Why Healthcare Supply Chain Savings Opportunities Beyond Contract Price Are Worth the Reward
In the healthcare world, managing supply chain costs is a critical component of maintaining financial health and ensuring the delivery of quality care. While negotiating favorable contract prices with suppliers is essential, there are numerous other opportunities for savings that can significantly impact the bottom line. These opportunities often involve calculated risks or managed change, but the potential rewards make them worth considering. This article explores why taking calculated risks in healthcare supply chain savings – beyond contract price – can lead to substantial benefits.
Understanding Calculated Risks in Healthcare Supply Chain Management
Calculated risks are decisions made after careful analysis of potential outcomes and their probabilities. In healthcare supply chain management, these risks might involve changes in products, services, processes, adoption of new technologies, or shifts in supplier relationships. Unlike reckless gambling, calculated risks are informed by data, experience, and strategic planning that don’t limit changes but manages them in a way that eliminates risks while gaining savings and quality improvement.
The Limitations of Focusing Solely on Contract Price
Focusing exclusively on contract price can lead to missed opportunities. While negotiating lower prices is essential, it often represents just a fraction of the total cost savings potential. Other areas, such as operational efficiencies, consumption management, and product/service optimization, can offer significant savings that are not immediately apparent in contract negotiations.
Areas for Healthcare Supply Chain Savings Beyond Contract Price
Process Optimization: Streamlining supply chain processes can lead to significant cost reductions. This might involve reengineering workflows, automating manual tasks, or implementing lean principles. By improving process efficiency, healthcare organizations can reduce waste, lower labor costs, and increase throughput. Value analysis with the functional approach is the perfect methodology to make this happen while managing all risks (perceived or real) in the changes. You would be surprised at how supply savings can have nothing to do with the product you are using but instead be process related. One example is nurses using too much of the new product on the nursing floor because half the staff aren’t following the Use Policy or were not properly in-serviced on original deployment.
Utilization Optimization: There is a lot of perceived risk involved with the “if it’s not broken, why fix it” type of thinking. We are not talking about changing things that do not need changing, but if there is a reason for changing then you will want to export the need for these changes to gain results while improving quality and outcomes along the way. For example, if a Surgeon is using an ablation instrument and is using two for a case when they should only be using one, you will want to know about it. We can do better with a little value analysis work and can reduce costs while not affecting the case outcome. No risk there.
Feature Optimization: There are hundreds and maybe even thousands of feature-rich products hiding in your supply chain contracts that your clinicians and non-clinicians use every day. The problem is, you just don’t know about them or want to take a risk in trying to get a physician or clinician to change when they had the feature-rich product in use for an extended period. Here, the risk is overcoming the fear of change. In most cases, we can find a lower cost alternative all within the current contracting that will meet functional requirements reliably at a lesser cost.
Cost Savings and Improved Patient Care, the Rewards of Taking Calculated Risks
The most immediate reward for taking calculated risks in healthcare supply chain management is cost savings. By exploring opportunities beyond contract prices, healthcare organizations can uncover hidden savings that contribute to a healthier bottom line.
An efficient and fully optimized supply chain can lead to better patient outcomes. By ensuring that the right supplies at the optimized cost and quality are available at the right time, healthcare providers can deliver timely and effective care.
Taking calculated risks often involves adopting new technologies and processes, which can drive innovation. This innovation can lead to new treatments, services, and business models, fostering growth and opening new revenue streams. Remember, for every dollar saved it would take your organization $20-$30 in new revenue to make that one dollar in profit. Managing risks is the new game for supply chain optimization!
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