You may think that savings validation is some sort of “trust but verify” type of reporting which is correct. It is an automated quick way to see where you stand on any savings opportunity that you took action on, but it can also tell you if there are things happening that you may not be aware of. I have compiled a list of the three main reasons you should consider implementing savings validation at your organization today.
3 Reasons to Implement Savings Validation
1. Gives You the Power to React Sooner – You may be able to post up the end projected result from a vendor contract pricing spreadsheet, a rebate estimate from your current fiscal year, or a savings from a value analysis implementation from a VA team on a spreadsheet, but the reality is those are only estimates. As a VP of Supply Chain for a 6-hospital system told me, “We are very reliant on those estimates as that is all we have and must trust them.”
There are two sides to this that you should consider. First, you need to know for sure that these savings projections are truly happening, otherwise all your hard work is all for naught. There is nothing worse than reporting savings that is not happening, especially when these savings are being taken away from budgets now. Second and most importantly, you will know if the savings are not materializing sooner rather than later which will allow you time to proactively fix these savings and salvage the positive results.
2. Find Out Exactly What Product, Department, and/or Facility Needs Attention and Which Don’t – If you are a large health system with multiple facilities, you realize that it is incredibly difficult just to fill out a savings projection report let alone follow up in detail on each category for each facility and each department within each facility on these savings opportunities. With savings validation, the job is done for you and is especially unique because every contract and every savings has a different set of start and end date comparable ranges to them which you can easily incorporate into your savings validation reports. Try doing that on a spreadsheet for a one- or two-year period – impossible!
For our clients, this has been one of the best ways to show them that their new contract is savings money, but that they may still need to address a few of their facilities who are misusing, overusing, or still trying to use the old products or services. Time is short in this assessment, so our clients also like the fact that they are able to drill down into which departments and products are out of line with their contract goals so that they can fix them quickly. Savings validation saves an incredible amount of time but also helps you to salvage savings that probably would have been reported but truly not materialized.
3. Rebate Validation – One area that is ever more important in savings reporting today is that of rebates on many supplies and implants for hospitals and health systems. It is nice when you get a check to hand to the CFO which goes over well. But are you really sure whether those are the correct numbers that you’re receiving and that you are not being short changed? One way savings validation is beneficial is that you can quickly ascertain either spend or cost per metric measures to ensure that you are not being shortchanged on any product or product category. Once again, every date range will vary, so you can pre-program in your rebate ranges and quickly find out whether or not you are getting the right rebate dollars. Plus, it will give you the detailed back-up you will need to challenge your sales representative if you did not receive the correct rebate dollars. This is a nightmare to try to discern on your own for one rebate let alone hundreds of rebates.
Versatility with a Savings Validation System
There is so much versatility that you can have with a Savings Validation System (get a special report here) in place that will give you the certainty that your savings numbers are correct and truly let you know which way the wind is blowing for any or all of your supply chain initiatives that involve savings. The power to know allows you to have a strategic advantage of time that is so valuable. Time is money in this day and age, especially when dealing with the millions of dollars in savings that healthcare organizations report out on every year. Savings validation will pay you many dividends in more savings and time.
Below are some similar articles that you may find interesting.
Podcast 83 – 4 Ways to Leverage Savings Validation for Maximum Results
Three Main Reasons Why Clinical Supply Utilization Management is More than Just Saving