Most of our healthcare supply chain world is notably focused on reducing costs and keeping costs in check whenever possible. Group purchasing organizations and their regional affiliates do this as well. Regionals put a better focus on more specific customizations of national contracts or holes in the formulary covered by the big GPOs. This is all great and you should continue to do what you are doing with them but that does not mean that’s all you need to do. Most of those savings from your GPO are price/contract related savings but there are so much more with areas beyond the norm of price savings.
Interestingly, Healthcare Supply Chain and Value Analysis Professionals often bump into unexpected or hidden savings opportunities. These savings opportunities pop up from time to time and at first glance are a bit of a surprise to everyone, but you get satisfaction when you can generate big savings from these newfound opportunities. What if I were to tell you that there are even more of these bonus savings available for you to attain?
GPOs are Price Savings Machines that Are Set Up to Generate Contract Price Savings
Yes, GPOs are totally fixated on that next price savings or better standardization that leads to better tier levels or rebates that accompany it. Both the National GPOs and Regional GPOs are price savings machines that follow the script to generate economy of scale volume to better the contract prices every day. Your health system should take a page out of their National and Regional GPO script but also set up a machine to capture all the rest of the hidden savings that are slipping through the cracks right now.
You Need to Have an Internal Savings Machine to Find the Hidden Savings Beyond the Pricing Your GPOs Bring
When you take away the price savings then that leaves grey areas that could easily be ignored altogether in a contracting portfolio of a health system with the thought that gaining the best price is job one. For example, one health system we work with was overspending by $550K on IV catheters but had the best price; no one realized that there were other factors that tripled their spend. This was one of those major savings opportunities that pop up that in reality should no longer be happening. Plus, if nobody caught that $550K overspend, it could have gone on for years without any action at all. We can no longer afford that.
Value Analysis Analytics is the Next Level of Proactive Cost Optimization
Put a savings machine together to report out using clinical patient volume centric benchmarking and key performance indicators married to category spend. This will tell you everything you need to know about the past, current, and future of your savings initiatives. With your VA analytics, you will then be able to pinpoint areas that need to be addressed, categories that you are doing really well in, and categories that are doing okay today but may need attention in the future. The power to know where your savings are closes the door on any hidden savings slipping through the cracks.
The Bottom Line
Who doesn’t want to find major savings opportunities before they hurt your bottom line? That is the name of the game, knowing where the next major savings are and proactively doing something about it to gain major results. VA analytics will allow you to strategically attack all your savings opportunities but also show you where you are doing well. You can then take lessons learned from the good areas and apply them to other major categories. There is no downside as these savings opportunities have to now be revealed in these tariff and inflationary times.
Below are some similar articles that you may find interesting.
4 Simple Strategies to Flipping the Switch to Cost Management with Your Value Analysis Program
The Critical Success Factors of Healthcare Supply and Purchased Service Cost Optimization