March 19

Hospital Supply Chain: 3 Different Ways for You to Find Big Savings


“Hospital supply chain and value analysis teams need to have multiple strategies to attain the next level of savings.”

Times are tight as inflation and other market conditions are driving less profitability for health systems around the country. Even though you have doubled down on your group purchasing contracts, which is a very good move, those contracts are very much affected by the conditions I just mentioned. You need to have new avenues for big savings, but they need to be straightforward and not time-consuming as you have got your hands full now dealing with contracting and sourcing. So, what are new and different ways to get your health system big savings?

New Ways for Your Hospital Supply Chain and Value Analysis Teams to Save

1. Change Your Mindset – “This doesn’t sound like it could save me a dime,” is what you are probably thinking, but the reality is that if you don’t believe that more major savings are available to be achieved then guess what, you won’t find them. Most organizations have been focusing on the price at the pump with standardization and custom contracting to achieve better tier pricing, which is great. But the fact is that at best you can affect maybe 20% of your products’ cost with pricing strategies, and with the maturity of the marketplace and group purchasing contracts you are lucky to save 3% to 7%.

You must open your mind to more possibilities that you can save on which are not based on price.

2. Look Inside Your Existing Contracts – This may sound like a no-brainer, but many times hospital supply chain/value analysis teams are quick to jump to find a lower cost product or service than the one they are currently using in their GPO contract portfolio. That will require a lot of change and it does not help your GPO compliance numbers to switch to another vendor. What is a simpler strategy?

Use your value analysis teams (Nursing, OR, Cath Lab, etc.) to assist you in identifying feature-rich or inefficiently used products, but instead of looking elsewhere, dive back into your existing contract to find lower cost alternatives. Since you are already contracted with the vendor and have tiered compliance levels in place, you are merely customizing your clinical requirements to a better matching product. You will be surprised how many feature-rich products are in use and how many products are being wasted that are causing major cost increases.

3. Start a Benchmarking Initiative – You can no longer be flying blind and not knowing that your costs are running high. For example, one organization we worked with thought they were doing everything right on a simple house-wide device category, but when they worked up comparable cohort benchmarks they realized they were running at a 52% higher cost per patient day than their peers. This instance was costing this health system over $200K annually but they didn’t know because their pricing was outstanding. This cannot happen any longer, you must know where you stand.

Benchmarks and key performance indicators are great, but only when your clinicians, department heads, and managers believe them. That is why you need to have your own benchmarking initiative that is internally driven but can also tap into outside sources for cohort benchmarks and key performance indicators. You will also find where you are doing good or even better than your cohort which is great as you may be able to tap into strategies used on similar product categories to assist you with your current projects.

Multiple Savings Strategies are Needed to Save in this Hospital Supply Chain Economy

There is no silver bullet for saving big. You need to have multiple strategies that will give you that next level of savings that your CFOs are looking for in order to sustain and expand your operations as well as your key staff. You can make a big difference with these three strategies, and they are not earth shattering to deploy. If you have any questions about how to start your own program or want more ways to save, send me a quick email at [email protected].

Below are some similar articles that you may find interesting.

Savings Beyond Price Strategies to Maximize Your GPO and Custom Contracts

Why Using KPIs and Benchmarks Is a Hidden Superpower

Three Simple Rules to Apply When Getting Pushback to Big Savings Opportunities

Request Demo of SVAH’s Value Analysis and Utilization Tools


benchmarking, benchmarks, GPO compliance, GPO contract, healthcare supply chain, hospital supply chain, key performance indicators, KPIs, supply chain, supply chain savings, value analysis

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