March 12

Savings Beyond Price Strategies to Maximize Your GPO and Custom Contracts


“The goal, once you have your GPO and/or custom contracts in place, is to fine tune them further and weed out the feature-rich products.”

Value begins and ends with the customers who are our patients, clinicians, and line staff at our organizations. Supply chain is not the customer who uses the surgical instruments, IV sets, pulse oxisensors, etc. Supply chain’s job is to get the clinical and non-clinical customers the right products at the right price at the right time and place. This article is going to focus on “the right product” piece of this statement which is a hidden gold mine of savings that health systems like your own can no longer ignore.

Savings Beyond Price

The “right product” should mean meeting the exact functional requirements of your customers and stakeholders and then finding the lowest cost and most reliable product. This is not to say that this is not done up front to the best of supply chain and value analysis teams’ abilities at the time of the contract implementation and/or conversion. But there are products that routinely slip through the cracks that end up causing major cost increases due to being too feature rich.

There are multitudes of feature-rich products you are using right now that you don’t need, which inevitably wastes money that your organization could use for other things. No one is to blame for this feature-rich product sneaking its way into a supply chain formulary as it happens all the time. When you think of all the contract changes, conversions, and adjustments you have to make, it is bound to happen that you’re going to use feature-rich products here and there. The good news is that you can acknowledge that this is happening and then get your supply chain and value analysis teams working to evaluate and weed these feature-rich products out of your supply chain for major savings.

Think in terms of taking the functional requirements of your customers and stakeholders and then finding the lowest cost and most reliable product that meets your customers’ requirements exactly.

Standardization and Customization for GPO Contracts

Standardization and customization should be the goal of all contracting categories. We want to standardize the number of manufacturers down to the lowest amount (one or two) in order to maximize the volume with the one or two vendors you are contracting with to garner the best price based on that volume. But what happens is that we tend to go a step further and standardize the products within the contract thinking that less items to choose from will also equate to less inventory items to stock and replenish. This may work if the product is only used in one area or for one procedure, but in most cases, products are used in many departments and thus each department will have different functional requirements. A simple example is that intensive care units have the most acute patients in the organization so they will require the highest featured products, but a regular nursing unit will not need that level of functionality and features. Once contracting is in place, we must then customize each department with the exact product that will meet their clinical requirements. Don’t overshoot or undershoot the mark, as being off the mark will cost you money.

Fine Tune GPO Contracts

The goal, once you have your GPO and/or custom contracts in place, is to fine tune them further and weed out the feature-rich products that are being utilized in areas of your organization that should not be using them. Think of a three port PICC line being used as your standard house-wide, when in reality only ICU should be using a three port PICC. We can no longer just let clinicians pick the products that they want to use in the OR and/or nursing floors, we need to make sure that there is no waste or inefficient use.

This is simple, but you will need tools to assist you to identify these areas. For instance, we use our clinical supply utilization reporting which highlights fast climbing costs per case, adjusted patient day, etc. These are great indicators that something is off in the category. Once alerted to this, you can analyze and customize to reduce waste and feature-rich products in your supply streams.

Below are some similar articles that you may find interesting.

Why Using KPIs and Benchmarks Is a Hidden Superpower

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

How Are You Handling Savings Validation? It Really Matters!

Request Demo of SVAH’s Value Analysis and Utilization Tools


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