have recurring price increases. Creating a centralized repository for purchased services agreements ensures transparency and maximizes your ability to keep the terms relevant.
Gain executive buy-in
Get C-suite and executive sponsors engaged with the purchased services process from the start. Once all the data has been analyzed, work with the C-suite to get a clear determination of which areas are and are not off-limits.
2. Capital equipment planning and procurement
Every dollar spent on clinical capital equipment is pressured by budget cuts and IT investments, so, evaluating the capital equipment life cycle in your organization is critical.
Engage supply chain staff and an equipment planner
During construction and facility renovations, ensure that supply chain staff and equipment planners are included at the start of the process to guarantee operations proceed efficiently and avoid costly change orders down the road. These resources are able to identify product alternatives and opportunities to maximize savings.
Use the power of the pen
Take advantage of opportunities to aggregate spend within your organization or across organizations (the purchase of 10 MRI machines will undoubtedly yield a better price than a single purchase).
Think big picture
Understand what equipment is in use, how it is covered by service or maintenance agreements and its expected lifecycle. Also, consider any ancillary components like monitors, cords or batteries that are required for the capital to work properly. Keeping track of these items helps to appropriately budget for funds to support or replace capital when needed.
3. Value analysis in purchasing
Value analysis is an objective process that injects perspectives from both medical and purchasing professionals and uses evidence-based, data-driven decisions to ensure clinicians have access to quality products at the right time and at the right price. The value analysis decision-making process accounts for issues related to quality, patient and staff safety, revenue enhancement and charge optimization across the continuum of care - creating appropriate standardization of use and reduced supply chain costs.
Value analysis teams should be multidisciplinary and consist of both clinical and supply chain professionals. Analysis of products considers price point and ensures quality isn’t sacrificed.
It’s ok to say no
The value analysis team is often approached with requests to use new, more expensive products. While the shiny toy may seem appealing, the value analysis process should drive to consider products, services and practices that meet but do not necessarily exceed the end user’s specifications while providing safety and quality care to patients. There will be times when an expensive item is the answer, but only when it truly provides an enhanced patient outcome that is not achieved by a comparable product.
What rocks are left to turn over at your organization?