If you are a frequent reader of this blog, you will know that hospitals, systems, and IDNs have multiple holes in their savings buckets due to wasteful and inefficient consumption, misuse, misapplication, and value mismatches in their products, services, and technologies’ application. In fact, we have seen countless healthcare organizations that lost 23% to 46% of their projected savings in the first few months of implementation of their savings opportunities. To avoid this savings shortfall, here are three ways to never lose a hospital supply expense savings again:
1. Measure Before Your Contract Term: It’s important for you to have a baseline or starting point for measuring your savings projections. We suggest going back one year utilizing an Activity-Based Costing methodology which smooths out your volume fluctuations during any given year to accurately calculate your potential savings opportunity.
2. Measure During Your Contract Term: Then measure, employing the same Activity-Based Costing methodology, at least quarterly to ensure that your savings projection is still on track. If you discover that your actual savings compared to your projection is slipping, then you must investigate the reason for this occurring so you can get it back on track again. For example, tracking your cost per EP Lab Ultrasound Catheters cost per EP Lab Case to ensure the contract is optimized and ordering does not exceed past use patterns.
3. Measure After Your Contract Term: To finalize your savings projection, it is imperative that you calculate your savings over the term of your contract, again utilizing an Activity-Based Costing methodology, to determine your exact savings over the contracted period. This way you can amend your original savings projection that you reported to your senior management.
We like to say that a savings isn’t a savings until it is validated before, during, and after a contract term. This is because anything can happen (e.g., volume changes, people changes, policy changes, etc.) during a contract term that can distort your original savings projections. This way you will never lose a hospital supply expense savings again.
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