Let’s face it, healthcare organizations tend to follow the trends of what others are doing in healthcare, which is okay. But even the trends don’t always lead you to the goal which is to wring the towel dry on savings. Many would say that totally wringing the towel dry of savings is like trying to see a Bigfoot. Most have focused their efforts on contracting, which has become so complex and demanding that it has limited the flexibility of Supply Chain organizations to engage in more strategies.
Contracting, standardization, contract conversions, recalls, resilience issues, and of course new product requests consume all the time in Supply Chain organizations. Of course, if you stumble upon juicy savings in the contracting process, you are going to go after it and achieve the savings, but that is more happenstance than a true strategy. We are better than just letting things happen and waiting to bump into big savings that are not handled by contracting, standardization, or value analysis.
Remember Purchased Services 5-8 Years Ago?
Do you remember when Supply Chain organizations all but ignored purchased service contracts a few years back? That was 30% to 45% of the entire non-salary expense budget at most health systems yet it was ignored until solutions providers and GPOs specifically started focusing on these major opportunities. Supply Chain organizations saved millions through their GPOs and solutions providers, but more importantly, they gained control over the 30% to 45% of the non-salary budget that had previously gone unmanaged. Now, imagine overlooking a similarly significant opportunity today — especially when so many organizations are reporting millions in savings by actively partnering with their GPOs.
Savings Beyond Price is the Bigfoot of Today’s Supply Chain
Most Supply Chain leaders now incorporate the phrase supply utilization into their cost optimization discussions, yet many still lack a defined strategy within their health systems to capture this next level of savings. It’s common to hear, “Our Value Analysis teams handle that,” but in reality, those teams are already stretched thin managing new product requests, conversions, recalls, and supply resilience. They simply don’t have the capacity to take on a major initiative starting from scratch. Remember, your new product request workflow software does a lot for your VA teams, including spending management, but you need to take it to another level and provide them with systems that give them proof of where savings opportunities are.
Stop Waiting for Your Cat to Bark
If you give a VA team a proven savings opportunity to work on, there is no doubt that they can use their VA process to optimize costs and achieve the major savings at hand. If you think they are just going to come up with the savings opportunities on their own for savings beyond price, then you truly are “waiting for your cat to bark!” For savings beyond price like contracting and purchased service cost optimization, there must be a clear path from start to finish and systems in place to feed that process over the short and long term. Most have software systems and spend management, but these do not deal with costs in a patient-volume-centric manner that is going to uncover all your savings beyond price opportunities on an ongoing basis.
Stop Wasting Time and Your Precious Dollars by Not Attacking Savings Beyond Price
Imagine that you have a Savings Beyond Price Program in place being run by your Value Analysis Program leaders and are getting major results from your VA teams. You can expect to not only achieve the short-term savings that this will bring but also manage the ongoing challenges you will have because cost optimization is not a one-time event. Even better, you will also know where you are operating at best-in-class levels and can take advantage of these methods for your other hospitals and/or their respective departments. With a Savings Beyond Price Program in place, you are going to start wringing the towel dry once and for all on savings, just like you have done with your GPO contracts for supplies and purchased services. Ultimately, the goal for any Supply Chain organization is to fully integrate savings beyond price into its strategy and unlock the next level of cost optimization.
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