The savings machine at healthcare organizations needs to be constantly humming along and making major strides in order to improve your bottom line and overall financial well-being of your organization. This savings machine has many names and disciplines tied to it but none are universally controlled like the non-salary expense world is in a healthcare system. For instance, Supply Chain has taken the lead to reduce the price of products, services, and technologies through strategic sourcing, GPO contracts, custom contracts, standardization, and much more. So much so that you can really refer to it as an engine that drives a healthier bottom line for every respective health system. But you must ensure that this engine is always primed and has a multitude of opportunities to put through the hopper in order to continually make major savings happen.
Keeping the savings engine fueled is not an easy task which is why we have identified 3 key steps to help ensure your savings pipeline is fueling your engine, now and for the next 3-5 years.
1. The Road Less Traveled Can Bare Ripe Fruit – Most organizations are open to every and all savings opportunities but have been reluctant to go down the path of utilization or consumption management. You may have the best pricing in our industry in most categories, but the big X-Factor is the quantity of the products that your end customers and clinicians use on a daily basis. The ability to recognize and control variation in the consumption habits of your customers is the next big major savings opportunity that is still available to Supply Chain Leaders and should be fully wrung dry.
The best way to wring this towel dry on the consumption side of the equation is to put in place a patient volume centric reporting and key performance indicator system to highlight variance in usage year over year between your hospitals and look to cohort peer benchmarks as well. These will give you some of the biggest savings that you will find hard to believe but with further investigation you will find that the savings are real and the only reason they are unbelievable is that no one has tracked after them yet.
2. Trust But Verify – With all of the contract and value analysis savings that a supply chain department implements and reports out, it is puzzling to me that many organizations would not track after these long term in order to see the true results. In some cases, you will find that your savings not only took but that you are saving more than you reported out to your CFO which you should take credit for. Why not?
You will need to implement a savings validation system that will allow you to track each and every savings opportunity you put on your savings report and give the flexibility to have the customized date ranges for each respective savings opportunity. This will show you the exact amount of savings that you have achieved and perhaps more. Plus, if by chance your customers went right back to doing things the old way before your savings implementation, you will know this and can turn right around and re-implement your savings again. Otherwise, you will be reporting $155K savings from correcting pulse oxisensor waste but it would not be real. It is better to recognize things when they go sideways and fix them than to think you saved money and it was not real.
3. A Little Training Will Go a Long Way – Most value analysis teams are made up of department heads and managers who manage their own multi-million-dollar budgets and offer their feedback during your VA meetings. It makes sense to give these department heads and managers advanced training in next generation savings so that they can apply it to their respective departments as well as up their games on the VA team. Most VA team members have had little or no training at all in the latest cost management strategies. It needs to start now. Don’t assume that everyone is on the same page or even close to the same skill level when it comes to cost management. Finding a better price is Supply Chain’s job but everything else is on the table of the VA teams so it is time to train them. Your savings will reap the benefits!
Given the radical increases that we have seen over the past few years that continue to happen, it just makes sense to think of your savings pipeline as a “Thing” at your organization. This Thing (savings pipeline) should always be fueled and nourished on an ongoing basis as you will be looking for over 80% to 90% of the opportunities that enter your funnel to be viable. Savings are ongoing so you have to think of your savings pipeline as a major element of your savings program moving forward. Always keeping the hopper filled is the name of the game!
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