After reading an article by David Shannon and Chuck Miller of Bain & Company about “Closed-Loop Savings Verification” processes (CLSV) in other industries, I discovered that this industry best practice also mirrored what is happening in healthcare. More and more, hospitals, systems and IDN’s CFOs are requiring their supply chain professionals to verify their projected savings on every savings initiative.
In my opinion, this is because too often savings are reported by supply chain management to CFOs that never hits their healthcare organization’s bottom line. To avoid this from happening at your healthcare organization, here are three powerful tactics to ensure your healthcare organization has a foolproof “Closed-Loop Savings Verification” process that works:
- Automatic Verification System: The easiest and least costly methodology we have discovered to verify your reported savings is to build, borrow or rent an automatic verification system to measure your savings before, during and after you have implemented them. This CLSV process guarantees you will never have your hard earned savings disappear again.
- Budget Your Savings: This requires budgeting at the beginning of the year or as the savings are reported (flexible budget) to hold all parties accountable for making the projected savings happen. However, you still will require a system to verify the savings that has occurred.
- Appoint a Committee to Monitor Savings: This is where your CEO or CFO appoints a committee represented by supply chain, accounting and your budget department to verify that the reported savings have happened. The only downside of this system is that the CLSV process is very cumbersome and time consuming for all involved parties.
No matter what “Closed-Loop Savings Verification” option you choose, it is now becoming mission critical that your savings don’t disappear because of many factors (e.g. wrong projections, volume changes, poor performance of a product or service, etc.) when your CFO is planning on your savings to improve his or her bottom line.
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