September 22

4 Cost Optimization Tips to Close Your Healthcare Organization’s Budget Gaps


There are very few – if any – hospitals, systems, and IDNs that haven’t been financially affected by the turbulent healthcare marketplace we all have experienced over the last six months. Even financially healthy healthcare organizations have budget gaps that need to be closed. Fortunately, these same economic forces have empowered supply chain professionals to further cost optimize their supply chain expenses with even greater support of their senior management. With this said, based on our observations, here are four cost optimization tips to help you to further close your healthcare organization’s budget gaps:

1. Increase your spend under management. We would guess that only 50% to 70% of most healthcare organizations’ supply spend is under supply chain management’s control. For instance, pharmacy, purchased services, food service, laboratory, marketing, etc., are often left to their own designs. The most progressive healthcare organizations are changing this paradigm to include these and other outliers under supply chain management supervision or better yet control.

2. Double-down on your physician preference items. One of our clients has saved millions through group buys of their cardiac rhythm devices over the last few years. Now, they are going a step further and functionally analyzing these same devices to reduce the number in use, thereby standardizing by function on the lowest cost cardiac rhythm devices that are already in use at their hospital. They estimate this could save them another million dollars annually.

3. Establish clinical supply utilization baseline metrics. Another client of ours is projected to save two to three million dollars annually because they are establishing clinical supply utilization baseline metrics for all the products, services, and technologies that they are buying. Prior to creating these baseline metrics, they were blind to where their clinical supply utilization savings opportunities were in their supply streams.

4. Rein in your purchased service contract’s cost. If your supply chain department isn’t responsible for your healthcare organization’s multimillion dollar purchased service contracts, then you are missing out on 11% to 18% in new contract savings. If you want to learn more about how to control your purchased services, then you need to read “The Ultimate Closed-Loop: Savings Validation Guidebook”. Just e-mail me at requesting your e-book copy.

Now is an opportune time to use your enhanced influence in your healthcare organization to get more savings on the board than in prior years. Hopefully, these four cost optimization tips will help you close your healthcare organization’s budget gaps without creating any quality issues. Let me know if any or all of these cost optimization ideas help to make your job easier.

Below are some similar articles that you may find interesting.

Four Healthcare Supply Chain Challenges You Need to Heed for 2020 and Beyond

3 High-Impact Savings Areas to Increase Your Hospital, System, or IDN’s Bottom Line

Request Demo of SVAH’s VA and Utilization Tools


budget, cost optimization, healthcare organization, hospital budget, hospitals, IDNs, physician preference items, purchased service contracts, supply chain, supply utilization, utilization management

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