January 12

How to Improve Your GPO Savings Yields by a Factor of Ten


We here at SVAH have been predicting that your GPO savings will net out to about 1.9% in 2021. While this is a historic low point in GPO yields, it can be just the starting point for your healthcare organization to grow your GPO savings yields by a factor of ten. The key here is to use your new and renewal GPO contracts as a catalyst to conduct comprehensive value analysis studies that include utilization management techniques. To give you an understanding of what I’m talking about, I’m going to share with you a synopsis of a Wound Care Value Analysis Study* one of our clients performed which employed a VA advanced strategy to save over $3 million in supply chain savings in just 32 months.

Create a New Mindset for Value Analysis Studies

One of the keys to success at the outset of client hospital’s Wound Care Value Analysis Study was to create a “new mindset” for its supply chain staff, physicians, clinicians, and department heads to spur them into action. The supply chain director calls this mindset “value-based thinking”: taking a questioning, probing, and inquisitive approach as to why clinicians and staff do the things they do and focus on outcomes, not activity. It was especially important for the Value Analysis Program Manager to realize that it was okay for her to challenge the organization’s long-held assumptions regarding the value of any given commodity.

This mindset brought about immediate financial and qualitative results on one of the hospital’s first reinvented value analysis studies: wound care. Instead of signing off on a new wound care group purchasing contract offering, the hospital decided to pursue a value-based approach by reviewing the organization’s wound care program in total in an attempt to reduce the organization’s pressure ulcer rate.  During the course of the initiative, the value analysis team reviewed its use of patient transfer devices, skin care and incontinent care products, ultra-absorbent pads, its bed-making process, and transport team training. In doing so, the organization uncovered inefficiencies (in the use of patient transfer devices, the efficacy of the skin care products, value mismatches with absorbent pads, and lack of a consistent process in bed making). Once these inefficiencies were corrected, the hospital reduced its ulcer rate by 10 percent while reducing its wound care supply spend by $262,000 annually.

The Importance of Measurement and Observation

Another big challenge that the hospital encountered was how and where to uncover supply utilization savings opportunities with the greatest ROI. Use of SVAH’s utilization dashboard, in combination with supply chain reports, new technology requests, and other benchmark tools, enabled the hospital to quickly measure and identify areas where wasteful and inefficient consumption, misuse, misappropriation, and value mismatches in the healthcare organization’s supply streams existed.

One example of this process is the hospital’s supply chain staff working with the organization’s quality workgroup to investigate utilization of ventilator-associated pneumonia (VAP) products. Initially, the workgroup established that the hospital was using standard oral kits, Hi/Lo ET tubes, 72-hour closed suction kits, and tape as part of its ventilator care processes. After the working group observed how these products were being employed and then evaluated their functionality, numerous changes and upgrades were made to its VAP product mix, which resulted in a $45,000 annual supply increase. However, incidences of VAP were reduced to zero over the next 10 months, compared with 16 cases the prior year at an average cost per VAP incident of $40,000. The workgroup estimated that $640,000 (16 prior incidence per year x $40,000) in cost avoidance was directly attributed to this value analysis study.

Integrate to Save

The same “value-based thinking” philosophy is integrated into the optimization of all of the hospital’s group purchasing contracts, its strategic sourcing and contracting efforts, and its new technology assessment process, because the hospital believes these functions all correlate in some way with its supply expense management responsibilities. For this reason, the organization employs the same Value Analysis Program Manager for its utilization management projects, uses the same project reporting system to track all of its savings, and employs the same utilization management methodology to make all savings happen. The results have been significant. Over the past three years, the hospital has saved more than $3 million by amalgamating all of its supply chain savings initiatives under one roof, so to speak.

(*) Source: Healthcare Cost Containment

Below are some similar articles that you may find interesting.

Supply Chain Expense Management Checklist for 2021

5 Pillars Of Effective Supply Chain Expense Management For 2021

Request Demo of SVAH’s VA and Utilization Tools


GPO, GPO savings, group purchasing contract, health system, healthcare, healthcare organization, hospital, IDN, improve savings, supply chain, supply chain savings, supply expense management, utilization management, value analysis

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