As hospitals, systems, and IDNs see fewer savings results from their GPO/local new and renewal contracts, more and more healthcare organizations are preparing to launch their own Supply Utilization Management (SUM) Program to make up for these shortfalls. To this end, here are five tips on establishing your own Supply Utilization Management Program that might make this transition to new and better savings even easier:
1. Adopt an Activity-Based Costing (ABC) Methodology to Level the Playing Field: One of the challenges of SUM is that it is a moving target. The best way to measure it is by defining its supply cost drivers or activities, such as, patient days, procedures, tests, etc., and then adjust them for their annual volume. This methodology is called “Activity-Based Costing.” Otherwise, you will be measuring apples to oranges and then basing your SUM decisions on faulty data.
2. Establish a Baseline to Determine Changes in Your Supply Utilization: A baseline or starting point used for comparison of your year-over-year utilization misalignments is where you want to start your search for new supply utilization savings opportunities. At SVAH, we ask our new clients for two years of data so we can make sure that favorable and unfavorable patterns, trends, and anomalies are factored into our supply utilization analytics.
3. Train Your Value Analysis Leaders and Team Members in the Techniques of Supply Utilization Management: SUM is a new supply chain discipline with its own set of philosophies, principles, and practices that must be learned by your VA team leaders and members to become proficient in this art and science. Without training, your VA leaders and teams will stumble on supply utilization savings, but they will never receive the full benefits of this new discipline.
4. Add Supply Utilization Management to Your Value Analysis Mission Statement: Most value analysis mission statements talk about vetting new and renewal GPO contracts and evaluating new product requests. Nowhere do these mission statements talk about supply utilization management. Yet, this should be a value analysis mission, since it falls under their purview to reduce a healthcare organization’s supply lifecycle cost.
5. Validate Supply Utilization Savings Before, During, and After They Have Been Implemented: As we like to say, a savings isn’t a savings until it is validated. This is doubly important with your utilization misalignments, since things change and people change over time. You owe it to your credibility to do so.
Supply utilization management is an emerging best practice in our healthcare supply chain community. Still, it is a new way of doing business for many supply chain professionals. Hopefully, these five tips will get you started on the road to SUM savings at your healthcare organization before your GPO savings well runs dry.
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