I bet you never thought there would be a day when you would be scrambling for new price savings, yet, this scenario has become a reality in healthcare today. To be exact, SVAH Solutions’ surveys show there is only 1%, 2% or 3% in additional price savings achievable for healthcare organizations in 2017. Now that you know this fact, what’s your strategic response to declining price savings in 2017?
Only Three Ways to Save Money in Your Supply Chain Expenses
There are only three ways to save money in your supply chain expenses: Price, standardization, and utilization. Therefore, here is a primer on how to tactically increase your savings yields from these three categories of purchase in 2017:
1. Price: In addition to greatly improving the compliance on all your GPO and local contracts, you will need to:
Expand your circle of buying influence on all your healthcare organization’s purchases (i.e., maintenance, food service, purchase service contracts, cardiology, radiology, construction, IT, laboratory, etc.) to generate new savings areas in your hospital, system, or IDN’s operations left to their own devices for many decades.
2. Standardization: We have often observed that hospitals, systems, and IDNs can further standardize on products, services, and technologies (in addition to their PPI items) they are buying because they haven’t previously had a need to do so. We believe the time has come for these healthcare organizations to normalize everything they are buying to squeeze a few more dollars out of the supply budget.
3. Utilization: This is a savings area in your supply chain expense management that has been tapped into by only a few hospitals, systems, or IDNs in the United States. Therefore, we can no longer nibble at the edges of these robust savings (7% to 15% of your total supply budget). With this said, it should be your priority to reduce these utilization costs where your biggest supply savings opportunities reside.
Saving money when price is eliminated from the equation is an art and science which must begin with a strategic response to this challenge. These three tactics are the foundation of this response. All other savings ideas will be some variation of them.
An End to an Era and the Beginning of a New One
Saving money in our supply chain expenses has always been price focused and its impact on your healthcare organization’s bottom line thought to be never-ending. Although price is an important component in the total cost of ownership formula, it isn’t the major cost driver for any product, service, or technology that you are buying. This leaves a whole new world of supply savings to be achieved (i.e., utilization), if we would only respond strategically to this challenge. Time is running out for dithering!