Up until recently, supply expense management was all about best pricing, standardization, and compliance to GPO contracts. That’s how supply chain professionals’ performance was graded by their senior management. However, the supply chain expense game has changed forever now that supply utilization management has been added to this list of must-haves to dramatically reduce your healthcare organization’s supply chain expenses.
Yet, your senior management may be in the dark about what this means for their healthcare organization. It’s your job to sell them on the concept of supply utilization management, so you can dramatically reduce your utilization misalignments. Here are three ideas on how to do it:
1. Help them understand what supply utilization management is and what it is not. Utilization is not about price or standardization, it’s all about reducing the wasteful consumption, misuse, misapplication, and value mismatches in your healthcare organization’s supply streams. Typically, this figure represents savings in the range of 7% to 15% of your total supply budget (supplies + purchased services).
2. Help them understand the upside and downside of utilization management. The upside of supply utilization management is that the savings from such an initiative is, on average, one million dollars per 100 occupied beds. The downside is that even if you are reducing your pricing every year and you are near 100% standardization, your ship is still leaking hundreds of thousands of dollars every year in hundreds of utilization misalignments. Your price savings will never catch up with this scenario until you plug the holes.
3. Tell them how over-utilization and under-utilization can affect their healthcare organization’s cost, quality, and outcomes. Over-utilization (i.e., using more products, services, and technologies) can actually cause quality problems, such as your nurses changing I.V. sets more than is medically necessary, which can lead to more infections. Or, discovering that your nursing staff is under-utilizing your medical device recycle program by a whopping two million dollars a year.
The whole purpose of this education of your senior management is to get them to become champions of your supply utilization management program. By doing so they can help you smooth the way with your department heads and management to make the required changes to reduce your supply cost even further and improve quality and your outcomes.