It used to be quite often that we worked with organizations that would set major goals and dedicate their annual strategic plans to dramatically reducing non-salary expenses during their fiscal years. Given the state of healthcare and the razor thin profit margins that health systems work from, it just makes sense to do more of this. With the maturity of the group purchasing organization and their major savings over the past 20 years, health systems would just dedicate themselves to the latest and greatest pricing and standardization program to achieve most of their savings goals. Times are different now and most organizations are already maximizing their efforts with their GPOs and thus this major non-salary expense reduction initiative may be more challenging, especially if you have never been through one of these in the past 10-15 years.
Having worked with many health systems on major non-salary expense reduction initiatives as well as their ongoing initiatives, I thought I would give you some insights to fast track your strategic thinking on where you can get the biggest savings in the least amount of time. These strategies are all proven at health systems throughout the country, so they are priceless strategies for you to consider.
1. Find a New and Bigger Well of Savings – Health systems today continue to operate a savings machine through their GPOs and other strategic sourcing/contracting initiatives. This is great, but that is just one major well which you have been getting water from for decades. That well is still giving you water but not nearly as much as you need now. You need to identify and dig new savings wells that will give you the next level of savings that you can rely on for the next 3 to 5 years.
A perfect example of this is Clinical Supply Utilization Management which marries spend and clinical operating volume statistics together to give you exact measures for savings in a simple reporting platform. You can do so much with this for all your hospitals and outpatient areas with year over year, quarterly, or monthly benchmarking. This alone is worth 5% to 10% in savings annually!
2. Train Your VA Team Members and Department Heads in Advanced Next Level Savings Strategies – All these professionals sit on your value analysis teams, and more importantly, those department heads are the budget owners who specify and use the products that you purchase for them. Doesn’t it make sense to give them advanced cost savings training from time to time? This will greatly aid you in your savings efforts – not to mention smooth the waters as they will have more of an understanding of what you are doing versus pushing back in confusion.
3. Stop Being so Reliant on Your GPO for Everything – Double down with everything you are doing with your group purchasing organizations where it makes sense but realize that the heyday of the GPO was about 5-10 years ago. GPOs still bring about savings but not as much as they used to which is why you need to have more roads to go down for major savings – beyond price.
4. Think Outside the Box – Most organizations live and breathe the “not invented here” philosophy which always perplexes me. It is great to know that you are doing good things for your healthcare system but to think that you already have all the best ideas and are doing all you can do is a bit big-headed. Why not reach out to some colleagues who have gone through similar major savings initiatives in the past few years and learn about their strategies that worked? This is two-fold as you don’t have to reinvent the wheel and you can literally borrow their exact model and use it for your organization.
5. Don’t Talk Away a Savings Opportunity Until Proven Otherwise – Too often, a savings opportunity is identified and before any steps are taken to validate or work through the savings opportunity, someone tries to talk it away. I have seen so many major savings opportunities get stopped, paused, or forgotten about altogether because someone talked the savings away. Don’t fall into this trap. Don’t let any savings get talked away until you have had a chance to investigate the opportunity and whether there are reasons that a key customer, stakeholder, or expert has that the savings are not there. Why jeopardize big dollar savings opportunities without being 100% sure whether they are real or not?
Let’s face it, we all have our own journey we have gone through and our beliefs of how to achieve the next level of savings for our healthcare organization, but if there are savings opportunities that you have not yet put your finger on, why not seek out different ways to find them? There is always a better way, better strategies, or better tools that may be right there ready for you to engage with and drive savings success for your health system for a long time to come.
Below are some similar articles that you may find interesting.
Simple Ways to Improve Your Healthcare Value Analysis Teams That are Priceless
Putting a Square Peg in a Round Hole with Clinical Supply Utilization Management (CSUM)
The Best Root Cause Paths for Value Analysis and Cost Optimization Success