“The right strategy is still to go after what we call savings beyond price or clinical supply utilization.”
I was recently on a conference call with a health system’s Vice President of Supply Chain discussing the variances to cohort benchmarks and that key performance indicators were showing that they were running much higher than the cohort as well as year over year (e.g., category cost per surgical case and or adjusted patient day in this instance). This supply chain leader knew these big supply and service categories like the back of his hand and quickly pointed out that he knew they were buying at the best tier level and were standardized. So, his department has achieved its objectives by gaining the best pricing and contract terms. He stated that it was not Supply Chain’s job to manage how much the end clinicians consume of these products and services.
Go After Clinical Supply Utilization
I imagine that this scenario plays out at many healthcare supply chain leadership meetings regarding who is responsible for managing the consumption, or in this case, over-consumption, waste, and inefficient use of the products and services of the health system. It is a conundrum that occurs more frequently now with the need to dramatically reduce costs and not being able to go to the price well due to inflation and the maturity of strategic sourcing programs. But the right strategy is still to go after what we call savings beyond price or clinical supply utilization.
Supply Chain Is Built to Assist with Supply Utilization Challenges
If you take a step back and look at the role of Supply Chain with their ever-present mantra of the right product at the right price at the right time at the right place, you would agree that their job is done at that point. But somebody has to let the end users who are taking care of the patients, running lab tests, performing surgery, etc., know that they are over consuming, wasting, and/or inefficiently using certain products in their departments. That job should come down to Supply Chain who is built to assist them with these challenges.
Remember, the end users and sometimes Supply Chain don’t know these over-consumption/waste issues are happening either but with just a little adjustment, better KPIs, and reports, this plays right into Supply Chain’s strengths. Plus, Supply Chain has value analysis teams that can assist with these new and different projects but instead of a product conversion or problem replacing a product, the new goal would be to weed out the over-consumption. Or, you could create a new value analysis team, which many healthcare systems are starting to do, and focus your mission on only clinical supply utilization savings opportunities.
7% to 15% of Total Non-Salary Budget is Still Available Beyond Price!
For many years, you have probably been reading articles like this about achieving savings beyond price opportunities. You may be thinking, “Yeah, we understand that we could do this or that and we will keep that in mind for the future.” Well, I think you would agree that there is no better future with all the challenges healthcare organizations’ bottom lines are facing than to start to plan and implement your organization’s savings beyond price or clinical supply utilization program. It will be worth it in the short and long term!
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