July 7

A Crash Course in Hospital Supply Utilization Management

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We have noticed that there is much confusion over what hospital supply utilization management is, so we thought we would give you a crash course on what it is and what it is not to bring more clarity to this important topic.

By definition, supply utilization management is “the management and control of products, services, and technologies’ consumption, application, and use to ensure that they are being employed in the most efficient and cost-effective manner.” In short, it’s all about your in-use cost!

For example, if your usage of isolation gowns is double that of your peers (adjusted for your census and weighted for intensity*), then you have a utilization misalignment in your supply streams that needs to be addressed. The reason for this utilization misalignment could be the price you are paying for the gowns, product selection (i.e., over-specification) of the gowns, or misuse and misapplication of the gowns. 

Why this should be important to you is because utilization misalignments drain your hospital’s budget of much needed cash. If you are using too much of any commodity, for any reason, it can quickly deplete any savings you are achieving on price or standardization in other areas of your hospital’s supply chain operations. It is insidious and counterproductive to leave these utilization misalignments continue to leave huge leaks in your supply streams.

Conversely, utilization management typically isn’t about price at the pump, but how much mileage (or consumption) you are getting per gallon of gasoline (or per use). If you are using 10x as much of any given product, service, or technology than your peers, that commodity is costing 10x more than it should be. No matter how good your price is on a commodity, it won’t compensate for the waste and inefficiency in your supply streams that are causing you to lose money. 

The basic idea behind utilization management is that while price is important, your in-use cost is the only true measurement of your supply chain expense management success. If you have utilization misalignments in your supply streams, which all hospitals do, then your total cost of acquisition to disposition will be higher than your peers’.

Once you understand this concept and internalize it, you will not only seek out the best price available for the products, services, and technologies that you are buying, but will jump to investigate why your total cost for a given commodity is costing your hospital more than your peer group. Then and only then can you have total control over your hospital’s supply chain expenses, which begins and ends with utilization management.

(*) Our clients have found that the easiest way to identify their utilization misalignments is with our Utilizer® Dashboard.


Articles you may like:

Why You Must Take Control of Your Supply Utilization Misalignments

Three Reasons Why You Should Attack Your Supply Utilization Misalignments Now

The Best Defense in the Hospital Supply Chain Business is a Good Offense


Request Demo of SVAH’s Value Analysis and Utilization Tools


Tags

Healthcare Value Analysis, hospital supply chain, hospital supply utilization, Hospital Value Analysis, standardization, supply chain, supply utilization, utilization management


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