We have been hearing about numerous supply chain professionals talking about how they are focusing on supply utilization management at their healthcare organization, but in most cases what they are really talking about is reigning in their price, standardization, and non-compliance on their products, services, and technologies. Just like the “extreme makeover” television show, supply utilization management isn’t about renovating a house, but instead blowing it up and starting over again.
Supply utilization management really shouldn’t be mystifying since we all experience this discipline in our everyday lives. For instance, when you buy a new car, aren’t you particularly interested in how many miles per gallon it is rated for? When you buy a new furnace for your home, aren’t you attentive to how many BTUs it will consume? Or, when you buy a stock, do you pay attention to its annual yield (amount of cash it returns)? I know I do, and you should too!
That’s what hospital supply utilization management is all about: Measuring and then investigating the variant or irregular velocity, yields, trends, patterns, and variations in your supply spend. It’s not about the price at the pump! You should already have that under control. By doing so, you will uncover hidden savings in the range of seven percent to fifteen percent, almost overnight.
We have found that the quickest way to capture countless utilization misalignments in your supply spend is to undertake an “extreme makeover” of all of your products, services, and technologies since they are generally over-specified. Meaning, they have too many unnecessary functions and features that aren’t wanted or needed to provide your patients with the highest service quality. This is just one big reason why hospitals have a higher than average cost per patient day, per procedure, or per test than their peers.
We’re sure you get the idea by now that price, standardization, and compliance are just small elements of your supply spend cost. Maybe 21% overall! So where should you be expending your time attacking supply expenses? On the 21% that is in relative control or the 79% in supply utilization cost that is out of control and that is eating away at your hospital, system, or IDN’s bottom line? You decide!
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