“There is high value in taking that next big step which is bringing department heads and managers further into the cost optimization fold that is not forced but a natural fit for them to manage their budget dollars more easily and efficiently.”
We are all aware of how much a health system spends on all their major and minor product categories on an ongoing basis as it is all cooked into our ERP and budget systems. But who owns the budget we are talking about? The budget holders are the department heads and managers who manage their supply chain budgets as well as specify and use the products that are procured for them. Naturally it would make sense to further involve them in the cost optimization process to reduce costs beyond price. But how?
Most department heads and managers are involved with the respective contracts that affect their areas and give their feedback and requirements to get exactly what they need to take care of patients and operate their departments. Supply chain then finds the best source and pricing to make the value analysis synergy work. How do you further involve your department heads and managers beyond the norm?
You Have to Take the Next Step to Engage Your Department Heads and Managers on Their Terms
The best way that we found to involve department heads and managers is to align your consumption and utilization reporting using their respective clinical units and departments’ patient volume centric statistics. You can’t tell a nursing unit manager that they are using too much linen or too many IV sets because they will just shoot back and tell you that they were busy that month, quarter, or year. However, if you use their unit patient days and give them exact comparable cost per patient day on linens and IV sets, then you will get their attention. And they use hundreds of categories of products!
Department Heads and Managers Don’t Want to Waste Their Own Budget Dollars
Let’s face it, no department head, manager, or doctor wants to waste the organization’s money, especially when it may be their own department dollars that are being wasted. They could be using those wasted budget dollars for more useful things or new technologies that could provide better patient care and outcomes. The key is that the budgeting process which does have its basis as a patient volume centric measure does not go to the level of product categories within a department. It will only tell them overall whether they are over or under and that will not save very much money because you need to see both where you are doing well but also where you need to do better as the net will wash out some good savings opportunities that most departments need for budget shortfalls.
If you break down all your categories and take the departmental patient volume level statistics into consideration, you will give each department head and manager a blueprint for them to self-correct consumption runovers due to waste or inefficient use. Or perhaps, highlight the higher use of feature-rich products where a lower cost alternative is available. Either way, they can self-correct which is really the perfect integration of supply chain and clinical worlds. Yes, they will also see where they are doing much better than previous periods and their peer nursing units in the organization or even outside the organization if you have cohorts to benchmark with.
Clinical Integration with Supply Chain at Its Best
The bottom line is that there is high value in taking that next big step which is bringing department heads and managers further into the cost optimization fold that is not forced but a natural fit for them to manage their budget dollars more easily and efficiently. With clinical integration being high priority in supply chain this will give you sustainable and believable results on an ongoing basis while gaining the buy-in from all your department heads and managers. Big savings will follow!
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