Every supply chain professional loses sleep over where to find more price, standardization, and utilization savings for their healthcare organization’s survival. Yet, what these same individuals do not realize is that there are hundreds of thousands or even millions of dollars being lost annually because of contract non-compliance issues. When are we going to plug the holes on these mission critical supply expense savings?
All Supply Expense Savings Projections Need To Be Verified
The typical hospital, system, or IDN’s supply chain management department will project and then report to their senior management their estimated savings for a finalized price, standardization, value analysis, or utilization project based on the commodity’s prior purchase history, but rarely, if ever, verify that these same savings are achieved down the road. Wouldn’t you agree that this is fuzzy math?
SVAH’s studies show that less than 64% of the savings that are reported each year to a healthcare organization’s senior management actually hits their hospital, system, or IDN’s bottom line. This is because of compliance issues due to product upsells, inadequate training, too much product variation, etc. That’s why all supply expense savings projections need to be verified quarterly, at the minimum, and then for the life of the contract or initiative.
The Ultimate Compliance Monitoring System
One of SVAH’s team members recently spoke to a large IDN that was going through a major standardization program with their contract portfolio. One of this organization’s supply chain executives told our team member that he had 20 standardization projects currently in process and 20 standardization projects that had already been implemented that spanned eight hospitals and over 50 different vendors. What concerned this supply chain executive was that they only had a spreadsheet showing them the annual spend on these projects, but there was no way to verify the actual savings easily or readily on their 40 initiatives. Yes, this executive could verify the standardization to specific vendors, but did these projects really save them what they projected? This fact made him nervous because he didn’t want to report savings to his senior management that didn’t materialize, since it could be a career ender! That’s when we talked to this executive about developing with him a system to track, monitor, and then verify his savings on all price, standardization, and utilization projects. This would assure him of accurate savings figures on all of his savings projects going forward.
A Savings Isn’t A Savings Until It Is Verified
How much longer can we project and report price, standardization, and utilization savings that never happen? How much longer will our bosses accept this fuzzy math? It is our contention that the moment of truth has arrived! That is that supply chain professionals will be held accountable for their savings projections. To avert this dilemma in the future, we would suggest that you buy, rent, or develop an automatic supply expense savings auditor so you, too, can be assured that you are reporting accurate savings projects. Remember, a savings isn’t a savings until it is verified.
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