Over the last few decades, we have been led to believe the notion that small incremental savings improvements (e.g., regional GPOs, value analysis, and standardization) were the way to keep our supply chain expense savings flowing even though our healthcare organization’s bottom line was sinking faster than we could plug the holes.
The Savings Gap Is a Huge Problem
All experts agree that 15% to 20% in operating expenses needs to be reduced over the next few years at all hospitals to match the cost reductions by the ACA and other third parties. Yet, supply chain managers are only saving 1%, 2% or 3% annually. You can easily see where this is a big savings gap in our hospitals’ budgets.
Supply Utilization Management Is the Answer to This Challenge
One of the most overlooked cost reduction techniques (utilization management) is available to you to bridge this savings gap. However, it must be applied scientifically and systematically if you want to receive the full benefits of this technique. Too many hospitals, systems, and IDNs are uncovering utilization misalignments (wasteful and inefficient supply expense practices) accidentally, which isn’t a system at all.
Do You Have a Supply Utilization Management Program?
If you don’t have a utilization management program you will never bridge the savings gap (15% to 20%) that is necessary to keep your boat afloat. It’s not enough to stumble over utilization savings – you must know with certainty where they are so you can identify them as quickly as possible. Otherwise, all your hard work on price, value analysis, and standardization will go for naught.