October 10

4 Major Dynamics of Advanced Cost Optimization


Cost optimization is the art and science of saving money for our healthcare organizations and, at one time, used to be fairly easy by just implementing that right group purchasing contract and garnering the savings that the contract would bring at the best tier level. This has dramatically changed in the past few years with the record inflation and market conditions all but eliminating the big savings we once got from our group purchasing organizations. So where do we go from here? No matter where you take your organization in the next level of cost optimization, you will need to incorporate the following dynamics into this next level of savings.

1. The Worst Number is One – You never want to get caught with just a one-dimensional approach to anything and that includes your go-to strategy for saving big. As I mentioned in my opening, the one major strategy of price/contracting is still there but it is greatly diminished and has lost steam. You need to have two or three more strategies that you can employ in order to continue your savings success moving forward. Your CFO wants new and bigger savings. You just need to identify and embark on these new strategies such as clinical supply utilization management, benchmarking/KPIs, savings validation, etc. You will be surprised how much more is still out there to be saved but you must pursue it – it won’t come to you.

2. You Gotta Believe – When you share a new savings to any stakeholder like a department head or manager or even a clinician, their first reaction to the savings opportunity is that they don’t believe it is real. In all my years in this industry and no matter how much evidence and proof I put in front of these stakeholders, their first reaction is to not believe or explain away the savings opportunities that more than likely are very real and actionable. I look at this as just part of the process and I have learned to look forward to this defensiveness in these customers because, at the minimum, they are paying attention to the savings now.

With their attention, whether they believe your savings opportunities are real or not, they will give their reasons why they do not believe these savings, and to me that is golden. It will be up to you and the supply chain or value analysis team to further dispel their knee jerk reactions to your savings opportunity and once done you can then move forward with solid, actionable savings.

3. Timing Is Everything – In a perfect world, you will find many actionable savings opportunities and then will move on to working on these through your supply chain or value analysis teams. For instance, our Clinical Supply Utilization Management Solution shows our clients a laundry list of viable savings opportunities that they could take advantage of. But the reality is, there is only so much bandwidth and resources that can be put into working through savings opportunities in a value analysis team. Make sure you’re strategic and that your timing is right for the savings opportunity which will ensure the successful completion of the initiatives you do choose.

4. You Have to Be “The Ice Man” – In the movie Top Gun, Tom Cruise or “Maverick” had an antagonist called “The Ice Man” challenging him to be the “Top Gun” in his class. They described “The Ice Man” as a pilot that once on your tail will just stay with you until you make a mistake and then he will jump on you. You have to be a little bit of the Ice Man with cost savings and with that I mean, don’t ever let a viable savings opportunity go or be forgotten about. Sometimes you learn that the timing is not right, or the stakeholder blocked you, or contractually something was not going to work, but the savings were still viable. Most organizations keep some form of savings report. I always encourage you to keep a report on all of the rejected savings opportunities as well. You would be surprised at how often a big savings opportunity that was shot down or put on pause can gain the attention of your CFO or other stakeholders when they really need savings. Just because it was not viable then does not mean that it is not workable in the near future.

There is a lot more going on in the healthcare supply chain and value analysis world than ever before operationally, contractually, and patient-driven wise. But one thing is clear, we must assist our Chief Financial Officers in the cost management efforts by looking for and engaging in new and better cost optimization strategies and systems. By our efforts we can greatly improve our organizations’ bottom lines and thus we all benefit in the forms of bigger capital budgets, bonuses, and raises, as well as hiring new and better talent at all levels of the organization. You can make a difference!

Below are some similar articles that you may find interesting.

Why It Is Important to Automate Savings Tracking and Validation Rather Than Rely on Savings Projections Alone with Healthcare Supply Expenses

Revenue Generation and Cost Optimization Play Critical Roles in the Overall Efficiency and Sustainability of a Health System

3 Fundamental Thoughts on Why You Need Savings Validation Today

Request Demo of SVAH’s Value Analysis and Utilization Tools


clinical supply utilization, cost optimization, healthcare supply chain, Healthcare Value Analysis, hospital supply chain, Hospital Value Analysis, savings opportunities, supply utilization management

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